School Finance Bill Report
85th Legislature – Regular Session
January 26, 2017
Without a mandate from the Supreme Court last year to change the school finance system, many
are wondering what the legislature will do about the Byzantine school finance system and its many
problems. With over a month left before the filing deadline and a newly appointed special working
group in the Senate devoted to school finance, besides the appropriations bills, it is unlikely that
legislators have filed the bills that will prove to be the most influential this session. Here is an
update on what bills have been filed thus far.
Appropriations Bills
The appropriations bills for both houses have been released. These bills determine the extent of
changes that can occur during the rest of the session—a money-strapped budget does not provide
much wiggle room for policy reform. Both the House and Senate fully fund the Foundation School
Program, including an increase to the Austin yield zone of Tier 2; but substantial funding for changes
or new programs will be hard to come by. The Senate does not provide funding on top of what the
funding formulas provide, whereas the House offers an additional $1.5 billion contingent on the passage
of legislation that amends recapture and supports greater equity in the school finance system.
Finance Bills
To date, 52 bills address specific school finance matters. (n.b., There are about 2 dozen property tax
bills that may also have an impact on school funding.) The bills seek to amend different aspects of the
school finance system. School finance issues that weigh heavily on many districts’ futures are: the
continued State dependence on recapture and property tax revenues and the end of Additional
State Aid for Tax Reduction (ASATR) funding.
On average, the current proposed bills create incremental or small changes to the funding formula.
However, several bills target larger changes to the overall system, although they do not provide structural
solutions to the formula itself. HJR 27 by Donna Howard seeks to ensure that 50% of education funding
would come from state aid, rather than local revenue. Similarly, SB 290 by Kirk Watson states that State
funding for education should not decrease with property value growth. HB 1050 by Rep. Valoree
Swanson seeks to get rid of the ad valorem tax, providing no alternate source of funding to replace the
lost revenue from the ad valorem tax.
HOUSE SCHOOL FINANCE BILLS
NIFA, Debt and Capital
Investment
Charters/Choice
Special
Populations,
Weights and
Transportation
State Funding and
Procedures
Basic and SmallDistrict Allotment
Local Revenue
SENATE SCHOOL FINANCE BILLS
State Funding and
Procedures
Special
Populations,
Weights and
Transportation
Local Revenue
School Finance Bill Report 1/26/17
NIFA, Debt and
Capital
Investment
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Bills Addressing Recapture
Houston ISD is subject to recapture for the first time this year. Without an amendment to the formula to
change Houston’s plight, Commissioner Morath will annex high-wealth properties from Houston’s tax
base to a near-by district that is not considered property wealthy. Eight bills target portions of the
formula that would have an impact on recapture and potentially keep Houston from having to give up
recapture dollars or property:
Bill
Number
Author
Description
HB 94
Harold Dutton (D)
This bill raises the basic allotment in general law to $5,800. This represents a
12.8% increase in the basic allotment. It would also increase the equalized
wealth level applicable to compressed tax rates. Approximate fiscal note of
$5 billion per year.
HB 286
Matt Rinaldi (R)
As filed, this bill repeals Chapter 41 of the Education Code and makes
various other repeals of references to the chapter in other part of the
Education Code and Tax Code.
HB 1037
Giovanni
Capriglione (R)
As filed: These bills would provide a credit for the transportation allotment to
districts that are required to take an action under Chapter 41 against the cost
of recapture. Effective date: September 1, 2017.
SB 358
Kirk Watson (D)
(Companion Bills;
Refiled from 84R
Session)
HB 1059
Jim Murphy (R)
As filed: This bill creates a process by which property detached by the
commissioner of education under Chapter 41 may be reattached to the district
from which it was detached. It also clarifies the effective date of detachment
and consolidation actions by the commissioner under Chapter 41. Effective
date: If the bill receives a two-thirds vote in each chamber, it would be
effective immediately; otherwise, September 1, 2017.
SB 353
Kirk Watson (D)
As filed: This bill would alter Chapter 41 determinations by excluding from
the basic allotment the portion that is funded by the purchase of attendance
credits from the state under Subchapter D, Chapter 41. It is unclear what
determinations those may be. The bill further requires that recapture funds be
used only for purposes of increasing the basic allotment, and sets out a
process by which the legislature would assure compliance. Effective date:
September 1, 2017.
SB 356
Kirk Watson (D)
As filed: This bill would change the guaranteed yield level for pennies that
exceed the compressed rate plus six cents to be equal to the yield provided in
Tier 1. It would also change the equalized wealth level that applies to those
pennies. Effective date: September 1, 2017.
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SB 357
Kirk Watson (D)
As filed: This bill changes the definition of WADA for purposes of Chapter
41 to allow the inclusion of the transportation allotment and the full effect of
the cost of education index in the computation. Effective date: September 1,
2017.
Bills Addressing ASATR
In 2006, the Legislature reduced property tax rates by one-third. To help districts maintain the same level
of funding per WADA that they received before the tax-rate compression, the State delivered additional
state aid to districts. While the vast majority of districts no longer rely on this state aid (ASATR), the
districts that do (around 200) are looking for an extension of the aid, which is set to expire this
September.
Bill
Number
Author
Description
HB 308
Dustin Burrows (R)
As filed: The bill extends ASATR through the 2026-27 school year.
Effective date: If passed with two-thirds vote in each house, the bill
takes immediate effect; otherwise if passed, the bill takes effect Sept. 1,
2017.
HB 527
Paul Workman (R)
HB 856
Leighton Schubert
(R)
As filed: These bills would extend additional state aid for tax reduction
(ASATR) for two more years. ASATR is currently repealed effective
September 1, 2017, but this bill changes that date to September 1, 2019.
Effective date: If the bill passes with two-thirds majority, it would be
effective immediately; otherwise, it is effective September 1, 2017.
(Identical Bills)
SB 419
Lois Kolkhorst (R)
As filed: The bill generally continues ASATR for 6 additional years. It
changes the expiration date of section 42.2516 (c-1) from September 1,
2017 to September 1, 2023. Section (c-1) allows the revenue generated
by the portion of a district's M&O tax rate included in calculating the
district's compressed tax rate under Section 42.101(a-1) (the "fractional
funding" fix) and local share under Section 42.252(a-1) to be included
in determining the amount to which a district is entitled for ASATR, but
does not increase the total amount of revenue per weighted student to
which the district is entitled (the target).
The bill also repeals the expiration of the statutory version of the
additional state for homestead exemption and limitation on tax increases
(Section 42.2518) that specifically considers ASATR. That section was
due to expire when ASATR expires, and would have been replaced by a
re-worded section on additional state aid for homestead exemption
losses. These repeals basically conform the operation of the homestead
exemption hold harmless to the continuation of ASATR. Effective date:
If the bill receives a two-thirds vote in each chamber, it would be
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effective immediately, otherwise it will take effect on the 91st day after
the last day of the legislative session.
HB 811
Ken King (R)
As filed: This bill would extend additional state aid for tax reduction
(ASATR) through the 2020-21 school year. Effective date: If the bill
receives approval of two-thirds of the members in each chamber, it
would take effect immediately; otherwise, effective on the 91st day after
the last day of the legislative session.
Senate Finance Working Group and Senate Education Committee
On January 27th, the newly created Senate Finance Working Group and the entire Senate Education
Committee will meet to discuss improvements to the school finance system. The Equity Center, TPPF and
other school organizations have been invited to discuss their individual plans and how their plans will
increase the equity and efficiency of school funding in Texas.
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