LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session May 14, 1997 TO: Honorable Paul Sadler, Chair IN RE: Senate Bill No. 841, Committee Report 2nd House, Substituted Committee on Revenue and Public Education Funding By: Cain House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB841 ( relating to ad valorem taxation.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB841-Committee Report 2nd House, Substituted FN Revision 1 Implementing the provisions of the bill would result in a net impact of $0 to General Revenue Related Funds through the biennium ending August 31, 1999. 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 The bill is an omnibus property tax bill. It bill would make numerous changes to the Tax code in the area of appraisal district administration, appraisal methods, transfer of over-65 tax freeze and limits in the growth in appraised value of residential homesteads and limits on the frequency of value increase. Methodolgy The bill would allow persons 65 years of age or older who move from one homestead to another to continue a tax freeze that they would otherwise loss under current law, creating a cost to the state. A mobility factor was estimated by dividing the national number of 65 and over homesteads moving within their state by the total US number of 65 and over homesteads. The mobility factor times the number of 65 and over homesteads in Texas equals the number of Texas 65 and over homesteads moving. The number of Texas 65 and over homesteads moving times the average freeze value loss times the 1996 average tax rate equals the yearly levy loss from movers. The levy loss was trended over the projection period. Each year's levy loss, net of 65 and over deaths is cumulative. The school funding formula would reimburse school districts after a one-year lag, resulting in a state cost and a corresponding reduction in the cost to school districts. The other provisions of the bill would also result in increased cost to the state and units of local government. 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 Revenue Probable Revenue Gain/(Loss) from Gain/(Loss) to General Revenue School Districts Fund 0001 LCL-SCHOOL 1998 $0 $0 1998 0 (49,500,000) 2000 (49,500,000) (14,400,000) 2001 (63,900,000) (13,800,000) 2002 (77,700,000) (12,700,000) 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 $0 1999 0 2000 (49,500,000) 2001 (63,900,000) 2002 (77,700,000) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. Source: Agencies: LBB Staff: JK ,RR ,JD ,BR