Honorable Brad Buckley, Chair, House Committee on Public Education
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB619 by Shaheen (Relating to an insurance premium tax credit for contributions made to certain educational assistance organizations.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB619, As Introduced : a negative impact of ($102,761,621) through the biennium ending August 31, 2025.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024
($1,322,528)
2025
($101,439,093)
2026
($70,930,245)
2027
($82,697,522)
2028
($93,801,962)
All Funds, Five-Year Impact:
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Savings/(Cost) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from Foundation School Fund 193
2024
($1,322,528)
$0
$0
$0
2025
($1,439,093)
$0
($75,000,000)
($25,000,000)
2026
($1,416,093)
$40,485,848
($82,500,000)
($27,500,000)
2027
($1,416,093)
$39,718,571
($90,750,000)
($30,250,000)
2028
($1,416,093)
$40,714,131
($99,825,000)
($33,275,000)
Fiscal Year
Change in Number of State Employees from FY 2023
2024
10.0
2025
10.0
2026
10.0
2027
10.0
2028
10.0
Fiscal Analysis
The bill would allow the Comptroller to award a credit on insurance premium taxes for contributions made to a certified educational assistance organization.
The bill would provide for a certified educational assistance organization, approved by the Comptroller, to award scholarships or pay educational expenses for eligible students.
The bill would allow entities to apply for a credit against state premium tax liability for contributions made to the certified educational assistance organization. The amount of premium tax credit for a year would be limited to the lesser of an entity's contribution or 50 percent of its tax liability.
For the 2024 fiscal year, the maximum amount of premium tax credits that could be awarded would be $100 million. For subsequent years, the maximum amount would be 110 percent of the previous year's maximum amount.
An entity could apply for preliminary approval of a tax credit before making a contribution to the account.
A student would be eligible for a scholarship or education expense assistance paid from program funds if they were otherwise eligible to enroll in public school and were enrolled in public school during the entire preceding school year or were enrolling in school in this state for the first time. Additionally, the student would have to be a member of a household with a total annual income that is at or below 200 percent of the income guidelines necessary to qualify for the national free or reduced-price lunch program established under 42 U.S.C. Section 1751 et seq.; be the sibling of a child who is eligible to apply for a scholarship or education expense assistance; have been eligible to participate in the program during a previous school year; be in foster care; be in institutional care; have a parent who is on active duty in the military; or be in kindergarten through grade 12, be eligible under section 29.003 of the Education Code, to participate in a school district's special education program, and have an individualized education program under Section 29.005 of the Education Code.
An eligible student may continue to receive assistance until the earlier of the date of the student's graduation or the student's twenty-second birthday.
The bill would require a nonpublic school participating in the program to be accredited by the Texas Education Agency or the Texas Private School Accreditation Commission and require the annual administration of an assessment instrument or the appropriate assessment instrument required under Section 39.023 of the Education Code.
Section 230.105 would provide for approved expenses including tuition and fees, the purchase of textbooks or other instructional materials, academic assessments, cocurricular activities, transportation, educational therapies, or services.
From funds available, the bill would provide for a maximum of 75 percent of the state average maintenance and operations revenue per student in average daily attendance for the preceding fiscal year for students who reside in a household with income less than or equal to 175 percent of the income guidelines necessary to qualify for the national free and reduced-price lunch program established under 42 U.S.C Se1751 et seq. If the student receiving the assistance resides in a household with income greater than 175 percent of the income guidelines under 42 U.S.C Se1751 et seq., but below 200 percent, the award amount is 50 percent of the state average maintenance and operations revenue per student in average daily attendance.
The certified educational assistance organization may award educational expense assistance to a student in an amount no greater than $750 in fiscal year 2024 and increased by 5 percent in subsequent years. Educational expense assistance may not exceed 20 percent of the total program funds awarded by the certified education assistance organization.
Methodology
The Comptroller assumes it would need 6 FTEs total to manage education assistance organization(s) as well as create and test the new tax credit. This results in a total fiscal impact of $825,000 in fiscal year 2024, $938,000 in fiscal year 2025, and $915,000 in every subsequent year.
The bill would have no fiscal impact for insurance premium tax collections in fiscal year 2024, as credits based on contributions made on or after the effective date of the bill would be taken on reports due in 2025 or later.
The Comptroller estimates certified educational assistance organization would receive enough contributions to reach the maximum amounts set out in the bill. The contributions would result in a tax credit that would result in lost tax revenue of $100 million in fiscal year 2025 and increase 10 percent in subsequent years.
There would be effects on the Economic Stabilization Fund (ESF) balance limit and consequent effects for GR reserves and transfers to ESF, however that amount is not expected to be significant.
TEA currently does not accredit private schools and assumes would need 4 FTEs to implement this provision of the bill. The total fiscal impact across these 4 FTEs is estimated to be $497,528 in fiscal year 2024 and $501,093 each year thereafter.
Students leaving the public school system and receiving the scholarship would, on average, save the Foundation School Program (FSP) $9,272 per student. The scholarship would cost the state $6,173 if the student's household income is greater than 175 percent but less than 200 percent of the income guidelines necessary to qualify for the national free and reduced-price lunch and $9,260 if the student resides in a household whose income is less than or equal to 175 percent of the income guidelines. TEA assumes 20 percent of eligible students fall in the former category and the remaining 80 percent are in the latter.
The amount of awards given would be limited by private school capacity and the program funds limit. This analysis assumes the bill would result in a savings to the FSP of approximately $40 million per year. This analysis assumes the impact to recapture cannot be estimated because the specific districts from which the public school students would leave are unknown.
Local Government Impact
As a result of this bill, Local Education Agencies (LEAs) would see a decrease in the number of students in average daily attendance. As school districts generate funding based primarily on student counts, LEAs would see a decrease in overall FSP funding as funding would follow the students choosing to participate in the program and the district would not generate entitlement for those students.
Source Agencies:
212 Office of Court Administration, Texas Judicial Council, 304 Comptroller of Public Accounts, 701 Texas Education Agency, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration, 758 Texas State University System, 768 Texas Tech University System Administration, 769 University of North Texas System Administration, 783 University of Houston System Administration, 978 San Jacinto College