81(R) HB 1273 - Introduced version

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION


May 5, 2009

TO:	Honorable Rob Eissler, Chair, House Committee on Public Education

FROM:	John S. O'Brien, Director, Legislative Budget Board

IN RE:	HB1273 by Kolkhorst (Relating to reporting of and an adjustment under the school finance system for benefits received by school districts or associated foundations or other entities in connection with agreements under the Texas Economic Development Act.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for HB1273, As Introduced: a positive impact of $75,100,000 through the biennium ending August 31, 2011.

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
2010	$24,000,000
2011	$51,100,000
2012	$78,900,000
2013	$83,200,000
2014	$82,800,000

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from Foundation School Fund 193	Probable Revenue Gain/(Loss) from School Districts
2010	$24,000,000	($24,000,000)
2011	$51,100,000	($51,100,000)
2012	$78,900,000	($78,900,000)
2013	$83,200,000	($83,200,000)
2014	$82,800,000	($82,800,000)

The bill would provide for adjustment to entitlements a school district might receive from the state for entering into an agreement under Chapter 313, Tax Code.

Under the bill, if a school district or another entity created to benefit the district’s students received a payment or other benefit provided in connection with an agreement with a property owner under Chapter 313, Tax Code, the commissioner would be required to reduce a school district’s entitlements under Chapter 42, Education Code by an amount equal to the “associated benefit” received. The commissioner would also be required to adjust the amounts necessary for a district to comply with the wealth equalization provisions of Chapter 41, Education Code by an amount equal to the value of any benefits received.

The bill would take effect September 1, 2009.

The bill would have an impact on the Foundation School Program (FSP) due to the reductions in state aid or increases in recapture required by the bill.

School district behavior in response to the provisions of the bill is uncertain. In order to provide an estimate for the purposes of the fiscal note, the office of the Comptroller of Public Accounts (CPA)analyzed existing Texas Economic Development Act (Chapter 313, Tax Code) program data to estimate probable annual school district levy loss due to the limitation and tax credit provisions of Chapter 313 for all existing agreements. The size and character of Chapter 313 projects starting in tax years 2010 and 2011 are assumed to be similar to those for tax year 2009.

Using data collected for existing projects and two years of projected data, the CPA estimated annual school district levy losses for fiscal years 2010 through 2014. Based on an analysis of existing agreements, the CPA then estimated an average portion of the levy loss that companies would pay the school districts for protection of future school district revenues, and amounts they would provide to districts as other payments in lieu of taxes. These amounts are assumed to approximate the adjustments the commissioner would make to those districts' state aid or recapture payments.

Based on this analysis and under these assumptions, it is estimated that state costs could be reduced in FY2010 by approximately $24 million, increasing to $51.1 million in FY2011 and increasing again to $78.9 million in FY2012, with savings remaining at a similar level for the following two years. The table above is provided for illustrative purposes only. The fiscal impact of the bill's provisions would depend on how school districts and companies alter their behavior, if at all, within the framework of limitation agreements between these parties under Chapter 313 of the Tax Code. Due to the uncertainty associated with the above-described behavioral changes, the fiscal impact cannot be determined.

The Texas Education Agency estimates a $20,000 one-time cost in FY10 to create a new financial accounting code for district Chapter 313 benefits pursuant to the requirements of the bill.

Local Government Impact

School districts would experience a loss of state funds commensurate with the amount of associated benefits received from the businesses with which they have Chapter 313 agreements to limit valuation of property.