COALITION FOR EDUCATION FUNDING
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House Bill 3 


​86TH TEXAS LEGISLATURE

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Release 12 - School Finance Template
Omar Garcia with BOK Financial Securities has a new release (Release 12 dated 12/16/2019) that is now available for download.  This new release makes a few changes, the more significant ones related to the 20-21 school year (see Notes tab).  There will be more to come, so as always, please stay tuned for any new developments.

House Bill 3 Synopsis and Runs
The conference committee version of House Bill 3 – the school finance bill – has been released.  You can read the bill by scrolling to the bottom of this post.  You can read district runs by legislative member for FY2020 and FY2021 by clicking on the links.  Here is a synopsis of the bill by our friends at Texas Taxpayers and Research Association:

Tax Relief

Effective September 1, 2019 (2019-20 school year)
  •  M&O tax rate cap is the maximum compressed tax rate plus $0.17.
  • Sets a statewide compression percentage of 93% in statute (93% x $1.00 = $0.93), resulting in $0.07 tax rate reduction.
  • Districts with $1.00 tier 1 rate in the 2018-19 school year will now have a $0.93 tier 1 rate.
  • Districts with M&O tax rates below $1.00 in the 2018-19 school year will have a tier 1 rate compressed to 93% of the 2018-19 tier 1 rate plus additional pennies levied in 2018-19 up to $0.93.
  • The portion of a school district’s M&O tax rate up to $0.93 must be used to generate the district’s share of its Tier 1 entitlement.
  • Requires mortgage lenders to adjust escrow accounts for tax reductions immediately.
  • Requires the Legislative Budget Board to study possible methods of providing property tax relief through the reduction of school district maintenance and operations taxes.

Effective September 1, 2020 (2020-21 school year)
  • Sets a statewide compression percentage of the lesser of 93% or a compression percentage set by using statewide property value growth in excess of 2.5% to compress tier 1 tax rates.
  • School districts with value growth in excess of the statewide average will use the district’s value growth in excess of 2.5% to compress their tier 1 tax rate.
  • Each school district will be subject to an M&O tax rate cap equal to the district’s maximum compressed rate plus $0.17.
  • TEA will calculate and make available all maximum compressed rates. If a school district has a maximum compressed tax rate that is less than 90% of another district’s rate, the Commissioner will recompute the lower rate until it is within the 90% range.

Tax Reduction and Excellence in Education (TREE) Fund
  • Creates the Tax Reduction and Excellence in Education (TREE) Fund to provide further tax rate compression and funding for schools. The fund would consist of:
  • Sales tax revenue from the Wayfair court decision ($300 million per year)
  • Available School Fund revenue to be used for increased school funding ($600 million per year)
  • Any severance tax revenue diversion provided by the Constitution to be used for tax compression
  • Any revenue appropriated to the fund

Tax Ratification Elections
  • Requires a tax ratification election for rates adopted that exceed $0.93 + prior year enrichment rate + debt rate.
  • In the 2020 tax year, rollback rate is increased by $0.01. School boards must have a unanimous vote of the board to access the $0.01 without an election.
  • Tax ratification election must be held on a uniform election date that allows sufficient time to comply with the requirements of other laws.
  • Requires a school district to conduct an efficiency audit before holding a tax ratification election. Efficiency audit is waived for two years if the school district is located in a disaster area.
  • School districts with strategic plans in place requiring a rate increase that exceeds the rollback rate may proceed with voter approval.
  • Prohibits school districts from increasing M&O tax rate to create a surplus for the purpose of paying the district's debt service.

Recapture
  • Changes the calculation of recapture to the amount of revenue raised by a district’s tier 1 tax rate that exceeds a school district’s tier 1 entitlement. It will no longer be based on property wealth per WADA.
  • Commissioner may not deduct 50% of local option homestead exemption value when calculating recapture amounts unless the deduction is made for all school districts for state funding purposes.
  • School districts can send their recapture obligation in one recapture payment not later than August 15 rather than in monthly payments February 15 – August 15.

“Golden” and “Copper” Pennies
  • Adds two “golden pennies” (not recaptured) for a total of 8 golden pennies (first 8 pennies above the compressed rate). De-links guaranteed yield from Austin ISD ($126.88) and links it to the greater of:
  1. a school district at the 96th percentile of wealth or
  2. 0.016 x basic allotment ($98.56) 
  • Increases yield of “copper pennies” (remaining pennies up to the M&O rate cap) to $49.28 (54%) and ties the guaranteed yield to 0.008 x basic allotment ($49.28). Requires compression to the number of pennies that would raise the same amount of revenue per weighted student as copper pennies raised in the previous year.

Formula Changes
  • Uses current year values (changed from prior year) in formula calculations.
  • Repeals the following formula elements and re-distributes the revenue attributable to them:
  1. Cost of Education Index (CEI)
  2. 1993 Chapter 41 Hold Harmless (phases out over 5 years)
  3. Chapter 41 Early Agreement Credit
  4. Gifted and Talented Weight (Requires school districts to maintain their gifted and talented programs, or funds will be withheld from the district. Districts must report to the Commissioner of Education regarding the use of funds on gifted and talented programs. School districts cannot limit the number of gifted and talented students identified based on any provisions in HB 3.
  5. High School Allotment ($275 per ADA)
  6. Staff Salary Allotment for non-professional staff.
  • Increases the basic allotment to $6,160 from $5,140 (+19.8%). Authorizes a school district to increase its M&O tax rate up to $1.17 to make up for lost revenue if the Legislature lowers the basic allotment.
  • Increases compensatory education funding based on student needs; sliding scale weight 0.225-0.275 (from 0.20). Based on “economic census blocks” using median household income, average educational attainment, percentage of single-parent households, rate of homeownership. No longer based on qualification for free and reduced price lunch.
  • Expands career & technology allotment to include courses in grades 7 -12.
  • Increases special education mainstream weight to 1.15 (from 1.10) and requires the Commissioner of Education to distribute funding to school districts for special education students in the amount necessary to comply with federal requirements for maintenance of state financial support. Requires the Commissioner of Education to appoint a Special Education Allotment Committee to make recommendations on special education funding.
  • Converts the small and mid-size district adjustment to a stand-alone allotment, but maintains it as a formula multiplier for special education students.
  • Maintains current law bilingual weight of 0.10.
  • Changes transportation allotment calculation to $1.00 per mile per student instead of using linear miles.
  • Requires quality full-day prekindergarten for eligible 4-year-olds. Districts can opt out for lack of facilities. District must seek partnerships before obtaining waiver.
  • Authorizes the Commissioner of Education to include the reimbursement of interest payments when adjusting a school district’s funding due to refunds made by a school district in the 2018 or 2019 fiscal year as a result of litigation.
  • Provides “formula transition grants” for five years so that all school districts and charter schools will receive at least the lesser of (1) 103% of the amount they would have received under current law or (2) 128% of the statewide average amount of M&O revenue that would have been provided for the 2019-20 under current law.
  • Provides a special hold harmless for the 10 school districts that are the only school district in a county and have less than 300 ADA.

New Allotments and Programs
  • Early education allotment for economically disadvantaged and bilingual students in grades K-3; weight 0.10.
  • Dual language allotment; weight 0.15, 0.05 if English proficient.
  • Dyslexia allotment for each student identified as having dyslexia or a related disorder; weight 0.10.
  • Dropout recovery school and residential placement facility allotment of $275 per student attending a dropout recovery school or residing in a residential placement facility.
  • Fast growth allotment of 0.04 for each student in a school district with enrollment growth in the top quartile over the past three years.
  • Mentor program allotment to provide school districts with funds to pay stipends to mentor teachers.
  • College, career, and military readiness outcomes bonus of $5,000 for economically disadvantaged students, $3,000 for non-economically disadvantaged students, and $2,000 for special education students to send to districts for students in the top 25th percentile of performance on the SAT and ACT test, and other indicators established by the Commissioner.
  • Extended year incentive program to provide 30 days (1/2 day) additional instruction days for students in Pre-K through 5th grade.
  • Directs the Commissioner to establish a blended learning grant program to assist districts in combining classroom and online instruction.

Kindergarten-Third Grade Reading Standards
  • Requires each school district and charter school to provide for the use of a phonics curriculum that uses systematic direct instruction in kindergarten through third grade to ensure all students obtain necessary early literacy skills and requires that K-3 teachers and principals attend a literacy achievement academy.

Early Childhood Literacy and Mathematics Proficiency Plans
  • Requires each school district to adopt and post on the district's website early childhood literacy and mathematics proficiency plans that set specific annual goals for the following five school years to reach quantifiable goals for student performance in reading and mathematics at each campus.
  • An annual report of progress must be reviewed annually by the school board and posted on the district's website.

Teacher Salaries
  • Requires school districts to use 30% of the revenue from the increase in the basic allotment to increase compensation for all employees other than administrators. 75% of that amount must be used to provide salary increases to teachers, librarians, counselors, and nurses, prioritizing differentiated compensation for classroom teachers with more than five years of experience.
  • Creates a new teacher incentive allotment to send to districts to provide pay increases to effective teachers who teach at high needs campuses, rural campuses, or in areas experiencing a critical shortage of teachers. Teachers designated as master, exemplary, or recognized by the district and who teach at campuses with the greatest needs can receive a bonus of up to $32,000. 
  • Requires each school district to submit a report to the Legislature on salary and wage increases by December 1, 2020.
  • Requires the Commissioner of Education to create a "Do Not Hire" registry for education employees.

Kindergarten Reading Diagnostic Instrument
  • Requires school districts to administer a reading diagnostic instrument o all kindergarten students.

FAFSA
  • Requires students to fill out a Free Application for Federal Student Aid (FAFSA) before graduating from high school. A student can obtain a waiver from this requirement.


Senate and House Conferees Reach Deal on HB 3

Governor Abbott, Lt. Governor Patrick, and House Speaker Dennis Bonnen today announced that an agreement has been reached on the session’s priority bills: HB 1, the state budget; SB 2, property tax reform; and HB 3, school finance reform.

As of the time of the press conference, all three bills are in document production, and not yet available; however, the leadership did provide a basic outline of the key reforms.

HB 3 will provide $11.6 billion in additional funding for public education. Of that, $4.5 billion will fund “transformational education reforms,” including a general increase in per student funding by raising the basic allotment and targeted funding increases for pre-kindergarten programs, 3rd grade reading proficiency, and dyslexia. Another $2 billion will provide an average $4,000 average increase in teacher compensation packages, with additional incentive-based supplements. Finally, the bill will provide roughly $5 billion in property tax relief—an average 8 cent property tax reduction in 2020 and another 13 cents in 2021. Overall, the bill will increase the state’s share of public education funding from 38% to 45% and will reduce recapture by $3.6 billion (47%).

HB 3 will also provide future school tax relief by limiting local school property tax growth to 2.5% per year (absent voter-approved changes). SB 2 will provide on-going property tax restraint for cities, counties, and special districts. Property tax growth for most taxpayers will be limited to 3.5%. Taxes may increase above that only if authorized by voters.

From Texas Taxpayers and Research Association. 

​Check out the latest comparison between the House and the Senate versions of HB 3 by clicking here.

April 24 - HB 3 Needs Your Help...
While HB 3 is not perfect, it is our best bet at getting more funding into our severely underfunded public school system. Our friends at Reform Austin have asked us to share this message regarding HB 3:

“HB 3 is going to the Senate Committee to vote this Thursday. We are urging Texas legislators to vote in favor of the bill, because quality public education is a fundamental right that helps to ensure children are provided the opportunities and experiences needed to reach their best potential.

We have a lot of needs in Texas, but it's important for us to invest in better outcomes for our kids and our community. Call Lt. Gov. Dan Patrick now using this link: https://reformaustin.cp.bsd.net/co/hb3reformaustin”

​April 3 - HB 3 Passes House
HB 3 – the House school finance bill – passed the Texas House today by a vote of 148-1 today. The bill would put over $9 billion in public education with $2.7 billion of that going for property tax relief.

The bill contained two adopted amendments from the work group in which the Coalition for Education Funding participates. The two amendments require that charter schools conduct an efficiency audit before expanding and make charter schools subject to the Whistleblower Act.

The bill now goes to the Texas Senate.

April 1 - House Bill 3 Runs Released by LBB
On Monday, April 1 Chairman of the House Education Committee, Rep. Dan Huberty released the Legislative Budget Board estimates on the House school finance bill - HB 3. Click on the links below to see how your district will be affected.
hb_3_fy_2020.pdf
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File Type: pdf
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hb_3_fy_2021.pdf
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