Austin, Texas
Revision 1
May 1, 2019

Honorable Larry Taylor, Chair, Senate Committee on Education
John McGeady, Assistant Director     Sarah Keyton, Assistant Director
Legislative Budget Board
HB3 by Huberty (Relating to public school finance and public education; authorizing the imposition of a fee.), Committee Report 2nd House, Substituted

The bill would make formula and structural changes to the Foundation School Program.

The bill contains a number of elements that would be anticipated to improve equity among Texas school districts relative to current law.

The bill would repeal several funding streams that either flow outside the Foundation School Program's (FSP) equalized system or are not fully realized by all school districts. Among these provisions are: aid provided for the purpose of paying nonprofessional staff wage supplements which currently flows entirely outside the equalized wealth system; the high school allotment which is codified as a Tier 1 FSP allotment but, per statute, flows outside the operation of the Tier 1 equalized system; and the additional state aid for homestead exemption. Flowing similar or increased levels of funding through the basic allotment in place of the existing structures would move the revenue inside the equalized system of the FSP.

The bill would gradually diminish the benefits experienced by certain districts that resulted in a higher equalized wealth level in fiscal year 2019, based on the district's 1992-93 revenue per student plus the indexed change between the current equalized wealth level and the level established in 1993.

The new method of calculating recapture, and the shift to the use of current year district property values in determining state aid within the funding formulas, would improve equity relative to current law.

The bill would create a mechanism starting in fiscal year 2022 by which the districts' maximum compressed rates would be further reduced based on how much property value growth exceeds certain thresholds. This mechanism has the potential to lessen the extent to which the school finance system enable substantially equal access to similar revenue at similar tax effort. The bill also creates a mechanism by which the Texas Education Agency would limit the divergence of district compressed tax rates under this mechanism such that the differences in rates between districts does not exceed 15 percent.

Source Agencies:
LBB Staff: