LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
March 7, 1995
TO: Honorable Tom Craddick, Chair IN RE: Committee Substitute
Committee on Ways & Means for House
House of Representatives Bill No. 900
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on House Bill No.
900 (relating to a franchise tax and property tax credit for
certain corporations for payment of certain tuition) this office
has determined the following:
The bill would establish a franchise tax credit for corporations
that fund private school scholarships, or pay tuition for out-of-
district public schools, for disadvantaged children. A local
school district governing board would be authorized to provide a
credit against property taxes. In addition, the bill would
require the commissioner of education to reduce the average daily
attendance of a school district for the year preceding the first
year a student attends private school under a scholarship funded
by a corporation.
The amount of the credits is limited to the lesser of the cost of
the tuition or 50 percent of the state aid per student under the
Foundation School Program.
The bill would be effective 90 days after passage. If approved
by local school boards for the 1995-96 fiscal year, the property
tax credit would be effective for payments due December 31, 1995.
The franchise tax credit would be effective for tax reports
originally due on or after January 1, 1996.
The credit is limited to the amount of tuition or 50 percent of
the state aid per student whichever is less. In 1994-95, the
average state aid per student is approximately $2,250, which
would cap the credit amount at approximately $1,125 per student.
In terms of out-of-district credits, the local district
traditionally pays the amount of the out-of-district tuition.
The funding of out-of-district tuition through franchise tax
credits represents a new cost to the state.
Reducing a district's ADA in the year prior to first year of
attendance under the scholarship would cause the district to lose
the full cost of the tier 1 regular program allotment, technology
allotment and teacher compensation allotment, plus one weighted
ADA in the second tier. On average for the 1994-95 school year,
the combined loss of these local district programs would be
$3,400 for each student receiving a scholarship. For 85 percent
of the students the entire $3,400 would be a loss in state aid.
The loss in state aid for the remainder would be approximately
$2,500 per student.
The number of eligible students enrolled in public schools is
projected to be 1.8 million in 1996. In addition, there are an
estimated 5,500 students entering private schools who would be
eligible for the scholarship.
For every 1,000 students transferring from public schools to an
out-of-district public school, the state could lose up to $1.125
million in franchise tax credits.
For every 1,000 students transferring from public schools to
private schools, the net savings to the state could be up to
$2.250 million in reduced state aid to local school districts.
For every 1,000 first year students claiming a scholarship for a
private school who would have gone to private school anyway, the
state could lose up to $1.125 million in franchise tax credits.
In addition, there would be a loss to local school districts of
up to $3.4 million.
If the bill is effective for the 1994-95 school year, students
that receive a scholarship in 1995-96 would result in reductions
to 1994-95 entitlements for local districts. This would affect
the settle-up process for the 1994-95 school year which takes
place in 1995-96.
Assuming one percent of the eligible student population takes
advantage of the program, the loss in franchise tax revenue would
be $42.6 million for the 1996-97 biennium.
The Comptroller indicates that the loss in franchise tax revenue
could be greater if each student participating is allowed to
receive more that one scholarship.
Source: Comptroller of Public Accounts, Central Education
Agency
LBB Staff: JK, DD, DH, RS, DF