Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  May 30, 1997
      TO: Honorable Bob Bullock            Honorable James E. "Pete" Laney
          Lieutenant Governor                Speaker of the House
House of Representatives
Austin, Texas
          Austin, Texas
         FROM:  John Keel, Director    
In response to your request for a Fiscal Note on HB4 ( relating 
to residence homestead school property tax exemptions and tax 
limitations, allocating and dedicating certain state funds for 
education, limiting the increase in school property tax rates, 
and providing for certain additional revenue; making an appropriation) 
this office has detemined the following:
         Biennial Net Impact to General Revenue Funds by HB4-Conference Committee Report
Implementation of the provisions of the bill through the biennium 
ending August 31, 1999 would result in an impact of $1,044,554,000 
for the $10,000 residential homestead exemption increase, an 
increase in Lottery revenue of $299,912,000 and $170,000,000 
reduction in the amount of appropriations in House Bill 1.

     The bill would appropriate the following amounts:
  Fiscal Year Appropriation Net           
          out of        Reductions                                                           
          General       to                                                                   
          Revenue Fund  Appropriations                                                         
                         in House                                                            
                        Bill 1 out                                                           
                        of The                                                               
                        Revenue Fund                                                         
          0001          0001                                                                  
     1998  $520,000,000($140,000,000)                                                        
     1999   520,000,000  (30,000,000)                                                        
Fiscal Analysis
The bill would require the state 
to reimburse local school districts for lost ad valorem tax 
revenue from a $10,000 residence homestead exemption increase. 
 In addition, portability would be provided for the age 65-and-over 
tax freeze.   This provision of the bill would become effective 
on the effective date of the Act and would apply to school district 
property taxes imposed for and after the 1997 tax year.  For 
purposes of calculating state aid under the Foundation School 
Program, local district property values would be calculated 
as if the homestead exemptions were in effect for the 1996 tax 

The bill would increase the Basic Allotment 
from $2,387 per student to $2,396 per student.  The increased 
state aid from the homestead exemption, in conjunction with 
the increased basic allotment, would trigger an increase in 
the minimum teacher salary schedule.  Local districts would 
be held harmless for payroll increases required to meet the 
new minimum.  A guaranteed yield, set at $28 per student, would 
be created for new facilities, limited by appropriation.

 The amount appropriated in House Bill 1, Acts of the 75th Legislature, 
Regular Session, 1997, for the Foundation School Program--School 
Facilities is reduced to $200 million for the fiscal biennium 
ending August 31, 1999.

The State Lottery 
Act would be amended to increase the state share of lottery 
proceeds by reducing the percentage of gross lottery revenue 
that could be paid in prizes.  In addition, lottery proceeds 
currently transferred to general revenue would be transferred 
to the foundation school fund, on or before the 15th of the 

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.
The estimates in this note for school finance 
are based on district property values presented by the Comptroller 
of Public Accounts from the Preliminary January 1996 study (local 
values) and revised Legislative Budget Board projections of 
student enrollment growth of 2.2 percent per year statewide. 
  In addition, estimates for teacher payroll from the Texas 
Education Agency were used.

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           Probable Revenue   Probable Revenue   
            Savings/(Cost)     Savings/(Cost)     Gain/(Loss) from   Gain/(Loss) from                     
            from Foundation    from Foundation    School             School                               
            School             School Fund-Over   Districts-$10,000  Districts-Over                       
            Fund-$10,000       65 Tax Freeze      Homestead          65 Tax Freeze                        
            Homestead          Portability        Exemption          Portability                          
            0193               0193               LCL-SCHOOL         LCL-SCHOOL                            
       1998    ($511,665,000)                $0    ($511,665,000)                $0                  
       1998     (532,889,000)                 0     (532,889,000)      (12,482,000)                  
       2000     (554,893,000)      (12,482,000)     (554,893,000)      (11,791,000)                  
       2001     (577,704,000)      (24,273,000)     (577,704,000)      (11,000,000)                  
       2002     (601,350,000)      (35,274,000)     (601,350,000)      (10,178,000)                  
Fiscal Year Probable Revenue   Probable Revenue   Probable           
            Gain/(Loss) from   Gain/(Loss) from   Savings/(Cost)                                          
            Foundation         General Revenue    from General                                            
            School Fund -      Fund               Revenue Fund /                                          
            Lottery Proceeds                      Savings from                                            
                                                  Reduction in                                            
                                                  in House Bill 1                                         
            0193               0001               0001                                                     
       1998    $1,425,664,000  ($1,294,738,000)      $140,000,000                                    
       1999     1,559,403,000   (1,390,417,000)        30,000,000                                    
       2000     1,634,904,000   (1,457,486,000)                 0                                    
       2001     1,695,707,000   (1,511,429,000)                 0                                    
       2002     1,735,642,000   (1,547,023,000)                 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
               1998       ($240,739,000)
               1999        (333,903,000)
               2000        (389,957,000)
               2001        (417,699,000)
               2002        (448,005,000)
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
Local school districts would collect less in local property 
tax revenues due to the increased homestead exemption.  State 
aid to local districts would increase by a like amount.
   Source:            Agencies:   
                                         304   Comptroller of Public Accounts
                                         701   Texas Education Agency - Administration
                      LBB Staff:   JK ,RR ,BR ,DD