copyright©2007 education service center region xiii 1 region 17 summer school finance conference...

Copyright©2007 Education Service Center Region XIII1

Region 17 Summer School Finance Conference

School Finance Update

Presented byOmar Garcia

Region XIII ESC

June 17, 2008


The Current System

• At least three-fourths of the system is based on a fixed amount of revenue per student

• Established by HB 1, 3rd Called Session of the 79th Legislature

– The so-called “Hold Harmless” Revenue per WADA or the “Greater of” Revenue per WADA


The Current System2

• What is the “greater of” revenue per WADA:

– Greater of 3 amounts

1) 05-06 State/Local Revenue per WADA (S1)

2) 06-07 State/Local Revenue per WADA under old law and using 05-06 M&O rate (S2)

3) 06-07 State/Local Revenue per WADA under old law and using effective M&O rate (S3)


The Current System3

“Greater of” Number x WADA

+ Salary Allotment

+ High School Allotment

= “Target Revenue”

• Up to a district’s compressed tax rate, it is both the “floor” and the “ceiling”


The Current System4

• If HB1 state/local revenue at the district’s compressed rate falls short of the target, Additional State Aid for Tax Reduction makes up the difference

• If HB1 state/local revenue at the district’s compressed rate is more than the target, the district is brought down to the target


The Current System5

Target Revenue

- HB 1 State & Local Revenue

= Additional State Aid for Tax Reduction

• Some combination of state and local revenue will equal the target

– The more local revenue, the less the state has to pay

– The less local revenue, the more the state has to pay


The Current System6

• Because it is primarily a Hold Harmless system, at a district’s compressed rate, the following no longer matter:

– The Basic Allotment

– The Tier II Level 1 Guaranteed Yield

– The Chapter 41 Equalized Wealth Level

– Whether you are Chapter 42 or 41

– Property values

– Percentage of collections


At Compressed Tax Rate At Compressed Tax Rate

$10M $10M

Additional State Aid for Tax Reduction Additional State Aid for Tax Reduction

State Tier I & Level 1 Tier II State Tier I & Level 1 Tier II

Local Revenue Local Revenue

BA = $3,135; Level 1 =$36.45 BA = $3,218; Level 1 = $37.42


At Compressed Tax Rate At Compressed Tax Rate

$10M $10M

Additional State Aid for Tax Reduction Additional State Aid for Tax Reduction

State

State

Local Revenue Local Revenue

Recapture @ $364,500 Recapture @ $374,200


Chapter 42 Chapter 41

$10M $10M

Additional State Aid for Tax Reduction

Additional State Aid for Tax

Reduction

State

State

Local Local

No recapture Recapture


The Current System7

• Because it is primarily a Hold Harmless system, beyond the compressed rate, the following do not matter near as much as they used to

– Property values

– Tax collection rate

• Make some difference for Levels 2 and 3 (if applicable) of Tier II


The Current System8

Taxes @ 100% = $2,080,000

Taxes @ 95% = $1,976,000

Taxes @ 90% = $1,872,000

Level 2: @100% @95% @90%

DTR .0615 .0585 .0554

State Aid$145,925 $138,628 $131,332

% Change in Aid -5.26% -11.1%


The Current System9

CPTD Value = $200K, $195K, & $190K

Collections @ 100%

Level 2: @$190K @$195K @$200K

DTR .0632 .0615 .0600

State Aid$152,923 $145,925 $139,277

% Change in CPTD +2.6% +5.3%

% Change in Aid -4.8% -9.8%


The Current System10

• Only 4 other sources of General Fund revenue outside Target Revenue

– The “golden” pennies (Level 2 of Tier II) (Austin ISD yield)

– The “silver” pennies (Level 3 of Tier II) (“rollback”-like pennies)

– Staff allotment

– Rider 86 Allotment ($23.63 per WADA)


General Fund Revenue:Compressed Rate = $1.00; Adopted Rate = $1.04

(estimated for 2008-09)

Revenue Target Staff Allotment Rider 86 Allotment

Golden Pennies Rollback-like Pennies


General Fund Revenue:Compressed Rate = $1.00; Adopted Rate = $1.17

(estimated for 2008-09)

Revenue Target Staff Allotment Rider 86 Allotment

Golden Pennies Rollback-like Pennies


What Is Your “Greater of” Amount?• As of 6/4/08:

– About 200 have “S1” as greater of

– About 700 have “S2” as greater of

– Rest have “S3” as greater of


Final (as of 6/4/08) "Greater of" Revenues per WADA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0 200 400 600 800 1000 1200

# of Districts

"Gre

ater

of"

Am

ount


Final (as of 6/4/08) "Greater of" Revenues per WADA

0

2000

4000

6000

8000

10000

12000

14000

0 200 400 600 800 1000 1200

# of Districts

"Gre

ater

of"

Am

ount


What Is Your “Greater of” Amount?2

• What caused you to get “stuck” where you are?

– Property value changes between 05-06 and 06-07

– Tax rates set (and taxes collected) in 04-05 and 05-06

– Changes in WADA between 05-06 and 06-07

– Net gain from the sale of WADA in 05-06


"S1" Top 10 Districts With Property Value Changes

Between Tax Years 2004 & 2005

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1 2 3 4 5 6 7 8 9 10

Top 10 Value Changes

Valu

e G

row

th

Tax Yr 2004 to 2005 Change Tax Yr 2005 to 2006 Change


"S2" Top 10 Districts WithProperty Value Changes


0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

1 2 3 4 5 6 7 8 9 10


Valu

e G

row

th



"S2" Lowest 10 Districts WithProperty Value Changes


-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Lowest 10 Value Changes

Valu

e G

row

th



"S3" Top 10 Districts WithProperty Value Changes


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1 2 3 4 5 6 7 8 9 10


Valu

e G

row

th



What Is Your “Greater of” Amount?3

• Why is “it” so important?

– “It” represents at least 78% (approximately) of total General Fund revenue that you will have available

• 78% to 85% for 70 districts

• 85% to 99% for all other districts


Target & "Greater of" Revenuesas a Percent of Total General Revenue (estimated

07-08)

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Districts

Target Revenue as % of Total GR Revenue

Greater of Allotment as % of Total GR Revenue


Target Revenue as a Percent of Total GR Revenue:All Districts @$1.17 (estimated)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

1 79 157 235 313 391 469 547 625 703 781 859 937

Districts

Per

cent

Tot

al G

R


Is There an Equity Problem?• 98% of total WADA is in districts that are

“stuck” between $4,000 and $6,000 per WADA

• Equity standard in law:

“…substantially equal access to similar revenue per student at similar tax effort…” [TEC 42.001(b)]


Final "Greater of" Revenue per WADAOnly Districts Between $4K & $6K

With 2005-06 M&O Tax RatesBetween $1.485 & $1.50+

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0 100 200 300 400 500 600


Final "Greater of" Revenue per WADAOnly Ch 42 Districts Between $4K & $6K


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0 100 200 300 400 500 600


Final "Greater of" Revenue per WADAOnly Ch 41 Districts Between $4K & $6K


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0 10 20 30 40 50


Final "Greater of" Revenue per WADAOnly Districts Between $5K & $6K


4,1834,462

5,962 5,993

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Lowest Ch 42 District

Lowest Ch 41 District

Highest Ch 42 District

Highest Ch 41 District


Is The Hold Harmless System Rational?• At compressed rate, lowest Ch 42 district has

access to $9.2M ($4,183 x 2,206 WADA)

• At compressed rate, highest Ch 41 district has access to $2.8M ($5,993 x 471 WADA)

– Ch 42 district is 4.7 times larger in terms of WADA but has only 3.3 times the revenue


Is The Hold Harmless System Rational?2

• At compressed rate, lowest Ch 42 district has access to $9.2M ($4,183 x 2,206 WADA)

• At compressed rate, highest Ch 42 district has access to $7.7M ($5,962 x 1,288 WADA)

– Lowest Ch 42 district is 1.7 times larger in terms of WADA but has only 1.2 times the revenue


Is The Hold Harmless System Rational?3

• At compressed rate, lowest Ch 41 district has access to $3.2M ($4,462 x 714 WADA)

• At compressed rate, highest Ch 41 district has access to $2.8M ($5,993 x 471 WADA)

– Lowest Ch 41 district is 1.5 times larger in terms of WADA but has only 1.1 times the revenue


2008-09 M&O Tax Rate• What’s your rollback rate?

– Lesser of:• $1.04 (plus any rollback pennies

adopted in previous year); OR

• Effective M&O Rate plus $.04–2008-09 Effective M&O Rate should

be approximately the rate you adopted in 2007-08


The 2 Additional “Golden” Pennies1

• Do you need voter approval to access the 2 additional “golden” pennies?

– The answer – it depends…

• On the relationship between your compressed rate and your rollback/adopted rate

– 2008-09 adopted M&O rate has to be at least 6 cents above the compressed rate



• If district’s M&O rate was $1.50 in 2005-06, then election will be required

– $1.50 x .6667 = $1.00 compressed rate

– 2007-08 M&O Rate = $1.04– 2008-09 Effective Rate + 4 = $1.08– Rollback Rate =$1.04

• Need to get to $1.06 ($1.00 + $.06) – can’t get there without voter approval



• If district’s M&O rate was $1.40 in 2005-06, then election MAY NOT be required

– $1.40 x .6667 = $0.933 compressed rate– 2007-08 M&O rate = $.973– Effective M&O Rate + 4 = $1.01 (estimated)– Rollback Rate = $1.01

• Need to get to $0.993 ($0.933 + $.06) to access the 2 additional pennies – can do so without voter approval



• The break point

2005-06 M&O Rate: $1.44 x .6667 = $.96005 + $.04 + $.02 = $1.02005$1.45 x .6667 = $.96672 + $.04 + $.02 = $1.02672$1.46 x .6667 = $.97338 + $.04 + $.02 = $1.03338$1.47 x .6667 = $.98005 + $.04 + $.02 = $1.04005$1.48 x .6667 = $.98672 + $.04 + $.02 = $1.04672$1.49 x .6667 = $.99338 + $.04 + $.02 = $1.05338$1.50 x .6667 = $1.0001 + $.04 + $.02 = $1.06010


The Next Session

• Latest “surplus” estimate from Comptroller is $10.7B

– Includes $3B that must go to Property Tax Relief Fund (may need more to cover cost of property tax relief already granted)

– Includes $5.7B for the Rainy Day Fund

• Only leaves $2B for General Revenue


The Next Session2

• What to expect– Some tweaking– Push for more property tax relief

• What not to expect– Major overhaul (NOTE: The history of

school finance tells you that the Legislature does not voluntarily overhaul school finance…only does so upon court intervention)


The Next Session3

• TASA’s solicited recommendations to Select Committee (assuming no overhaul)

1) Target Revenue / Inflation– Establish revenue target floor ($1.9B)– Inflation adjustment ($2.8B @ 3%)– In lieu of inflation adjustment, allow

access to 4 more pennies each biennium without going to voters


The Next Session4

• TASA’s solicited recommendations to Select Committee, cont’d

2) Transportation Costs– Double current allotment ($576M)

3) High School Allotment– Increase from $275 per ADA to $500 per WADA

($334M)


The Next Session5


4) Facility Funding– Increase IFA & EDA yield from $35 to $50

($1.2B)– Roll-forward EDA eligibility date ($150M)– Provide for additional round of IFA ($85M)

5) Technology Allotment– Increase from $30 to $50 ($180M)


The Next Session6


6) Small & Mid-size Adjustment– Allow Chapter 41 districts to get mid-size

district adjustment ($62M)

• Total = $7.287B for the biennium


The Next Session7

• Also state that:

– Money from value growth should be reinvested into public school finance on top of amount needed for enrollment growth

– They support a comprehensive study on long-term needs


Pending Issues

• M&O tax collections used in “S3” calculations may change– Will only benefit some districts

• TEA still working on:– ‘frozen levy lost’ calculations– adjustments for Tax Increment Financing

arrangements• Survey asking for more details due 7/1/08

• Not sure when all will be finalized

copyright©2007 education service center region xiii 1 region 17 summer school finance conference...

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