Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                                May 4, 1999
          TO:  Honorable Paul Sadler, Chair, House Committee on Public
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB4  by Bivins (Relating to public school finance and to
               public education), As Engrossed
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB4, As Engrossed:  negative impact of $(2,425,750,000) through       *
*  the biennium ending August 31, 2001.                                  *
*                                                                        *
*  The bill would make no appropriation but could provide the legal      *
*  basis for an appropriation of funds to implement the provisions of    *
*  the bill.                                                             *
*                                                                        *
*  The Committee Substitute for House Bill 1 as passed by the Senate     *
*  includes $2.6 billion in general revenue funds intended to provide    *
*  for public schools, including the provisions contained in this        *
*  legislation.                                                          *
General Revenue-Related Funds, Five-Year Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2000                     $(1,155,750,000)  *
          *       2001                      (1,270,000,000)  *
          *       2002                      (1,319,200,000)  *
          *       2003                      (1,359,600,000)  *
          *       2004                      (1,359,600,000)  *
All Funds, Five-Year Impact:
*Fiscal    Probable Savings/(Cost) from    Probable Savings/(Cost) from   *
* Year        Foundation School Fund           General Revenue Fund       *
*                      0193                            0001               *
*  2000                  $(1,103,400,000)                   $(52,350,000) *
*  2001                   (1,206,000,000)                    (64,000,000) *
*  2002                   (1,255,200,000)                    (64,000,000) *
*  2003                   (1,295,600,000)                    (64,000,000) *
*  2004                   (1,295,600,000)                    (64,000,000) *
Fiscal Analysis
The bill would modify a number of elements in the Foundation School
Program and the minimum teacher salary schedule.  The bill also creates
new programs within the Texas Education Agency (TEA).

The bill would increase the Tier II guaranteed yield to $23.10, the basic
allotment to $2,435 and equalized wealth level to $300,000.  The current
law hold harmless provision relating to the tax base for  Chapter 41
school districts is institutionalized, and the hold harmless level for
hold-harmless eligible school districts with nominal maintenance and
operation (M&O) tax rates of $1.50 is increased by about 7%.

The bill requires that 60% of the additional state funds referenced above
be used by school districts for teacher salary increases.  The bill also
increases the minimum teacher salary schedule by $4,000 and includes a
provision for transition aid for districts which would be required to use
in excess of the 60% threshold in order to pay teachers on the revised
minimum teacher salary schedule.

Provisions relating to public school facilities are amended in the
legislation.  A new funding tier for existing school district interest
and sinking fund (I&S) debt is created, with a seven cent cap and a
guaranteed yield of $35 per student in average daily attendance (ADA).
The current law Instructional Facilities Allotment program is amended by
increasing the guaranteed yield from $28 per ADA to $35 per ADA.

The bill includes a provision creating an entitlement for an additional
allotment for operational expenses associated with opening a new
instructional facility.  For each student attending a new instructional
facility in its first year of operation, and for each additional student
in the facility's second year of operation, the district is entitled to a
$500 per student allotment, effective with fiscal year 2001.

The bill extends the current law provision holding districts harmless for
loss in total revenue pursuant to the homestead exemption enacted in
House Bill 4 of the 75th Legislature.

Additional transportation allocations are authorized by the legislation
applicable for students traveling through hazardous areas.  The
additional allocation is limited to 2% of the regular transportation

The bill directs that the property value of districts paying tuition to
another district be adjusted in a manner that provides additional state
aid that approximates the tuition amount.

The treatment of property value declines is amended by the legislation.
Under the provisions of the bill, adjustments of value in districts with
less than 4% declines are allowed, but only if sufficient funds are
available in each year of the biennium for declines in excess of 4%.

Chapter 41 schools districts are made eligible for the mid-size school
adjustment by this legislation.

The bill would create a master reading teacher designation and salary

The bill makes several changes to the benefits provided by the Teacher
Retirement System (TRS).  It increases the multiplier used in
calculating pension benefits for future retirees from 2.0% to 2.2%  and
provides an equivalent increase to current retirees, provides a
cost-of-living increase to retirees, makes several changes to the
deferred retirement option program, and allows retired teachers to
return to work under certain circumstances without losing any retirement
The bill would result in additional state aid to school districts through
the Foundation School Program formula due to the increases to the
guaranteed yield, basic allotment and equalized wealth level.   The
additional state aid pursuant to these elements is estimated to be $1.4
billion for the 2000-01 biennium.

The fiscal impact of the new tier for existing debt is estimated to be
approximately $670 million for the  2000-01 biennium. This cost assumes
that the pennies of school district tax effort for debt for which the
district is currently receiving Tier II state aid, as well as those
pennies which are outside of the equalized system are shifted into this
new tier up to the seven cent cap.  The increase in guaranteed yield for
the current law Instructional Facilities Allotment applies to new debt
issued under the program.  Both the House and Senate versions of the
General Appropriations Act, House Bill 1 contain $150 million for such
new debt issuances.

The allotment per student enrolled in a new facility, or new students in
a facility's second year of operation, takes effect for fiscal year 2001.
This allotment is capped in the bill at $50 million per year.

The bill increases the minimum teacher salary schedule by $4,000 starting
in fiscal year 2000 and requires that school districts dedicate sixty
percent of the revenue generated by the increases to the  basic
allotment, guaranteed yield and equalized wealth levels to increasing
teacher compensation.  This provision is subject to audit under Chapter
44 of the Texas Education Code.   The transition aid for school districts
under the provisions of the legislation is estimated to be approximately
$100 million for the biennium.

The increase to the minimum teacher salary schedule results in a cost to
the state for contributions to the TRS.   The state pays the employer
contributions on the minimum salary; the increase from the old minimum
teacher salary schedule to the revised teacher salary schedule results in
an increase in  the state TRS contributions estimated to be $50 million
per year.  The changes to the benefits provided by the TRS plan have an
actuarial cost but no fiscal impact.

The addition of tuition adjustments to property value as found in Section
4 of the bill would increase state aid by approximately $5.4 million per
year.  The revision to the transportation allotment for hazardous zones
is estimated to increase state cost by approximately $1 million for the
biennium.  Extension of the 1998-99 homestead exemption hold harmless
provision is estimated increase state cost by $100 million for the

The Master Reading Teacher provision is estimated to result in a cost to
TEA of $12 million in 2001 and subsequent fiscal years.  Also, this
estimate includes $350,000 in fiscal year 2000 to the State Board of
Educator Certification for development of Master Reading Teacher
standards and the Master Reading Teacher exam.
Local Government Impact
School districts make the employer contribution to TRS for pay over the
minimum salary schedule. The required 60 percent state aid pass-through
for teacher salaries will result in local school district costs for TRS
contributions.  To the extent that the increase in the minimum salary
schedule reduces the amount of additional pay provided by a school
district, the costs to the district for TRS contributions will be
Source Agencies:   701   Texas Education Agency - Administration
LBB Staff:         JK, CT, RN, UP, SC