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:
HB3646 by Hochberg (relating to public school finance. ), Committee Report 1st House, Substituted



Estimated Two-year Net Impact to General Revenue Related Funds for HB3646, Committee Report 1st House, Substituted: a negative impact of ($2,065,396,924) 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.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010 ($937,168,462)
2011 ($1,128,228,462)
2012 ($1,459,228,462)
2013 ($1,863,728,462)
2014 ($2,362,828,462)




Fiscal Year Probable Savings/(Cost) from
General Revenue Fund
1
Probable Savings/(Cost) from
Foundation School Fund
193
2010 ($138,268,462) ($798,900,000)
2011 ($140,828,462) ($987,400,000)
2012 ($154,828,462) ($1,304,400,000)
2013 ($158,828,462) ($1,704,900,000)
2014 ($162,828,462) ($2,200,000,000)



Fiscal Year Change in Number of State Employees from FY 2009
2010 1.0
2011 1.0
2012 1.0
2013 1.0
2014 1.0

Fiscal Analysis

The bill would make changes to the public school finance system, as well as establish or amend various programs for school districts administered by the Texas Education Agency.

Sections 3 and 4 would require that school districts and charter schools increase the salaries of employees eligible for placement on the minium salary schedule (MSS), as defined by the bill, by the greater of $80 per month or the maximum uniform amount that could be paid to each MSS eligible employee using 50 percent of the additional funds provided by the bill.

Sections 5 through 10, with the repeal of Chapter 21, Subchapter N in Section 51, would repeal the Texas Educator Excellence Grants (TEEG) program and amend the Subchapter O program, identifying the annual amount as determined by appropriation, among other changes.

Section 11 would create a special education grant to assist certain districts with expenses related to the education of special education students that exceed revenue generated by those students. 

Sections 24 through 39 of the bill would make changes to components of the state’s school finance system under Chapters 41 and 42 of the Education Code.

The bill would specify that references in Chapters 41 and 42 to the taxable value of property in a distict would refer to the value for the current year unless otherwise specified.

Tier 1 and the first level of Tier 2 would be collapsed into a single Tier 1.  The Tier 1 entitlement would be tied to the statewide averarge taxable value of property per weighted student, multiplied by 0.000173 or higher value as specified in the General Appropriations Act.  The bill would eliminate the current 0.5 discount of the CEI adjustment from the calculation of weighted average daily attendance (WADA).  The high school allotment would be established as a separate Tier 1 allotment.

Districts would be guaranteed M&O revenue available to them during the 2008-09 school year based on the districts compressed rate, as adjusted for various additional funding provisions.

Districts would entitled to receive an increase of at least $100 per WADA as a result of the bill's changes to Chapters 41 and 42 over amounts the district would have been entitled to under those chapters as those chapters existed on January 1, 2009, at districts' adopted tax rates for the 2008-09 school year.  WADA under this section would be calculated as it existed on January 1, 2009.

The last 6 cents of a district's effective M&O rate would be equalized to Austin ISD's yield with no recapture.  Excluding this 6 cents, any additional tax effort not included in a district’s local fund assignment would be equalized to $31.95 per WADA per penny, with recapture above that level. 

The bill would repeal existing set-asides from the state compensatory education allotment.  In addition, the bill would eliminate a number of funding and hold harmless provisions contained in the Education Code.  Of particular note is that the bill would eliminate the “target revenue” structure currently codified within Section 42.2516, Education Code.

Section 44 would establish a permanent roll-forward mechanism for the eligibility of school district bonds for state assistance under the Existing Debt Allotment program.

The repeal of 42.103(e) in Section 51 would allow eligible Chapter 41 districts to receive the mid-sized adjustment.

The bill would take effect September 1, 2009.


Methodology

Special Education Grant Program:  Data from the Public Education Information Management System (PEIMS), the Foundation School Program (FSP) and federal funding were used to compare district special education expenditures and available revenue.  Under the assumption that TEA would reimburse districts for special education expenditures in excess of twice the amount of revenues received, the grant program would cost an estimated $17 million in FY2010, $20 million in FY2011.  Under the assumption that federal stimulus funds for special education do not continue after FY2012, costs would be projected to increase in FY2013 to $34 million; should increased federal allocations continue, costs in the out years would decrease.  TEA anticipates the need for 1 program specialist position to administer the grant program, at an estimated administrative cost of $68,462 per year.

 

Foundation School Program:  Based on the provisions of the bill, the 0.000173 multiplier would produce an estimated basic allotment yield of $48.74 per penny per WADA in FY2010 and $49.47 per penny per WADA in FY2011. 

 

The impact to the FSP is estimated to be significant.  Under the assumptions made in this fiscal note, the bill is estimated to increase FSP M&O state aid by $763.4 million in FY2010, $953.1 million in FY2011, increasing steadily thereafter and reaching $2,169.1 million in FY2014.  Included in these cost estimates is a reduction in the need for state funding related to the educator salary increase described by TEA Rider 86 in the 2008-09 General Appropriations Act, since the bill includes that funding in the calculation of district minimum funding levels under Section 13.  In addition, it is assumed that approximately $121 million in costs for programs currently funded through set-asides from the compensatory education allotment would continue to be funded with General Revenue Fund 1.  

 

The permanent roll-forward of the EDA eligibility date is estimated to cost approximately $35.5 million in FY2010, $34.3 million in FY2011, slightly decreasing annually to $30.9 million in FY2014. 


Technology

TEA would be required to modify the FSP payment system in order to accommodate the changes made by the bill. Costs to implement these modifications are estimated to be at least $500,000 in FY2010, with maintenance costs of $60,000 per year thereafter.

Local Government Impact

Eligible districts meeting the requirements of the special education grant would realize an increase in funding.

It is estimated that all school districts would realize a gain in FSP state aid or reduced recapture payments as a result of the provisions of the bill.  School districts would be required to provide pay increases to MSS eligible employees, including full-time speech pathologists, as prescribed by the bill.

Qualifying districts that have made payments on eligible bonds also would receive additional state aid through the EDA.   



Source Agencies:
701 Central Education Agency
LBB Staff:
JOB, JSp, JGM