LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session April 10, 2001 TO: Honorable Paul Sadler, Chair, House Committee on Public Education FROM: John Keel, Director, Legislative Budget Board IN RE: HB3418 by Grusendorf (Relating to the financing of public school facilities.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB3418, As Introduced: negative impact of $(84,000,000) through * * the biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(45,500,000) * * 2003 (38,500,000) * * 2004 (263,500,000) * * 2005 (263,500,000) * * 2006 (413,500,000) * **************************************************** All Funds, Five-Year Impact: ***************************************************** * Fiscal Year Probable Savings/(Cost) from * * Foundation School Fund * * 0193 * * 2002 $(45,500,000) * * 2003 (38,500,000) * * 2004 (263,500,000) * * 2005 (263,500,000) * * 2006 (413,500,000) * ***************************************************** Fiscal Analysis Section 46.034 of the bill would increase the tax rate limitation on state assistance from the existing debt allotment (EDA) program from $0.12 to $0.29. Section 46.004 of the bill requires the state, in making instructional facilities allotment (IFA) awards, to recalculate the allotment amount every year based on current year average daily attendance (ADA), instead of based on the district's ADA in the biennium in which the bonds were issued (current law). This provision would not generate significant additional state cost; however, together with the bill's amendments to the EDA, this amendment could shift the state aid paid in the IFA and EDA on an annual basis. Under current law, the EDA provides state aid for debt that a district levied and collected taxes for in school year 1998-99. Section 46.033 of the bill would eliminate this requirement and require school districts to certify to the commissioner of education prior to January 1 of the second year of the biennium the amount of debt payments due in the following biennium in order to be eligible for EDA funding. After the bill would take effect on September 1, 2001, the next January 1 of the second year of a biennium would occur on January 1, 2003. Thus, there would be no EDA-related cost to this bill for the 2002-03 biennium. Methodology The increase in the limitation on assistance for EDA from $0.12 to $0.29. In fiscal year 2001, the ceiling rate for the EDA was raised from $0.12 to $0.29 per $100 of valuation, at a cost of approximately $62 million. It is estimated that increasing property values and adjustments for student enrollment projections would result in an estimate cost for fiscal year 2002 of $45.5 million over current law cost, and $38.5 million for fiscal year 2003. Regarding section 46.033 of the bill: because January 1 of the second year of the current biennium has already passed, no districts have certified their eligible debt payments to the commissioner for EDA assistance in the 2002-03 biennium. Therefore, for the purposes of this fiscal note, it is assumed that there would be no cost to the state in the 2002-03 biennium. The next opportunity to certify EDA-eligible debt would be January 1, 2003, and so the state costs of the EDA would begin in the 2004-05 biennium. The bill would roll the EDA eligible date forward two years every biennium, starting with the 2004-05. There would be two biennia of debt to "catch up" to for the 2004-05 biennium. As a result, and based on a review of previous applications for the IFA for which funding was not available in the current biennium, the estimated state cost of recognizing these debts in the EDA is approximately $75 million per year from the 2001-02 biennium, and an additional $150 million from the 2002-03 biennium, for a total of $225 million. Due to the ambiguity of this provision, it is possible that the intent of the bill is to begin the certification process in January 2001. If this is the case, there would be a state cost in the 2002-03 biennium; it is estimated that the state cost to recognize debt from the 2001-02 biennium would be approximately $75 million per year. Local Government Impact There is no net fiscal impact upon school districts. Districts receiving the EDA would be required to reduce related tax effort by a corresponding amount to reflect this increase in state assistance. Source Agencies: 701 Texas Education Agency LBB Staff: JK, CT, JM, PF