1-1 By: Bivins S.B. No. 131 1-2 (In the Senate - Filed January 18, 1993; January 19, 1993, 1-3 read first time and referred to Committee on Education; January 26, 1-4 1993, reported adversely, with favorable Committee Substitute by 1-5 the following vote: Yeas 10, Nays 1; January 26, 1993, sent to 1-6 printer.) 1-7 COMMITTEE VOTE 1-8 Yea Nay PNV Absent 1-9 Ratliff x 1-10 Haley x 1-11 Barrientos x 1-12 Bivins x 1-13 Harris of Tarrant x 1-14 Luna x 1-15 Montford x 1-16 Shapiro x 1-17 Sibley x 1-18 Turner x 1-19 Zaffirini x 1-20 COMMITTEE SUBSTITUTE FOR S.B. No. 131 By: Bivins 1-21 A BILL TO BE ENTITLED 1-22 AN ACT 1-23 relating to facilities equalization for public schools; authorizing 1-24 the issuance of bonds and facilities certificates and the levy of 1-25 taxes. 1-26 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-27 SECTION 1. Chapter 20, Education Code, is amended by adding 1-28 Subchapter H to read as follows: 1-29 SUBCHAPTER H. SCHOOL FACILITIES EQUALIZATION PROGRAM 1-30 Sec. 20.961. DEFINITIONS. In this subchapter: 1-31 (1) "Agency" means the Central Education Agency. 1-32 (2) "Basic program" means the basic facilities 1-33 equalization program. 1-34 (3) "Facilities certificate" means a debt instrument 1-35 issued by a school district under Section 20.970 of this code. 1-36 (4) "Instructional facility" means real property, an 1-37 improvement to real property, or a necessary fixture of an 1-38 improvement to real property that is used predominantly for 1-39 teaching the curriculum required under Section 21.101 of this code. 1-40 (5) "Level of local participation" means the ratio 1-41 that the dollar amount of bonds issued under Section 20.968 of this 1-42 code or of cash provided by a school district under Section 20.969 1-43 of this code bears to the total dollar amount of bonds, cash, and 1-44 facilities certificates to be sold to finance a project, expressed 1-45 as a percentage. 1-46 (6) "Repayment period" means a four-year period for 1-47 which a school district's level of local participation has been 1-48 established as provided by Section 20.966 or 20.967 of this code. 1-49 (7) "School district" means any public school district 1-50 in this state. 1-51 (8) "Supplemental program" means the supplemental 1-52 facilities equalization program. 1-53 (9) "Wealth per student" means the taxable property 1-54 values reported by the comptroller to the commissioner of education 1-55 under Section 11.86 of this code divided by the number of students 1-56 in regular average daily attendance as determined under Section 1-57 16.006 of this code. 1-58 Sec. 20.962. PROJECTS FINANCED THROUGH BASIC FACILITIES 1-59 EQUALIZATION PROGRAM OR SUPPLEMENTAL FACILITIES EQUALIZATION 1-60 PROGRAM. (a) A project that is financed through the basic program 1-61 or the supplemental program is financed by: 1-62 (1) the issuance and sale of bonds as provided by 1-63 Section 20.968 of this code or the provision in cash of the school 1-64 district's level of local participation as provided by Section 1-65 20.969 of this code; and 1-66 (2) the issuance and sale to the state of facilities 1-67 certificates as provided by Section 20.970 of this code. 1-68 (b) The state may forgive the payment of principal and 2-1 interest on facilities certificates as provided by Section 2-2 20.971(c) of this code. 2-3 (c) The state may issue and sell bonds as provided by 2-4 Article 717w, Revised Statutes, to finance the state's share of the 2-5 basic program and the supplemental program. 2-6 (d) To be eligible for assistance through the basic program 2-7 or the supplemental program, a school district must submit an 2-8 application to the agency. A district may not apply for more than 2-9 $9 million in assistance under this subchapter in a state fiscal 2-10 biennium. 2-11 (e) The agency shall determine the costs that are eligible 2-12 for state assistance under this subchapter. Those costs: 2-13 (1) may include costs necessary for construction of 2-14 necessary technology infrastructure; and 2-15 (2) may not exceed the cost index applicable to the 2-16 district under Subsection (h) of this section. 2-17 (f) A cost that permits a district to construct a facility 2-18 that exceeds a standard for the adequacy of school facilities 2-19 adopted by the State Board of Education under Section 16.402 of 2-20 this code is not eligible for state assistance under this 2-21 subchapter, but may be paid for by the district. 2-22 (g) A school district may not receive more than $9 million 2-23 in assistance under this subchapter in a state fiscal biennium. 2-24 (h) The agency shall adopt regional cost indexes for 2-25 acquisition of land and construction, renovation, and improvement 2-26 of instructional facilities for use in determining costs that are 2-27 eligible for state assistance. 2-28 Sec. 20.963. BASIC PROGRAM. (a) A school district may 2-29 finance an instructional facility through the basic program. 2-30 (b) A school district may apply for assistance through the 2-31 basic program if: 2-32 (1) the district has conducted a bond election as 2-33 provided by Section 20.974 of this code; and 2-34 (2) the voters have approved the issuance of bonds 2-35 sufficient to pay the entire cost of the project for which the 2-36 district is applying for assistance. 2-37 (c) The agency shall rank each school district to determine 2-38 the district's priority for participation in the basic program, 2-39 with the rankings determined as follows: 2-40 (1) a district's wealth per student in the preceding 2-41 year accounts for 80 percent of the district's ranking; and 2-42 (2) a district's average debt service tax rate in the 2-43 preceding three years accounts for 20 percent of the district's 2-44 ranking. 2-45 Sec. 20.964. SUPPLEMENTAL PROGRAM. (a) A school district 2-46 may finance an instructional facility through the supplemental 2-47 program. 2-48 (b) A school district may apply for assistance through the 2-49 supplemental program if: 2-50 (1) the district has conducted a bond election as 2-51 provided by Section 20.974 of this code; and 2-52 (2) the voters have approved the issuance of bonds 2-53 sufficient to pay the entire cost of the project for which the 2-54 district is applying for assistance. 2-55 (c) The agency shall rank each school district to determine 2-56 the district's priority for participation in the supplemental 2-57 program, with the rankings determined as follows: 2-58 (1) a district's wealth per student in the preceding 2-59 year accounts for 10 percent of the district's ranking; 2-60 (2) the average aggregate rate of taxes levied by a 2-61 district in the preceding three years accounts for 50 percent of 2-62 the district's ranking; and 2-63 (3) a district's growth in student population over the 2-64 past five years accounts for 40 percent of the district's ranking. 2-65 Sec. 20.965. PERCENTILE OF WEALTH PER STUDENT. In this 2-66 subchapter, a school district's percentile of wealth per student is 2-67 determined by: 2-68 (1) ranking all the school districts in the state in 2-69 ascending order according to each district's wealth per student; 2-70 (2) beginning with the district with the lowest wealth 3-1 per student, adding the number of students in each district to the 3-2 sum of the number of students in all lower ranked districts until 3-3 the district for which a percentile is being computed is reached; 3-4 and 3-5 (3) determining the percent the sum of students 3-6 represents in relation to the total number of students in the 3-7 state. 3-8 Sec. 20.966. INITIAL LEVEL OF LOCAL PARTICIPATION; MINIMUM 3-9 LEVEL OF LOCAL PARTICIPATION. (a) The commissioner of education 3-10 shall determine the initial level of local participation for a 3-11 school district that applies for assistance under the basic program 3-12 or the supplemental program. The initial level of local 3-13 participation is equal to the district's percentile of wealth per 3-14 student. If a district's percentile of wealth per student is less 3-15 than the minimum level of local participation under Subsection (c) 3-16 or (d) of this section, the minimum level applies. 3-17 (b) A school district may appeal the commissioner of 3-18 education's determination of the level of local participation to 3-19 the State Board of Education. 3-20 (c) The level of local participation for a project financed 3-21 through the basic program may not be less than 20 percent. 3-22 (d) After considering the needs of school districts and the 3-23 availability of state funds, the agency shall determine for all 3-24 school districts a minimum level of local participation for 3-25 projects financed through the supplemental program. 3-26 (e) If the agency determines that the level of local 3-27 participation for a project is so great that the cost of the 3-28 state's participation in financing the project outweighs the 3-29 benefit to be obtained by the school district, the agency shall 3-30 assign the project a level of local participation of 100 percent. 3-31 Sec. 20.967. REPAYMENT PERIOD; CHANGE IN LEVEL OF LOCAL 3-32 PARTICIPATION. (a) The initial repayment period for a project 3-33 begins the date the first bond or facilities certificate is sold to 3-34 finance the project and ends on the fourth anniversary of the date 3-35 the period began. A new repayment period for a project begins the 3-36 day after the previous repayment period ends and ends on the fourth 3-37 anniversary of the date the new period began. 3-38 (b) Before the end of each repayment period, the agency 3-39 shall determine if there has been a change in the school district's 3-40 percentile of wealth per student. 3-41 (c) The agency shall assign a new level of local 3-42 participation for the subsequent repayment period if the agency 3-43 determines that the district is at a higher percentile of wealth 3-44 per student. A new level of local participation may not be less 3-45 than the highest previous level of local participation. 3-46 Sec. 20.968. ISSUANCE AND SALE OF BONDS. (a) Except as 3-47 provided by Section 20.969 of this code, a school district that has 3-48 contracted with the agency under the basic program or the 3-49 supplemental program shall issue and sell bonds as provided by this 3-50 subchapter. 3-51 (b) Proceeds from the sale of bonds issued under this 3-52 subchapter may be used only for: 3-53 (1) the acquisition, construction, renovation, or 3-54 improvement of the asset for which the bonds were issued; and 3-55 (2) payment of costs of issuance of the bonds. 3-56 Sec. 20.969. PROVISION OF CASH IN LIEU OF BONDS. In lieu of 3-57 issuing bonds as provided by Section 20.968 of this code, a school 3-58 district may provide its level of local participation on a project 3-59 in cash. A school district that provides its level of local 3-60 participation in cash must nonetheless conduct an election under 3-61 Section 20.974 of this code authorizing the issuance of bonds to 3-62 provide its level of local participation. 3-63 Sec. 20.970. ISSUANCE AND SALE OF FACILITIES CERTIFICATES. 3-64 (a) A school district that has contracted with the agency under 3-65 the basic program or the supplemental program shall issue 3-66 facilities certificates. 3-67 (b) The state treasurer shall prescribe the form of 3-68 facilities certificates to meet the goals of the basic program or 3-69 the supplemental program. A facilities certificate must provide 3-70 for payment by the issuing district of the principal and interest 4-1 of the certificate. A facilities certificate must provide for the 4-2 forgiveness of principal and interest payments as provided by 4-3 Section 20.971(c) of this code. The agency shall prescribe the 4-4 interest rate and maturity dates of facilities certificates. 4-5 (c) A school district may sell facilities certificates to 4-6 the state only. 4-7 (d) Proceeds from the sale of facilities certificates may be 4-8 used only for: 4-9 (1) the acquisition, construction, renovation, or 4-10 improvement of the asset for which the certificates were issued; 4-11 and 4-12 (2) payment of costs of issuance of the certificates. 4-13 Sec. 20.971. PAYMENT OF FACILITIES CERTIFICATES. 4-14 (a) During the initial repayment period, a school district is not 4-15 obligated to make scheduled payments of principal or interest on 4-16 facilities certificates. 4-17 (b) A school district shall begin making scheduled payments 4-18 of principal and interest on facilities certificates in any 4-19 subsequent repayment period in which the agency assigns the 4-20 district a higher level of local participation under Section 20.967 4-21 of this code. The percentage of principal and interest that a 4-22 district must pay during a repayment period must equal the 4-23 difference between the district's current level of local 4-24 participation and the district's level of local participation in 4-25 the initial repayment period. 4-26 (c) Principal and interest payments on facilities 4-27 certificates are forgiven except for payments required under 4-28 Subsection (b) of this section. 4-29 Sec. 20.972. SUDDEN DECLINE IN PROPERTY VALUES. If a 4-30 natural or economic disaster occurs in a school district, the 4-31 agency may waive all or part of a scheduled payment on a facilities 4-32 certificate that is required under Section 20.971 of this code if 4-33 the agency finds that: 4-34 (1) the total of property values in the school 4-35 district has declined by 25 percent or more since the preceding tax 4-36 year; and 4-37 (2) the decline is not primarily due to: 4-38 (A) an increase in the amount of property that: 4-39 (i) is exempt from taxation; or 4-40 (ii) qualifies for special appraisal under 4-41 Chapter 23, Tax Code; or 4-42 (B) detachment of territory from the district. 4-43 Sec. 20.973. BOND TAXES. (a) The governing body of a 4-44 school district that issues bonds under the basic program or the 4-45 supplemental program shall levy, pledge, assess, and collect annual 4-46 ad valorem taxes sufficient to pay the principal and interest on 4-47 the bonds as they become due. 4-48 (b) The governing body of a school district that issues 4-49 facilities certificates under the basic program or the supplemental 4-50 program shall levy, pledge, assess, and collect annual ad valorem 4-51 taxes sufficient to pay the principal and interest on facilities 4-52 certificates as they become due, if required to do so under Section 4-53 20.971 of this code. 4-54 Sec. 20.974. BOND AND TAX ELECTIONS. (a) A school district 4-55 may not issue bonds or facilities certificates or levy taxes under 4-56 the basic program or the supplemental program unless authorized by 4-57 a majority of the qualified voters of the district voting at an 4-58 election: 4-59 (1) held for that purpose; or 4-60 (2) held before the effective date of this subchapter 4-61 to authorize the issuance of bonds. 4-62 (b) A proposition to authorize the issuance of bonds or 4-63 facilities certificates under the basic program or the supplemental 4-64 program must include the question of whether the governing body of 4-65 the district may levy, pledge, and collect annual ad valorem taxes 4-66 on all taxable property in the district sufficient, without limit 4-67 as to rate or amount, to pay the principal and interest on the 4-68 bonds or facilities certificates. 4-69 SECTION 2. Section 20.04, Education Code, is amended by 4-70 adding Subsection (f) to read as follows: 5-1 (f) For purposes of the limitation on the amount of tax bond 5-2 indebtedness of a district under Subsection (c) of this section, a 5-3 facilities certificate issued under Section 20.970 of this code is 5-4 not considered a bond. 5-5 SECTION 3. Sections 20.902 and 20.904, Education Code, are 5-6 amended to read as follows: 5-7 Sec. 20.902. GUARANTEE. On approval by the commissioner, 5-8 bonds issued under Subchapter A or H of this chapter, including 5-9 refunding bonds, are guaranteed by the corpus and income of the 5-10 permanent school fund. 5-11 Sec. 20.904. ELIGIBILITY. To be eligible for approval by 5-12 the commissioner, bonds must be issued under Subchapter A or H of 5-13 this chapter or under Chapter 503, Acts of the 54th Legislature, 5-14 1955 (Article 717k, Vernon's Texas Civil Statutes), by an 5-15 accredited school district. 5-16 SECTION 4. Chapter 1, Title 22, Revised Statutes, is amended 5-17 by adding Article 717w to read as follows: 5-18 Art. 717w. PUBLIC SCHOOL FACILITIES EQUALIZATION FUNDING 5-19 Sec. 1. DEFINITIONS. In this article: 5-20 (1) "Basic program" means the basic facilities 5-21 equalization program under Section 20.963, Education Code. 5-22 (2) "Instructional facility" has the meaning assigned 5-23 by Section 20.961, Education Code. 5-24 (3) "Supplemental program" means the supplemental 5-25 facilities equalization program under Section 20.964, Education 5-26 Code. 5-27 Sec. 2. BONDS. (a) The state treasurer shall issue general 5-28 obligation bonds to finance the basic program and the supplemental 5-29 program in the amount specified in the General Appropriations Act. 5-30 The amount of outstanding bonds issued under this article may not 5-31 exceed $750 million at any one time. Bonds that are or have been 5-32 refunded do not count against the limit on outstanding bonds. 5-33 (b) In connection with the issuance and administration of 5-34 bonds, the state treasurer may exercise the rights and powers 5-35 granted to an issuer by: 5-36 (1) Chapter 503, Acts of the 54th Legislature, 1955 5-37 (Article 717k, Vernon's Texas Civil Statutes); and 5-38 (2) the Bond Procedures Act of 1981 (Article 717k-6, 5-39 Vernon's Texas Civil Statutes). 5-40 Sec. 3. FUND. (a) The school facilities equalization fund 5-41 is in the state treasury. The fund shall be administered by the 5-42 state treasurer as directed by the Central Education Agency. The 5-43 state treasurer may create accounts in the fund as the state 5-44 treasurer considers necessary. 5-45 (b) The state treasurer shall deposit in the fund: 5-46 (1) the proceeds of all bonds sold under this article, 5-47 less the costs of issuance; 5-48 (2) all payments on facilities certificates under 5-49 Section 20.971, Education Code; 5-50 (3) any federal or private funds received and 5-51 designated for assisting school districts in acquiring, 5-52 constructing, renovating, or improving instructional facilities; 5-53 (4) any investment securities purchased by the fund; 5-54 (5) interest or other earnings derived from the 5-55 amounts described in Subdivisions (1) through (4) of this 5-56 subsection; and 5-57 (6) any amounts transferred for deposit into the fund. 5-58 (c) Money in the fund may be used only to provide aid to 5-59 qualifying school districts under the basic program or the 5-60 supplemental program. 5-61 Sec. 4. ALLOCATION BETWEEN PROGRAMS. The state treasurer 5-62 shall allocate the proceeds of bonds sold under this article, less 5-63 the costs of issuance, as follows: 5-64 (1) 75 percent shall be allocated to the basic 5-65 program; and 5-66 (2) 25 percent shall be allocated to the supplemental 5-67 program. 5-68 SECTION 5. The Public School Facilities Funding Act (Article 5-69 717t, Vernon's Texas Civil Statutes) is repealed. 5-70 SECTION 6. This Act takes effect only if the constitutional 6-1 amendment proposed by S.J.R. No. 4, 73rd Legislature, Regular 6-2 Session, 1993, authorizing state general obligation bonds to assist 6-3 school districts in financing facilities is approved by the voters. 6-4 If the proposed constitutional amendment is not approved by the 6-5 voters, this Act has no effect. 6-6 SECTION 7. The importance of this legislation and the 6-7 crowded condition of the calendars in both houses create an 6-8 emergency and an imperative public necessity that the 6-9 constitutional rule requiring bills to be read on three several 6-10 days in each house be suspended, and this rule is hereby suspended. 6-11 * * * * * 6-12 Austin, 6-13 Texas 6-14 January 26, 6-15 1993 6-16 Hon. Bob Bullock 6-17 President of the Senate 6-18 Sir: 6-19 We, your Committee on Education to which was referred S.B. No. 131, 6-20 have had the same under consideration, and I am instructed to 6-21 report it back to the Senate with the recommendation that it do not 6-22 pass, but that the Committee Substitute adopted in lieu thereof do 6-23 pass and be printed. 6-24 Ratliff, 6-25 Chairman 6-26 * * * * * 6-27 WITNESSES 6-28 FOR AGAINST ON 6-29 ___________________________________________________________________ 6-30 Name: Ann Dixon 6-31 Representing: Somerset ISD 6-32 City: Somerset x 6-33 Name: Lonnie Hollingsworth, Jr. 6-34 Representing: Tx Classroom Teachers Assn 6-35 City: Austin x 6-36 Name: Debra Haas 6-37 Representing: Legislative Education Board 6-38 City: Austin x