Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                                Revision 1
                               May 21, 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,
               property tax relief, and public education.), Committee
               Report 2nd House, Substituted
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB4, Committee Report 2nd House, Substituted:  negative impact of     *
*  $(3,799,500,000) 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 Conference Committee on House Bill 1, the General                 *
*  Appropriations Act, has currently included $3.8 billion in general    *
*  revenue appropriations to the Texas Education Agency in Strategy      *
*  A.2.2. Public Education: School Finance/Teacher Compensation and      *
*  Benefits/Property Tax Relief 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                     $(1,851,600,000)  *
          *       2001                      (1,947,900,000)  *
          *       2002                      (2,046,800,000)  *
          *       2003                      (2,116,200,000)  *
          *       2004                      (2,116,000,000)  *
All Funds, Five-Year Impact:
*Fiscal    Probable Savings/(Cost) from    Probable Savings/(Cost) from   *
* Year        Foundation School Fund           General Revenue Fund       *
*                      0193                            0001               *
*  2000                  $(1,701,600,000)                  $(150,000,000) *
*  2001                   (1,797,900,000)                   (150,000,000) *
*  2002                   (1,896,800,000)                   (150,000,000) *
*  2003                   (1,966,200,000)                   (150,000,000) *
*  2004                   (1,966,000,000)                   (150,000,000) *
Fiscal Analysis
The bill revises a number of public school funding provisions, and
creates new programs within the Texas Education Agency.  The funding
elements of the Foundation School Program (FSP) are amended in order to
generate a reduction in school district property taxes and to generate a
net increase in total revenue for school districts.  A significant
portion of the increased state aid is directed to educator salaries.
School districts are required to increase educator pay by $3,000.  The
legislation would allow districts access to additional state aid beyond
the amount required to increase educator compensation.  The bill provides
transition aid for school districts which do not generate sufficient
additional state aid to pay the required $3,000 increase.

The Legislative Budget Board Model 360 estimates the cost of these
provision relating to FSP funding elements to be $3.324 billion for the
2000-01 biennium.  Including other program costs contained in the
legislation, the fiscal impact of the bill represents a cost to the state
of approximately $3.8 billion for the 2000-01 biennium.

The bill contains miscellaneous other provisions, which are detailed
The legislation reduces tax rates by increasing the Tier II guaranteed
yield to $23.10 per weighted student and then compressing Tier II tax
rates in order to generate the same amount of state and local revenue as
school districts would receive under the current law guaranteed yield of
$21.00.  This provision results in a cost to the state of $732 million
for the 2000-01 biennium.  The resulting school district debt remaining
over $1.50 is then equalized at the same $23.10 yield, representing a
cost to the state of $144 million for the 2000-01 biennium.  The
legislation then applies a yield of $24.75 to the compressed Tier II tax
rates, at a biennial state cost of $865 million.  The bill increases the
basic allotment to $2,537, increasing state aid to school districts by
almost $1.4 billion for the 2000-01 biennium.

The equalized wealth level is increased from $280,000 to $295,000 and the
hold harmless provision for Chapter 41 school districts, set to expire
in current law in 2000, is indexed to the increase in the equalized
wealth level and is extended to 2002.  These Chapter 41 provisions result
in reduced school district recapture revenue to the state of $185

The impact of the educator salary provisions to the Teacher Retirement
System is estimated to be $100 million for the 2000-01 biennium.  House
Bill 1 contains sufficient funds to offset this cost.

The legislation provides for two hold harmless provisions relating to
teacher salaries.  One provision  funds districts unable to pay the
required $3,000 increase by mean of the increase to the FSP funding
elements.  This aid could result in a cost to the state of an estimated
$65 million for the 2000-01 biennium.   The second provision extends
payment of the teacher salary transition aid provided for the 1998-99
biennium, under certain circumstances.

The bill modifies the methodology for the calculation of weighted
students pursuant  to the funding of set-aside programs, resulting in an
increase to the number of weighted students, but stipulates that the
Commissioner adjust the guaranteed yield such that this provision would
be cost-neutral to the state for the 2000-01 biennium.  The fiscal impact
of this provision could be significant starting in the 2002-03 biennium.

The bill establishes an allotment of $400 for each student attending a
school facility in its first year of operation or new students  attending
the facility in its second year of operation.  This program is capped at
$40 million per year, and takes effect in 2001.

The current law hold harmless provision for districts experiencing a
reduction on total revenue due to the homestead exemption provision of
1997 is extended, at an estimated cost of $45 million per year.

The bill would allow the commissioner of education to increase state aid
based on district property values that would be reduced by one-half of
the local optional homestead exemption. The commissioner would not be
able to authorize additional state aid unless it is determined that
surplus Foundation School Program funding is available for the first and
second years of a fiscal biennium.   It is estimated that state aid would
increase by approximately $110 million per year, effectively  reducing
any balance which might be available by that amount.  State aid due to
this provision could increase significantly if school districts increase
their local exemptions to take advantage of the opportunity for greater
state funding.

The legislation creates a grant program to extend the availability of
funding for kindergarten and pre-kindergarten programs, including a
provision  to add an education component to Head Start programs.  The
estimated cost of this provision is $215 million for the biennium.  In
addition, the legislation creates a  program of intensive instruction for
ninth grade students, at an estimated cost of $43 million per year.

The legislation also creates an initiative for teacher training and
programs to assist students identified as at risk of falling below grade
level.  House Bill 1 contains $173 million for implementation of this
Local Government Impact
Local school districts will experience a net increase in both state aid
and in total revenue.  Property tax rates will be compressed in 2000,
resulting in less tax effort for state aid purposes for the 2000-01
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, CT, UP