FISCAL NOTE, 87TH LEGISLATURE 3rd CALLED SESSION 2021
September 30, 2021
TO:
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB90 by Oliverson (Relating to reducing school district maintenance and operations ad valorem taxes through the use of certain surplus state revenue.), As Introduced
Passage of the bill would require the Comptroller of Public Accounts deposit to the Property Tax Relief Fund an amount equal to 90.0 percent of the amount by which general revenue received in a biennium exceeds the consolidated general revenue appropriations for that biennium that may be appropriated within the limit on the rate of growth of appropriations under Government Code Section 316.005 for that biennium. Costs associated with the bill would be dependent the Comptroller's interpretation of the term "general revenue received" as it applies to the provisions of bill, the amount of general revenue received, and the limit on the rate of growth of consolidated general revenue appropriations adopted by the Legislative Budget Board. The costs would not begin until the 2026-27 biennium. The fiscal implications of the bill cannot be determined at this time, but would be significant.
For an illustration of a range of potential costs, if the provisions of the bill were applied to the 2020-21 and 2022-23 biennia, the estimated amount of the transfer to the Property Tax Relief Fund would range from $1.5 billion to $11.4 billion for the biennium. If this is representative, then costs associated with implementing the bill could range from approximately $1.5 billion to $11.4 billion in the 2026-27 biennium. This range of deposits would be expected to decrease the state compression percentage by approximately 3.8 percent to 20.9 percent beginning in fiscal year 2026.
The bill would require the commissioner to reduce the state compression percentage to the lowest percentage possible using funding deposited under the bill to the Property Tax Relief Fund (PTRF) or any additional appropriations for this purpose.
The bill would require the Comptroller to allocate for deposit to the PTRF 90.0 percent of the amount by which general revenue received in a biennium exceeds the consolidated general revenue appropriations (CGRA) for that biennium that may be appropriated within the limit on the rate of growth of appropriations adopted under Government Code Section 316.005 for that biennium (CGRA limit).
The bill would allow amounts deposited to the PTRF to be appropriated solely to reduce the state compression percentage (SCP), unless the amount of available funding would exceed the amount of school district maintenance and operations (M&O) taxes the commissioner of education estimates to be payable for that biennium.
The term “general revenue” is not defined in the bill; for the purposes of this analysis it is assumed to mean general revenue-related collections and general revenue-dedicated collections, however that term could be interpreted to equal a different amount. This analysis assumes the bill would result in the deposit to the PTRF of an amount of general revenue equal to of 90.0 percent of the amount by which general revenue received in the 2024-25 biennium exceeds the CGRA for that biennium that may be appropriated within the CGRA limit for that biennium, for the purpose of reducing school district property taxes by decreasing the SCP. This analysis presumes the first reduction in the SCP under the bill would occur in fiscal year 2026, because the CGRA limit referenced in the bill will not exist until the 2024-25 biennium. The SCP reduction would continue in future fiscal years and would be further decreased by additional PTRF transfers until the SCP reached 0.0 percent, eliminating Tier 1 M&O school district taxes. Once the SCP were to equal 0.0 percent, any additional PTRF transfers received in excess of the estimated total M&O collections for the biennium would be available for appropriation for any purpose. Implementing the provisions of the bill would require the legislature to maintain funding out of general revenue-related collections for any previously required SCP reductions in a biennium in which general revenue received does not exceed the CGRA limit and require a transfer to the PTRF.
The amount by which general revenue received in the 2024-25 biennium exceeds the CGRA for that biennium that may be appropriated within the CGRA limit for that biennium cannot be estimated at this time. For illustrative purposes, applying the provisions of the bill to the 2020-21 and 2022-23 biennia, the amount of general revenue received is expected to exceed a hypothetical CGRA limit by $1.7 billion in 2020-21 and by $12.7 billion in 2022-23. 90.0 percent of these amounts would result in a deposit to the PTRF of $1.5 billion to $11.4 billion, respectively. Using the 2020-21 amount, the deposit is estimated to decrease the SCP by approximately 3.8 percent beginning in fiscal year 2026. This would reduce the highest projected district Tier 1 maximum compressed tax rate (MCR) for fiscal year 2026 by $.032 from $0.8382 per $100 valuation under current law to $0.8062 per $100 valuation under the bill. Using the 2022-23 amount, the deposit is estimated to decrease the SCP by approximately 20.9 percent beginning in fiscal year 2026, reducing the highest projected district MCR for fiscal year 2026 by $0.175 from $0.8382 per $100 valuation under current law to $0.6632 per $100 valuation under the bill. The actual decrease in the SCP per $1.0 billion appropriated under the bill would vary based on the level of district property growth from fiscal year 2022-26 and the amount of the appropriation.
Note that the estimated range of $1.5 billion to $11.4 billion used in the above illustrative example is not the same amount as the Comptroller of Public Account's estimated ending balance of General Revenue Related Funds Available for Certification, made pursuant to Article III, Section 49a of the Texas Constitution. For the 2022-23 biennium, that amount is currently estimated to be $6.04 billion. The formula for transfer of GR to the PTRF in HB 90 does not include several adjustments accounted for under the Article III, Section 49a limitation on appropriations, such as appropriation changes made for the upcoming biennium, constitutionally dedicated transfers to the ESF and SHF, and beginning fund balances. Appropriations made under the provisions of HB 90 could potentially bring appropriation totals in excess of the Article III, Section 49a limit or the Article VIII, Section 22 limit on appropriations of state tax revenue not dedicated by the Constitution.
The bill would apply beginning with the state fiscal biennium beginning September 1, 2023.
Local Government Impact
According to the Texas Education Agency, some school districts would be required to adopt lower tax rates and receive additional state aid to compensate for the local revenue loss. School districts would be required to re-adopt tax rates and possibly issue refunds to taxpayers.
Source Agencies:
304 Comptroller of Public Accounts, 701 Texas Education Agency