| TO: | Honorable David Dewhurst, Lieutenant Governor, Senate |
| FROM: | John S. O'Brien, Director, Legislative Budget Board |
| IN RE: | SB2274 by Seliger (relating to the authority of a school district to impose ad valorem taxes.), As Passed 2nd House |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2010 | $0 |
| 2011 | ($11,473,000) |
| 2012 | ($15,224,000) |
| 2013 | ($16,549,000) |
| 2014 | ($17,560,000) |
| Fiscal Year | Probable Savings/(Cost) from Foundation School Fund 193 |
Probable Revenue Gain/(Loss) from School Districts - Net Impact |
|---|---|---|
| 2010 | $0 | $0 |
| 2011 | ($11,473,000) | ($3,818,000) |
| 2012 | ($15,224,000) | ($3,620,000) |
| 2013 | ($16,549,000) | ($3,830,000) |
| 2014 | ($17,560,000) | ($4,176,000) |
This bill would amend Section 26.08, Tax Code, by adding Subsection (p). Under new Subsection (p), if a district's adopted maintenance and operations (M&O) tax rate for the prior year was less than its effective M&O rate for that year, then the district's current-year rollback tax rate would be calculated as if its prior-year adopted M&O rate was equal to its prior-year effective M&O rate. This subsection would apply only to a limited number of school districts that meet the geographic and student-count criteria as established in the bill.
The bill would amend the Tax Code to allow persons qualifying for a residence homestead on which they were granted an exemption based on disability or age 65-and-over to also qualify for the entire year for any other homestead exemptions provided by Section 11.13 of the Tax Code for which they are eligible.
The bill would also provide for a prorated exemption of the standard (age under 65/non-disabled) homestead exemptions if the property was acquired during the year and had not formerly qualified during the tax year for a homestead exemption. If the property ceased to qualify for the exemption during the same tax year, the proration formula would provide that the exemption be based only on the days that the property was qualified and not for the remainder of the year.
The bill would alter the calculation of districts' rollback tax rate, but it cannot be determined the extent to which this change may affect district tax rate adoptions. The Texas Education Agency estimates that the statewide impact to the Foundation School Program is not likely to be significant.
Currently, taxpayers who acquire a residence homestead and are eligible for age 65-and-over or disabled exemptions must wait until the January 1 of the following year to become eligible for the standard $15,000 school district homestead exemption and any local optional percentage exemptions.
The bill would make these exemptions available immediately after acquisition of the homestead, creating a cost to school districts and the state. This provision would create a similar cost for other taxing units that grant optional exemptions, but this cost could not be estimated.
Information from appraisal districts and the Real Estate Center at Texas A&M University was used to project home sales to age 65-and-over or disabled homeowners. The value loss to homestead exemptions retroactive to the beginning of the year for age 65-and-over or disabled homeowners was estimated by multiplying the number of age 65-and-over or disabled homeowners by the average exemption value.
The bill would also change current law by prorating exemptions for age under 65 and non-disabled homestead owners, creating a loss for school districts and the state. This provision would create a similar cost for other taxing units that grant optional exemptions, but this cost could not be estimated.
Information from appraisal districts and the Real Estate Center at Texas A&M University was used to project home sales to age under 65 and non-disabled taxpayers. Based on this information the value loss to prorated exemptions was estimated and added to the value loss for age 65-and-over or disabled homeowners.
By making homestead exemptions available one year earlier than under current law for age 65-and-over or disabled homeowners, the bill would also make the 10 percent limitation on homestead appraised value increases applicable one year earlier than under current law for the affected homesteads, creating a cost to school districts and to the state. This provision would create a similar cost for other taxing units, but this cost could not be estimated.
Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the portion of the cost related to school district compressed rates is transferred to the state. A portion of the school districts' debt (facilities funding) and enrichment costs are also transferred to the state after a one-year lag because of the operation of the funding formulas. All costs were estimated over the five year projection period.
The bill is estimated to have an impact on the state aid districts receive based on the enrichment tier as tied to the yield of the Austin Independent School District (ISD). To the extent that the bill has the effect of lessening Austin ISD's revenue per weighted student per penny of tax effort, as determined by the Commissioner of Education, the growth of the equalized yield on those enrichment pennies would slow, resulting in slower growth in state aid.
| Source Agencies: | 304 Comptroller of Public Accounts
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| LBB Staff: | JOB, MN, SD, SJS
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