| TO: | Honorable Tom Craddick, Speaker of the House, House of Representatives |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB1 by Chisum (Relating to public school finance, property tax relief, public school accountability and programs, and related matters; making an appropriation.), As Passed 2nd House |
| Fiscal Year | Appropriation out of FOUNDATION SCHOOL FUND 193 |
|---|---|
| 2006 | $0 |
| 2007 | $3,825,000,000 |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2007 | ($3,922,431,140) |
| 2008 | ($8,694,799,484) |
| 2009 | ($10,130,480,806) |
| 2010 | ($9,851,799,502) |
| 2011 | ($10,349,194,039) |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
Probable Savings/(Cost) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) from SCHOOL DISTRICTS |
Change in Number of State Employees from FY 2007 |
|---|---|---|---|---|
| 2007 | ($83,535,564) | ($3,838,895,576) | ($1,657,400,000) | 21.0 |
| 2008 | ($212,311,118) | ($8,482,488,366) | ($5,846,600,000) | 21.0 |
| 2009 | ($268,346,145) | ($9,862,134,661) | ($5,873,600,000) | 21.0 |
| 2010 | ($273,403,763) | ($9,578,395,739) | ($5,918,700,000) | 21.0 |
| 2011 | ($274,821,559) | ($10,074,372,480) | ($5,960,000,000) | 21.0 |
In fiscal year 2007, this bill results in a total net state cost estimated to be $3.9 billion, which includes the cost of property tax relief, teacher salary increases, the high school allotment, enrichment, and a number of other programs as discussed below.
Approximately $2.1 billion represents the equivalent of a dollar-for-dollar replacement of state aid for local revenue in the school finance system, at the state compression percentage of 88.67. Another $802 million is the estimated cost of the $2,500 per MSS employee, and $319 million is for the $275 per ADA high school allotment. This additional state aid is flowed to districts through increases to the formulas and through a hold harmless payment if formula increases do not deliver a district’s entitlement.
Other provisions in the calculation of a district's revenue target, including guaranteeing the higher of 2007 current law revenue or 2006 revenue per WADA, allowing districts to include revenue gained in excess of entitlement from wealth-sharing arrangements, and including revenue for property value decline, add approximately $65 million in state costs in 2007.
The provision allowing districts to access pennies above their compressed rate results in additional local revenue and state equalization costs. For fiscal year 2007, it is assumed that districts, on a statewide average basis, access the equivalent of four pennies above their compressed rate. These 4 pennies would be equalized at the level of Austin ISD (estimated to be $41.22 per penny per WADA), with no recapture, at an estimated state cost of approximately $478 million in 2007.
The bill's reduction in district local revenue through tax relief, combined with the effect of netting out a district's recapture payments against its hold harmless revenue guarantee, reduces recapture payments statewide from an estimated $1.8 billion to a little less than $1.1 billion in 2007.
Due primarily to the reduction in local tax rate in FY 2008 and beyond, state costs of the bill increase significantly. State costs related to replacing lost local revenue due to tax compression are estimated to be nearly $6.6 billion in fiscal year 2008. For 2009 and beyond, the state compression percentage is based on appropriations from the property tax relief fund and any other revenue source. For the purposes of this fiscal note, it is assumed that the state aid for tax rate compression in 2009 and beyond remains equivalent to the 2008 percentage of 66.67 percent but to the extent appropriations for this purpose vary from this estimate, state costs will vary in a corresponding manner. Additionally, out-year increases are enhanced by a revenue benefit certain districts gain by using 2006 revenue per WADA as their revenue target, but are somewhat offset by the bill's revenue target calculation, which limits the revenue benefit certain districts otherwise would receive from property value increases.
Out-year costs of the teacher salary increase and the high school allotment will grow based on growth in MSS employees and high school ADA, respectively. Additional state costs are driven by districts accessing additional pennies above their compressed rate.
On top of the assumption of a statewide average of four enrichment pennies in 2007, it is assumed that districts will add another 2 pennies of tax effort in each year of 2008 to 2011. In 2009, under an assumption of 8 enrichment pennies levied, 6 would be equalized at the Austin ISD level, with another 2 at $31.95, generating an estimated net state cost of $940 million.
The bill would require that the final installment of districts' annual entitlement under the Foundation School Program be made on or before the 25th of August in each fiscal year, beginning in fiscal year 2009, which would incur a state cost of $800 million in fiscal year 2009.
The bill’s provision relating to property values in certain school districts is estimated to increase costs to the Foundation School Program of $300,000 per year beginning in fiscal year 2009.
The state cost to hold the School for the Blind and Visually Impaired and the School for the Deaf harmless for the loss of school district revenue is estimated to be approximately $200,000 in 2007, increasing to approximately $600,000 in 2008 and beyond. The state aid increase due to the recognition of district payments into a TIF fund as required by the bill are estimated to be $14 million in 2007, $47 million in 2008 and increasing by roughly 13 percent each year thereafter.
The bill would authorize the use of federal funds, including consolidated administrative or innovative program funds, to fund several provisions of the bill. If sufficient federal funds are not available, Section 13.02 authorizes the use of state General Revenue funds.
The bill would add section 1.005, Education Code, to authorize the commissioners of education and of higher education to establish up to three centers for education research. The cost is estimated at $3 million in General Revenue in fiscal year 2007. After the first year, the bill stipulates that the centers be supported through gifts, grants, and fees.
The bill would add section 7.008, Education Code, to require the commissioner of education to contract with a third-party to develop and implement procedures to make all school district and campus level financial and academic performance data available on the TEA website. The cost is estimated at $750,000 in General Revenue in fiscal year 2007.
The bill would add section 7.009, Education Code, to require TEA in coordination with the Legislative Budget Board (LBB) to establish an online clearinghouse of information relating to the best practices of school districts for instruction, resource allocation, and business practices. The bill would require TEA to contract with one or more third-party contractors to develop a system of collecting and evaluating best practices of school districts. The bill would authorize the commissioner to purchase curriculum and other instructional tools identified by the clearinghouse for use by school districts. State cost is estimated at $3.5 million in general revenue in fiscal year 2007 and $350,000 in each subsequent year.
The bill would add section 44.0061, Education Code, to require the commissioner of education to contract with a third party to conduct a review of school district accounting systems, and to report the results of the review to the legislature before January 1, 2007. The cost of the review is estimated at $300,000 in General Revenue in fiscal year 2007.
The bill would amend section 44.007, Education Code, to require the SBOE to evaluate school district accounting software and report to the legislature by January 1, 2007 the benefits of providing school districts with standard accounting software. The cost of the study is estimated at $2 million in fiscal year 2007.
The bill would add section 44.011, Education Code, to require the commissioner to develop annual spending targets for school district expenditures. The bill would require local school boards to pass a resolution in order to exceed the spending targets. The estimated cost for developing and maintaining annual spending targets is $1.1 million in General Revenue in fiscal year 2007 and $100,000 in each subsequent year.
The bill would add section 7.010, Education Code, to establish a statewide electronic student records system according to standards approved by the commissioners of education and higher education to be implemented by the beginning of the 2007-08 school year. State cost for development is estimated at $2 million in general revenue in fiscal year 2007 with on-going maintenance costs of $300,000 in each subsequent year.
The bill would add section 39.034, Education Code, to require the commissioner of education to develop a measure of annual improvement in student achievement. The cost to develop the measure is estimated at $2,000,000 in General Revenue in fiscal year 2007.
The bill would add and amend several provisions in Chapter 39, Education Code, concerning sanctions imposed on campuses, including a requirement that a technical assistance team be assigned to each campus that fails to meet specified accountability system standards. State costs for the management of intervention operations are estimated at $176,000 in general revenue each year, beginning in fiscal year 2007.
The bill would add Subchapter K, Chapter 39, Education Code, to specify procedures by which a district may challenge an accountability rating or sanction. The process would require the district to appeal the decision to SOAH. Assuming the provisions would generate 33 SOAH hearings in fiscal year 2007at a cost of $6,000 per hearing, the cost is estimated at $198,000 in General Revenue in fiscal year 2007. Costs would increase to $360,000 in fiscal year 2008 for an estimated 60 hearings and would be expected to level off to a $150,000 annual cost in subsequent years.
The bill would add section 11.203, Education Code, to require TEA to develop and operate a school leadership pilot program for principals and persons interested in becoming principals. The bill would require TEA to conduct an evaluation of the program’s effectiveness and report the results of the evaluation by January 1, 2009. The program would be limited to funding of $3.6 million in General Revenue for fiscal year 2007, with level costs in subsequent years.
The bill would add section 12.133, Education Code, to entitle charter school employees who would be subject to the minimum salary schedule if they were employed by a school district to a salary increase of $2,500 or $2,000 beginning in fiscal year 2007 dependent on the charter school’s participation in the Texas School Employees Group Health Coverage program (TRS-Active Care). The bill would require charter schools that are TRS-Active Care participants to provide a wage increase beginning in fiscal year 2007 equivalent to an average of $500 per full-time and $250 per part-time non-administrator employees not eligible for the $2,500 increase. The bill would provide state aid in like amounts to charter schools beginning in fiscal year 2007. The estimated cost of additional state aid is $13 million in general revenue in fiscal year 2007, increasing to $16 million by fiscal year 2011. Increases in public education employee salaries have an impact on the state’s contributions to TRS. At the current state contribution rate of 6 percent, the additional state contribution to TRS associated with the salary provisions in this section is $631,000 in general revenue in fiscal year 2007, increasing to $812,000 by fiscal year 2011.
The bill would amend section 19.007, Education Code, to entitle classroom teachers, full-time librarians, full-time counselors, and full-time school nurses employed by the Windham school district to a salary increase of $2,000 beginning in fiscal year 2007. Section 4.03 would provide state aid to the Windham school district in amounts sufficient to fund the salary increase. The estimated cost in additional state aid to the Windham School district for this purpose is $1.9 million per year in General Revenue. The additional cost of state contributions to TRS associated with these provisions would be an estimated $110,000 per year in General Revenue.
The bill would amend section 21.402, to entitle school district employees subject to the state minimum salary schedule to a $2,500 salary increase in 2006-07. At the current state contribution rate of 6 percent, the estimated cost of increased state contributions to TRS associated with the proposed salary increase would range from $41 million in general revenue in fiscal year 2007 to $44 million in fiscal year 2011. Estimated state contributions to TRS have been adjusted to reflect changes to the compensation supplement program contemplated elsewhere in this bill.
The bill would add section 21.415, Education Code, to authorize school districts to provide mentors to each classroom teacher with fewer than two years of teaching experience, and direct the commissioner to provide funding to school districts from funds appropriated for that purpose. State cost is estimated at $13.3 million in general revenue in fiscal year 2007, increasing to $14.4 million by fiscal year 2011.
The bill would add new Subchapter N, Chapter 21, Texas Education Code to establish an awards for student achievement program under which the commissioner of education would provide grants to eligible campuses based on the percentage of educationally disadvantaged students and the campus accountability rating. The commissioner would determine grant award amounts, not to exceed $100 million in general revenue in fiscal year 2007. In fiscal year 2008 and subsequent years, awards would be paid from the amounts not to exceed $100 million per year deposited to the credit of the Educator Excellence Fund to be established within Subchapter O, Chapter 21, Education Code under the bill.
The bill would add new Subchapter O, Chapter 21, Education Code to establish an educator excellence awards program. The provisions would require the commissioner of education to provide grants to school districts for the purpose of providing incentive payments to employees under the terms of locally developed awards plans approved by the commissioner. The bill would establish an educator excellence fund within the general revenue fund and would require the commissioner of education to deposit an amount equal to $840 multiplied by the number of classroom teachers in fiscal year 2008 increasing to $1,000 per teacher in fiscal year 2009 and subsequent years. Funding for each district would be determined on the basis of average daily attendance. State cost is estimated at $261 million in general revenue in fiscal year 2008, increasing to $328 million by fiscal year 2011.
Stipends or bonuses received by teachers under the Awards for Student Achievement and the Educator Excellence Awards program would be considered compensation for purposes of contributions to TRS. Additional state TRS contributions associated with these programs are estimated at $4.5 million in fiscal year 2007, increasing to $10.9 million by fiscal year 2011.
The bill would reenact and amend Subchapter D, Chapter 22 of the Texas Education Code to convert the compensation supplement for public education employees to an authorization to allow school district employees who are members of TRS, employees of charter schools that participate in TRS Active Care, and employees of regional education service centers to elect to defer a portion of salary for the purpose of contributing to a cafeteria plan or paying health care premiums through premium conversion. Administrators would not be eligible to elect a deferral under this section.
Deferral amounts would be limited by applicable federal law. The reenactment and amendment of this subchapter would result in a savings to the state of $275 million in fiscal year 2007 in funds appropriated for the purpose of funding the compensation supplement as it exists in current law. Under current law, the rate at which the compensation supplement is paid is to be set by rider in the General Appropriations Act. Assuming that the rate would have remained at the current level established by the legislature, $500 per full-time employee and $250 per part-time employee, in future biennia, the provisions of this bill would result in a savings of $297 million in general revenue million in fiscal year 2008, increasing to $313 million in fiscal year 2011.
Up to $1,000 of deferred compensation would not be considered compensation for the purpose of retirement contributions to TRS.
The bill would entitle full-time and part-time non-administrative school district employees not subject to the minimum salary schedule to a wage increase of $500 and $250 respectively beginning in fiscal year 2007. The estimated increase in the state’s contribution to TRS associated with the wage increase is between $2.5 million and $3.0 million annually. Estimated state contributions to TRS have been adjusted to reflect changes to the compensation supplement program contemplated elsewhere in this bill.
The bill would add section 42.2513, Education Code, to provide state aid to school districts sufficient to fund the salary increases to school district support staff required by this bill. State cost is estimated at $141 million in general revenue in fiscal year 2007, increasing to $151 million by fiscal year 2011.
The bill would add sections 28.008 and 28.009, Education Code, to require the commissioner of education and the Higher Education Coordinating Board (THECB) to establish vertical teams composed of high school and higher education faculty for the purpose of aligning high school and higher education curricula and expectations, including the joint development of courses aimed at assisting students requiring additional preparation in advance of college-level work. The cost of curriculum development is estimated at $1,000,000 in fiscal year 2007.
The bill would add section 29.124, Education Code, to establish Texas Governor’s Schools to be funded through grants of $750,000 per year per approved governor’s school program. Assuming that two programs were established, the state cost is estimated at $1.5 million in general revenue per year beginning in fiscal year 2007.
The bill would add sections 39.113 and 39.114, Education Code, to require the Texas Education Agency (TEA) to provide guidance and develop evaluation standards on high school completion and success and college readiness programs. This section would direct the use of funds received under the high school allotment provided through provisions in Article I of this bill.
The bill would add sections 61.0761, 61.0762, and 61.0763, Education Code, to require the P-16 Council to develop a college-readiness and success strategic plan. This section would require THECB to implement a course redesign project aimed at improving the delivery and cost-effectiveness of college-level courses. Total costs for the provisions of this section are estimated at $11.8 million in fiscal year 2007 and $7.2 million annually in subsequent years. These costs represent functions that would be required for TEA and THECB.
The bill would amend section 29.153, Education Code, to make children of active duty members of the armed forces of the United States or members of the armed forces of the United States who are injured or killed while on active duty eligible for enrollment in state-funded prekindergarten classes. Based on an average cost of $4,390 per student in average daily attendance enrolled in prekindergarten programs, the annual cost to the Foundation School Program is estimated at $6.3 million.
The bill would amend section 32.157, Education Code, to authorize TEA to use undedicated and unobligated General Revenue funds for the purpose of support the Technology Immersion Pilot Project. Currently the program is supported with federal funds. Based on annual program costs, the cost is estimated at $5.5 million in General Revenue annually.
TEA administrative cost associated with the provisions of the bill is estimated at $855,000 in fiscal year 2007 and $800,000 in each subsequent fiscal year to fund 13 full-time-equivalent employees. TEA technology costs associated with the bill and not included in costs explained above are estimated at $775,000 in fiscal year 2007, $625,000 in fiscal year 2008, and $285,000 in each subsequent year. The estimated THECB administrative cost associated with the provisions of the bill is $650,000 in each year to fund 8 full-time-equivalent employees.
The bill would repeal subsection (a) of Rider 97 following the appropriations to TEA in the 2006-07 General Appropriations Act, 79th Legislature, Regular Session, 2005.
| Source Agencies: |
| LBB Staff: | JOB, SD, UP
|