LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 26, 2001 TO: Honorable Bill Ratliff, Lieutenant Governor Honorable James E. "Pete" Laney, Speaker of the House FROM: John Keel, Director, Legislative Budget Board IN RE: HB2879 by Sadler (Relating to public school finance.), Conference Committee Report ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB2879, Conference Committee Report: negative impact of * * $(448,800,000) through the biennium ending August 31, 2003. * * * * The Conference Committee Report on Senate Bill 1 includes funding * * of $448,800,000 for these purposes. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(246,700,000) * * 2003 (202,100,000) * * 2004 (201,800,000) * * 2005 (201,800,000) * * 2006 (201,800,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Change in Number of State * * Year Foundation School Fund Employees from FY 2001 * * 0193 * * 2002 $(246,700,000) 2.0 * * 2003 (202,100,000) 2.0 * * 2004 (201,800,000) 2.0 * * 2005 (201,800,000) 2.0 * * 2006 (201,800,000) 2.0 * *************************************************************************** Fiscal Analysis The bill makes a number of substantive changes to the Foundation School Program, particularly in the financing of school district debt, and authorizes the allocation of funds to various education programs. Methodology Section 2 of the bill allows certain districts not serving all grades to exercise an option for three years to have their wealth per-student adjusted in order to maintain a 1999-2000 amount of state and local revenue; the provision expires September 1, 2004. Eligible districts may not teach all twelve grades, and must forego any credit for tuition paid against recapture expenses and change in the taxable value of property used to compute state aid that results from recognition of tuition paid. An analysis of the implications of changing the law indicates a reduction in recapture revenue of $11 million from the twelve districts for the biennium. Section 3 of the bill provides additional state aid to school districts experiencing declines of 2 percent or more in average daily attendance. The bill limits allocations for this provision to $22 million for the biennium. Section 4 of the bill directs that the commissioner develop a rule to calculate educationally disadvantaged students in districts with no campuses participating in the federal free or reduced lunch program; as the provision increases the number of students who many be counted as being entitled to the compensatory education allotment, a cost to the Foundation School Program is created. The Texas Education Agency estimates that 1,796 students were identified as low-income by the 81 school districts and charter schools which do not participate in the free or reduced price lunch program. The estimated compensatory education allotment per student in the 81 districts in question is about $700, with an additional increase to weighted pupils created by the allotment generating $400 per student in tier II. While the wording of a commissioner's rule implementing the provision is not known at this time and may impact the actual cost of the bill, it is estimated that based on the data above that the provision would cost approximately $4 million for the biennium. Section 10 of the bill increases the limit on the number of pennies of eligible debt that may be covered under the Existing Debt Allotment (EDA) from $0.12 to $0.29 per $100 of valuation in 2002 and moves forward the date by which school district debt is eligible for funding. These provisions are estimated to cost $205 million for the 2002-03 biennium. Section 12 repeals two provisions: it repeals Section 42.152 (t) which directs the commissioner of education to reduce the effective tier II yield in order to ensure that the calculation of weighted students is not impacted by set-asides from the Foundation School Program. {The fiscal implication of this repeal is reflected in the fiscal note for HB 3343 in the context of the increase in the funding formulas.} Section 46.034 (d) is also repealed; this section allows the commissioner to extend the number of pennies in the EDA if funds are available; this current law provision is amended in Section 14 below. Section 14 provides a mechanism by which certain programs may receive additional funding if the commissioner identifies a funding surplus in the Foundation School Program (FSP). In the event district property values exceed the estimated values used for state aid purposes, the commissioner is directed to create a surplus in the FSP by using the higher values for current year payments. In 2002, the commissioner is directed to use such funds to provide additional state aid to districts experiencing rapid decline in property values under 42.2521 first, and then to use funds to implement the optional homestead provision of 42.2522 and finally to make adjustments under 42.2531. In 2003, the list of eligible programs is expanded to include extension of the Existing Debt allotment to $0.29 first and expansion by $50 million of the Instructional Facilities Allotment. The items identified above fall 3-5 on the priority list in 2003. Sections 15-19 direct the commissioner in the use of appropriated funds for purposed related to reading, math, Communities in Schools and teacher training. Section 20 directs the allocation of certain funds appropriated in SB 1, 77th Legislature. The total allocation is $209.3 million for the 2002-03 biennium (An additional $205 million allocated in this section for the Existing Debt Allotment is noted under section 10 in this fiscal note). Section 21 directs the reduction of certain funds appropriated in SB 1, 77th Legislature. The total reduction is $2.5 million for the 2002-03 biennium. Local Government Impact The provisions above tend to increase funds available to school districts. Source Agencies: LBB Staff: JK, SD, PF, UP