LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 17, 1997 TO: Honorable Bill Ratliff, Chair IN RE: Senate Bill No. 1795 Committee on Finance By: Wentworth Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB1795 ( Relating to the taxable value of property of a school district that does not offer each grade level from kindergarten to 12th grade.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB1795-As Introduced Implementing the provisions of the bill would result in a net negative impact of $(6,800,000) 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 would amend Subchapter B, Chapter 42 of the Texas Education Code by adding Section 42.106 relating to the taxable value of property for computing a district's local share of the Foundation School Program, or local fund assignment (LFA). The new section would apply to districts that do not offer all 12 grade levels and pay tuition to other district(s) for the education of its students. For these districts, the tax base for the calculation of the LFA would be adjusted by taking the amount of tuition paid into account. The bill would take effect September 1, 1997. Methodolgy The bill would reduce the local share of the Foundation School Program for those districts that do not offer all 12 grades and that pay tuition to a neighbor to educate its students. In turn, this would increase the state shares for affected districts. Fifty-one districts would be impacted by the bill. In employing the formula provided in the bill, the 51 districts would have cost the state an additional $3,382,667 for tier I had the bill been in effect in 1994-95. Although the bill does not apply to tier II directly, a reduction in property value could result in an increase in the measure of tax effort, which would increase tier II funding for qualifying districts. This may be offset, however, by the limitation of the tax rate cap on access to tier II monies. 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 Savings/(Cost) from Foundation School Fund 0193 1998 ($3,400,000) 1998 (3,400,000) 2000 (3,400,000) 2001 (3,400,000) 2002 (3,400,000) 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 ($3,400,000) 1999 (3,400,000) 2000 (3,400,000) 2001 (3,400,000) 2002 (3,400,000) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. Affected local districts would receive additional state aid of approximately $3.4 million each year. Source: Agencies: 701 Texas Education Agency - Administration 304 Comptroller of Public Accounts LBB Staff: JK ,RR ,DD