LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 29, 1997
TO: Honorable Kenneth Armbrister, Chair IN RE: House Bill No. 4,
As Engrossed
Committee on Tax Reform & Public
School Finance By: Craddick
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB4 ( relating
to funding public elementary and secondary schools and providing
tax relief and equity and to the imposition, administration,
enforcement, and collection of, and allocation of the revenue
from, various state and local taxes; providing for a cost control
committee; providing penalties.) this office has detemined the
following:
Biennial Net Impact to General Revenue Funds by HB4-As Engrossed FN Revision 1
Implementing the provisions of the bill would result in a net
negative impact of $(892,288,573) to General Revenue Related
Funds through the biennium ending August 31, 1999. It is anticipated
that $1 billion of available revenue from the 1998-99 biennium
will be appropriated by the Legislature for property tax relief.
The original fiscal note for HB4, as engrossed, interpreted
a floor amendment affecting the rollback election provisions
to be cumulative for fiscal years 2000, 2001, and 2002 and assumed
it would apply to state funding. In reviewing the floor amendment
with legal counsel, this office has determined that the amendment
does not affect state funding. The estimate has been revised
to reduce the cost by over $350 million per year in 2000, 2001,
and 2002.
The bill would make no appropriation but could
provide the legal basis for an appropriation of funds to implement
the provisions of the bill.
Fiscal Analysis
SCHOOL FINANCE
The bill would repeal recapture. The bill amends
the Foundation School Program's two-tiered funding formulas
with a single-tiered, guaranteed yield system for maintenance
and operations with a maximum school district tax rate of 75
cents per $100 of valuation on residential property. The guaranteed
yield would be set at $49.60 per penny per student. The M&O
guaranteed yield would be based on residential property only.
Additional state aid would be provided for districts unable
to generate the level of revenue they would be projected to
have available in 1998-99 under current law. The bill would
also establish state assistance for school district facilities
through a separate guaranteed yield for existing debt and an
additional guaranteed yield for new debt.
PROPERTY TAX RESPONSE
The
bill would authorize a five cent tax increase. If half of the
school districts increase tax rates beginning in the year 2000,
the increase would be as follows:
5 cent increase = $250
million
2.5 cent increase = $125 million
0 cent increase
= no cost
STATE AD VALOREM TAX
The bill would establish
a state property tax of $1.05 per $100 of value on business
property. The provisions in this bill would create a gain to
the General Revenue Fund, earmarked for public education, and
a loss of local revenue to school districts, beginning in fiscal
1998.
FRANCHISE TAX BASE EXPANSION
The bill would amend
Chapter 171 of the Tax Code to make a series of changes to the
state's franchise tax. Non-corporate business entities other
than sole proprietors would be included under the franchise
tax.
SALES TAX BASE EXPANSION
The bill would expand the
taxable base of the sales tax to include previously exempted
items or services. Items that became taxable as a result of
this article would be subject to local government sales taxes.
Cities and counties would hold elections to select the manner
in which the additional sales tax revenue would be spent.
INCREASE
AND EXPAND INSURANCE PREMIUM TAXES
The bill would amend various
articles in the Insurance Code to eliminate certain insurance
premium tax credits and exemptions.
LOTTERY SURCHARGE
The
bill would amend the State Lottery Act to increase the state
share of lottery proceeds through a reduction of the prize percentage.
OTHER
AMENDMENTS TO THE TAX CODE
The bill would also amend the Tax
Code to increase excise taxes on Alcohol and Tobacco Products.
It would repeal the motor fuels tax exemption on aviation fuel
and the exemption for certain commercial vessels. It would
increase various other taxes.
ADMINISTRATIVE COST
The bill
would increase the tax base by an estimated 700,000 new taxpayers.
All major activities of the Comptroller's Office would be affected
by the increased workload.
Assuming that voters would approve
the amendment proposed by CSHJR 4 in 1997, the Comptroller's
Office would require an emergency appropriation of $2 million
in fiscal 1997 to begin educating and notifying the new taxpayers,
training current staff, hiring contract programmers, and purchasing
additional computer hardware.
GENERAL
Some provisions of
the bill, are contingent on the adoption of a constitutional
amendment proposed by House Joint Resolution 4, Seventy-fifth
Legislature, Regular Session, 1997. The proposed constitutional
amendment will be submitted to the voters at an election to
be held August 9, 1997.
Methodolgy
SCHOOL FINANCE
To estimate these effects a school finance model
was run.
The estimates in this note for school finance
are based on projections of district property values provided
by the Comptroller of Public Accounts and Legislative Budget
Board projections of student enrollment growth of 2 percent
per year statewide.
ALL OTHER REVENUE ESTIMATES
The estimates
in this note for all other revenues are based on projections
provided by the Comptroller of Public Accounts.
The probable fiscal implications of implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable Probable Revenue Probable Revenue Probable Revenue
Savings/(Cost) Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from
from Foundation General Revenue General Revenue General Revenue
School Fund Fund - State Ad Fund - Expansion Fund - Expansion
Valorem Tax on of State of State Sales
Business Property Franchise Tax Base Tax Base
0193 0001 0001 0001
1998 ($6,090,300,000) $4,031,454,000 $242,336,000 $421,809,000
1998 (6,483,000,000) 4,057,564,000 290,947,000 572,804,000
2000 (6,674,200,000) 4,119,568,000 304,556,000 611,615,000
2001 (6,861,400,000) 4,177,835,000 322,336,000 643,011,000
2002 (6,974,000,000) 4,237,316,000 352,636,000 673,203,000
Fiscal Year Probable Revenue Probable Revenue Probable Revenue Probable Revenue
Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from
General Revenue General Revenue General Revenue Foundation
Fund - Insurance Fund - Lottery Fund - Other Tax School Fund
Premium Tax Increases
0001 0001 0001 0193
1998 $168,756,000 ($1,294,738,000) $587,760,000 $1,488,326,000
1999 229,588,000 (1,390,417,000) 823,081,000 1,668,603,000
2000 234,126,000 (1,457,486,000) 819,081,000 1,749,617,000
2001 238,773,000 (1,511,429,000) 856,875,000 1,814,975,000
2002 243,560,000 (1,547,023,000) 848,290,000 1,858,723,000
Fiscal Year Probable Revenue Probable Revenue Probable Probable Change in Number
Gain/(Loss) to Gain/(Loss) to Savings/(Cost) Savings/(Cost) of State
local School Counties/Cities Comptroller Office of Employees from
Districts Administrative Attorney General FY 1997
Cost - General Administrative
Revenue Fund Cost - General
Revenue Fund
LCL-SCHOOL LCL-COUNTY 0001 0001
1998 ($6,486,000,000) $56,779,000 ($109,798,970) ($1,264,028) 296.0
1999 (6,760,000,000) 91,132,000 (104,597,079) (1,201,496) 296.0
2000 (7,079,000,000) 96,669,000 (107,700,983) (1,201,496) 369.0
2001 (7,357,000,000) 101,022,000 (106,637,767) (1,201,496) 300.0
2002 (7,646,000,000) 105,118,000 (108,706,753) (1,201,496) 300.0
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 ($555,659,998)
1999 (336,628,575)
2000 (402,025,479)
2001 (426,863,263)
2002 (417,203,249)
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
Source: Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK ,RR ,BR ,DD