Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                              April 7, 1999
          TO:  Honorable Teel Bivins, Chair, Senate Committee on
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB4  by Bivins (Relating to public school finance and to
               public education), As Introduced
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB4, As Introduced:  negative impact of $(2,307,055,487) 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.                                                             *
General Revenue-Related Funds, Five-Year Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2000                     $(1,006,097,053)  *
          *       2001                      (1,300,958,434)  *
          *       2002                      (1,643,011,273)  *
          *       2003                      (1,679,742,724)  *
          *       2004                      (1,715,362,861)  *
All Funds, Five-Year Impact:
*Fiscal    Probable Savings/(Cost) from    Probable Savings/(Cost) from   *
* Year         General Revenue Fund           Foundation School Fund      *
*                      0001                            0193               *
*  2000                    $(385,373,399)                  $(620,723,654) *
*  2001                     (591,750,679)                   (709,207,755) *
*  2002                     (608,074,046)                 (1,034,937,227) *
*  2003                     (624,805,497)                 (1,054,937,227) *
*  2004                     (640,425,634)                 (1,074,937,227) *
Fiscal Analysis
The bill would modify a number of elements in the Foundation School
Program and in the Teacher Retirement System.  The bill would increase
the Tier II guaranteed yield to $23.80 and the Instructional Facilities
Allotment yield to $31.65.  The equalized wealth level is increased to
$300,000.  The hold harmless level of property wealth for school
districts subject to Chapter 41 is institutionalized, and is increased in
proportion to the increase in the equalized wealth level.

The bill resets the limit on the amount of tax effort for which school
districts can receive state aid in the 1999-2000 and 2000-01 school
years, by requiring that tax effort only be recognized to the point of
maintaining the same revenue as was available to the district in the
1998-99 school year.  The legislation also modifies the calculation of
the rollback limit in the Tax Code.

The bill would require the state to pay the member's contribution to the
Teacher Retirement System (TRS) retirement program of 6.4% of payroll up
to the minimum salary for teachers and librarians employed by the local
school districts.  As a result, the state's contribution rate for these
employees would be 12.4% instead of the current 6.0%.  The provision
would take effect January 1, 2000, contingent upon passage of Senate
Joint Resolution 38.  The factor used in calculating TRS retirement
annuities is increased to 2.1.
Several provisions in this bill would have cost implications.

The change in the equalized wealth level and the indexing of the hold
harmless wealth level to that change will result in less revenue from the
purchase of attendance credits.  It is estimated that this reduction in
recapture revenue is approximately $309 million for the 2000-01 biennium.

The increase in the Tier II guaranteed yield to $23.80 coupled with the
provision that limits access to additional state aid by referencing the
maintenance revenues available to the district in 1998-99 is anticipated
to increase state aid by slightly more than $1 billion for the 2000-01
biennium.  For subsequent years, this estimate assumes districts would
earn additional funding under the guaranteed yield at increased tax
effort.   Information provided by the Texas Education Agency and used in
this estimate assumes that school districts would take full advantage of
the eight cent rollback provision, resulting in higher tax effort and
therefore increased state aid in 2002.  To the extent that school
districts do not increase tax effort to the maximum allowable under the
legislation, state aid would be less than indicated in the table above.

The estimate of the cost for TRS contributions is based on projected 1999
payroll levels, assumed to grow 2.5% annually as a result of increases
in the number of employees, but no increase in the minimum salary
schedule.  The estimate is based on TRS contribution data.
Local Government Impact
The legislation holds school districts revenue neutral for the 2000-01
biennium.  Increases in state aid for Chapter 42 districts and a
reduction in recapture for Chapter 41 districts translates into lower tax
rates and therefore no net revenue gain for the 2000-01 biennium.  In
future years, districts would be able to realize net revenue increases
pursuant to these provisions.

The provisions relating to member contributions to TRS do not require
that school districts pick up the member contributions on salaries over
the minimum salary schedule.  Currently, school districts are responsible
for making the employer contribution on salaries that exceed the minimum

There will also be some local implications to the TRS change.  It is
unclear how this effect can be quantified until final rules for the
administration of the benefit are available.
Source Agencies:   
LBB Staff:         JK, CT, RN, UP, SC