| TO: | Honorable Florence Shapiro, Chair, Senate Committee on Education |
| FROM: | John S. O'Brien, Director, Legislative Budget Board |
| IN RE: | SB644 by Shapiro (relating to modifications, adjustments, and reimbursements under the public school finance system and contract delegation authority for a school district located in a disaster area.), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2010 | ($82,602,359) |
| 2011 | ($6,276,180) |
| 2012 | $0 |
| 2013 | $0 |
| 2014 | $0 |
| Fiscal Year | Probable Savings/(Cost) from Foundation School Fund 193 |
Probable Savings/(Cost) from General Revenue Fund 1 |
|---|---|---|
| 2010 | ($82,552,359) | ($50,000) |
| 2011 | ($6,276,180) | $0 |
| 2012 | $0 | $0 |
| 2013 | $0 | $0 |
| 2014 | $0 | $0 |
Section 1 of the bill would make special provisions for a school district that is located in a declared disaster area and has incurred disaster remediation costs. For the two-year period following the date of the governor's initial declaration, the amount of attendance credits that must be purchased under Section 41.093, Education Code would be reduced by the amount of any disaster remediation costs paid by the district during that period for which the district does not anticipate reimbursement through insurance proceeds, federal disaster relief, or other sources. For the purposes of reducing recapture costs in 2009–2010, disaster remediation costs paid by the district after September 1, 2008, would be included.
Section 2 of the bill would require the commissioner to adjust the average daily attendance (ADA) of a school district located within a declared disaster area, if the district experienced a decline in ADA that was reasonably attributable to the disaster. The adjustment would have to be sufficient to provide funding comparable to that the district would have received if the decline in ADA attributable to the disaster had not occurred. This adjustment would have to be made for the two-year period following the date of the initial declaration of a state of disaster.
Section 3 would require the commissioner to adjust the taxable value of property of a school district located within a declared disaster area as was necessary to ensure that the district received funding based as soon as possible on property values as affected by the disaster.
Section 3 also would provide a reimbursement of disaster remediation costs for a school district located within a declared disaster area for which the district does not anticipate reimbursement through insurance proceeds, federal disaster relief, or other sources. During the two-year period following the date of the initial declaration of a state of disaster, a district could apply to the commissioner for reimbursement of disaster remediation costs paid during that period for which the district does not anticipate reimbursement through insurance proceeds, federal disaster relief, or other sources. A district could also seek reimbursement of disaster remediation costs paid on or after September 1, 2008. The commissioner could provide reimbursement only if the commissioner determined that there were surplus appropriations for the Foundation School Program (FSP).
Section 4 of the bill would authorize a local board of trustees to delegate the authority to contract for replacement, construction, or repair of school equipment or facilities, if emergency replacement, construction, or repair were necesary for the health and safety of district students and staff.
Section 5 of the bill provides that the bill would take effect September 1, 2009.
According to the Texas Education Agency (TEA), current estimates indicate that school districts affected by Hurricane Ike incurred approximately $350 million in damages. TEA further assumes that, based on experiences with Hurricane Rita, approximately 20 percent, or $70 million, of those costs would not be covered by insurance or other disaster relief assistance.
Based on the provisions of the bill, districts would be eligible to apply for disaster remediation funds in one of two ways: (1) for districts subject to wealth equalization, remediation compensation may come in the form of reduced recapture payments, and (2) districts not receiving reimbursement through reduced recapture payments may receive state aid to the extent that surplus funds were available in the Foundation School Program (FSP). For the purposes of this fiscal note, it is assumed that such FSP funds would be available, and therefore would be used as disaster remediation payments instead of offsetting other state costs or lapsing to the Treasury.
In estimating how much of state remediation costs would flow through the various provisions of the bill, it is assumed that the four coastal districts that TEA has identified as hardest hit by Hurricane Ike in 2008, Galveston, High Island, Bridge City, and Sabine Pass ISDs, would lose 20 percent of their pre-hurricane attendance in fiscal year 2010 and 30 percent of their tax year 2009 property values. Under the current law school finance system, the attendance decline would cause a district's wealth per weighted student (WADA), the basis for wealth equalization obligations under Chapter 41 Education Code, to increase in the same year. However, due to the use of lagged property values in the state funding system, the tax year 2009 property value decline would not lower wealth per WADA until fiscal year 2011. The cost for the recapture adjustment under Section 1 of the bill is estimated to be $14,916,971. The remaining amount of the estimated $70 million in potentially eligible remediation costs would then flow through the reimbursement mechanism in Section 3 of the bill.
In addition to these costs, the bill would provide relief to disaster-affected districts through adjustments to counts of students in average daily attendance (ADA) and property values. TEA estimates the cost for adjustments to ADA or property values for the coastal districts identified above at $12,552,359 for fiscal year 2010. Assuming that average daily attendance in the identified districts would recover somewhat in fiscal year 2011, costs for the second year of the ADA adjustment provided under the bill are estimated to be approximately $6,276,180.
For the purpose of this estimate, identified state costs are assumed to be limited to costs resulting from application of the bill's provisions to Galveston, High Island, Bridge City and Sabine Pass ISDs. However, the bill would render eligible for relief any school district in a designated disaster area and that incurs qualifying disaster remediation costs. Currently, there are 570 school districts in a county designated by the Governor as a disaster area. Should more districts than the four assumed by the agency have incurred qualifying disaster remediation costs, experienced declining attendance or experienced property value decline, state costs due to the provisions of the bill could increase significantly.
TEA estimates that accounting for the provisions of the bill in the current Foundation School Program management and payment system would require approximately $50,000 in software modification costs in fiscal year 2010.
Districts might incur some administrative costs to prepare applications for funds, but the TEA does not expect these costs to be significant. School districts would receive additional revenue through adjustments and additional funding under the Foundation School Program to offset costs associated with disaster remediation for which the district does not anticipate reimbursement through insurance proceeds, federal disaster relief, or other sources. If authorized by the commissioner of education, a school district would be permitted to use the funding provided under this bill to pay the costs of replacing a facility instead of repairing a facility. In such circumstances, funding would be limited to the lesser of the amount the would be available to the district if the facility were repaired or the amount necessary to replace the facility.
| Source Agencies: | 701 Central Education Agency
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| LBB Staff: | JOB, JSp, JGM
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