session v – february 26, 2015. texas ranks second behind california in the number of students...

SCHOOL FINANCE& LTISD

Session V – February 26, 2015

TEXAS- A Bird’s Eye View

Texas ranks second behind California in the number of students enrolled in public schools.

With a 21.6% increase over a 10 year period, Texas enrollment is the second fastest growing of the 15 most populous states. (Arizona-1st at 22.1%).


Education funding in Texas will support more than 4.88 million students this year in public schools.

Texas is expected to continue to grow at a rate of 1.7-2.0% annually. This equates to between 82,000 and 96,000 students.

From these new students, 80% are enrolling in fewer than 10% of the Texas school districts. Over the past five years, Lake Travis ISD has grown 34%.


There were 1,025 regular school districts and 202 charter school holders operating in Texas in fiscal year 2013.

The total 1,227 school districts and charter school operators in the state ranks Texas first among the 50 states in the number of operating school districts.


Texas is characterized by its large number of very small, primarily rural school districts, counterbalanced by a handful of very large urban and suburban districts.

# of Districts# of Enrolled

StudentsPercent of Students

825 < 1,600 9%

18 > 50,000 29%

384 1,600-49,999 62%


Over the past 10 years, the racial and ethnic composition of the student population has changed dramatically.

Population Group

Percentage Change (10 years)

Current StateComposition

Current Lake Travis

Composition

Hispanic +37.6% 51.0% 19.9%

Anglo -9.3% 30.0% 70.0%

African American +4.9% 14.0% 1.0%

Other Ethnicities +114.3% 5.0% 9.1%


For the 2014-15 school year, school district property wealth in the state of Texas averaged about $343,000 per student.

Out of the 1,227 districts and charter school operators, 156 have wealth per student above $504,000 and are therefore subject to recapture (“Robin Hood”).


School districts subject to Robin Hood at the $504,000 level serve about 8% of the state’s students.

For 2014-2015, Lake Travis ISD has a wealth per student level of $805,860.

For 2014-2015, Lake Travis ISD is equalized (“recaptured”) on 37.06% of every tax dollar collected at the tier 1 funding level.

Lake Travis ISD: 2014-15 Budget Information

Legally Adopted Budget-General Operating Fund $ 93,317,477Food Service Fund $ 3,530,825Debt Service Fund $ 28,579,298Total Budgeted Funds$125,427,600

Lake Travis ISDGeneral Fund Expenditures-by Function

2014-2015 Budget

Lake Travis ISDGeneral Fund Expenditures-by Object

2014-2015 Budget

Texas Foundation School Program

The Foundation School Program (FSP) is the principal vehicle for distributing state aid to school districts.

The FSP is a shared funding model, depending on contributions from both state and local tax revenue sources to fund the level of entitlement generated under the statutory formulas.

At an overall state level, the state share is currently at the 46% level, leaving the remaining 54% to be paid out of local property taxes.


The FSP has two main components, operations funding and facilities funding, each of which is tied to the tax effort of school districts.

The operations funding component of the FSP provides school districts with assistance in financing their maintenance and operations based on the following three components:

1. Tier 12. Tier 23. Property Tax Relief

Texas Foundation School Program-Tier 1

Statutory formulas are used to calculate basic aid under Tier 1. The current basic allotment amount is $5,040 per student in average daily attendance (ADA).

A school district is responsible for funding a portion of its Tier 1 entitlement. This portion is called the Local Fund Assignment (LFA).


The LFA is the amount of tax collections generated at the tax rate of $1.00 .

If a district’s LFA exceeds its Tier 1 entitlement, the district is said to be “budget balanced.”

A district that is budget balanced is also necessarily subject to the provisions of the Texas Education Code (TEC), Chapter 41 (State Equalization).


Tier 2 provides a “guaranteed yield” (GY), or guaranteed level of funding, to school districts to supplement the basic funding provided for by Tier 1.

The GY ensures that school districts generate a specified amount of state and local funds per student in weighted average daily attendance (WADA) for each cent of tax effort above the tax effort required to meet the LFA, up to an amount set by statute (17 cents).


The passage of HB 3646 (81st Legislature) in 2009 modified Tier 2 to provide for two levels of GY funding.

Level 1 (L1) equals an amount set by the General Appropriations Act that is the greater of :

Austin ISD’s property wealth per student ($61.86 per WADA)

orThe amount of a district’s tax revenue per WADA

per cent of tax effort generated for this level of GY funding (LT-$79.53 per WADA)


A district may generate L1 funding for only six pennies above the $1.00 tax rate. These pennies are called “golden pennies” because they are the pennies of tax effort for which a district is able to generate the highest level of enrichment funding.

Districts can access four of the six pennies at the discretion of the local school board. Because of restrictions in the Texas Tax Code, access to the fifth and sixth pennies of enrichment usually require voter approval. Because of this stipulation, I like to refer to these two pennies as “silver pennies.”

The passage of


Level 2 (L2) equals a fixed amount set by statute ($31.95 per WADA).

The L2 pennies of tax effort are sometimes called copper pennies because they generate a lower level of enrichment funding than the golden and silver pennies. Enrichment at this level requires voter approval. The district can access an additional eleven pennies at the L2 funding level.

The passage of

Texas Foundation School Program-Tier 1 & Tier 2

Texas Foundation School Program-Property Tax Relief

In fiscal year 2006, when districts were required to compress their property tax rates by one-third over a two-year period, the state developed a “hold-harmless” mechanism to guarantee that districts would not lose revenue as a result.

Each district was guaranteed by the state the same amount of total revenue per WADA as they received in either the 2005-06 or 2006-07 school year, whichever amount was greater. This total revenue per WADA amount is commonly referred to as a district’s “Revenue Target.”

The passage of

Lake Travis ISDTax Rate History

2014-2015 Budget

Texas Foundation School Program-Property Tax Relief

If a district’s (now compressed) local revenue and state aid through the Basic Allotment does not generate sufficient funding to meet this revenue target, the state provides hold harmless funding-termed Additional State Aid for Tax Reduction (ASATR).

Pursuant to legislation passed by the 82nd Legislature, ASATR will expire in statute at the end of fiscal year 2017 (LT-$5.7 million). The Legislature began phasing out this funding stream in fiscal year 2013.

The passage of at

Texas Foundation School Program-Facilities Funding

The Facilities Funding component of the FSP consists of the Instructional Facilities Allotment (IFA) Program and the Existing Debt Allotment (EDA) Program. These programs assist school districts in funding facilities by equalizing Interest & Sinking (I&S) tax effort.

State aid under the IFA and EDA programs provide GY of $35 per penny of tax effort per ADA, within limitations prescribed for each program. Chapter 41 districts do not qualify for IFA or EDA program funding.

Texas Foundation School Program-Facilities Funding

To receive IFA program assistance, a district must apply to the Texas Education Agency (TEA). IFA supported debt must support the construction of instructional facilities.

A school district does not need to apply to receive EDA funding. The TEA determines the EDA Funds to which a school district is entitled based on I&S tax collections and bond data that the agency receives through the Public Education Information Management System (PEIMS) reporting system.

Texas Other State Aid Programs-Available School Fund

The Available School Fund (ASF) is a constitutionally dedicated fund for the support of the public education system. It is funded from distributions from returns on investment of the Permanent School Fund (PSF) and also receives 25% of the state’s motor fuels tax revenue.

The ASF funds the state’s instructional materials purchases (through a transfer to the state Instructional Materials Fund) and an annual per capita distribution to school districts.

Summary of State & Net Tax Revenue

FSP-Tier 1 Entitlement: $48,898,607 FSP-Tier 2 Entitlement: $ 3,065,030 FSP-Property Tax Relief: $ 3,658,006 Other State Aid Programs: $ 3,444,795 FSP-Facilities Entitlement: $ 0

Total State & Net Tax Revenue $59,066,438

Chapter 41-State Equalization (“Robin Hood”)

Recapture, also known as “Robin Hood” Payments, is a mechanism in state funding formulas that ensures that a district’s property wealth per student does not exceed certain levels, known as equalized wealth levels (EWL).

A district that is subject to recapture is often referred to as a Chapter 41 district because the provisions governing recapture are found in the TEC, Chapter 41.


There are three equalized levels of property wealth per WADA that limit the access of school districts to the tax revenue generated by local Maintenance & Operations (M&O) tax effort.

Equalized Wealth Level Tax Rate

2014-15 Wealth per

WADA

1st EWL $1.00 $504,000

2nd EWL $0.06 Unlimited

3rd EWL $0.11 $319,500

Total Tax Effort $1.17


A district has five options available to reduce its property wealth per WADA.

Option 1: Consolidate with another district.Option 2: Detach property.Option 3: Purchase attendance credits from the

state.Option 4: Contract to educate nonresident

students from a partner district.Option 5: Consolidate tax bases with another

district.


State Equalization Summary for Lake Travis ISD:Recapture at the $504,000 Level (1st EWL)$27,727,145Recapture at the Unlimited Level (2nd EWL)$ 0Recapture at the $319,500 Level (3rd EWL) $ 0Total 2014-15 Recapture Payments to TEA$27,727,145

Interest & Sinking Fund(Bond Programs)

The Texas Education Code limits issuance of additional ad valorem tax bonds if the tax rate needed to pay aggregate principal and interest exceeds $0.50 per $100 of assessed valuation of taxable property within the district.

For 2014-2015, Lake Travis ISD has a debt service tax rate of $0.3675 .

Lake Travis ISD outstanding debt portfolio as of February 15, 2015

General Obligation Bonds Series

Date of Issue

Maturity Date

Interest Rate

Bond Rating

Outstanding at 2/15/2015

2006 03-23-06 08-15-36 4.5-5% AA+ $ 19,589,308

2006A 09-14-06 08-15-16 4-5% AA+ $ 1,265,000

2008 05-29-08 08-15-20 4-4.5% AA+ $ 1,775,000

2012 08-15-12 02-15-42 3-5% AA+ $139,220,000

2013 02-28-13 02-15-36 1.5-5% AA+ $101,210,000

TOTAL $263,059,308

Interest & Sinking Fund(Bond Programs)

Texas School Finance Funding Challenges-82nd & 83rd

Legislation

In 2011 special legislative session, the state legislature passed Senate Bill 1(SB1) that reduced the FSP by $4 billion over the biennium. An additional $1.4 billion was cut in other state programs such as the Pre-K Program and the Technology Fund Allotment.

Result of SB1 to Lake Travis ISD:

2011-12 2012-13 2013-14 2014-15 Total

($3.3) M ($4.8) M ($4.1) M ($3.8) M ($16.0) M

Lake Travis ISD tax exemption saves the

average homeowner $1,196

For LTISD taxpayers, their annual property tax expense is considerably smaller than it would be without the Local Optional Homestead Exemption (LOHE) provided by our School Board.

Here’s how the calculation works:Average LTISD Residence $425,00020% Exemption x 20%Value Subject to Exemption $ 85,000Per $100 Tax Value / 100Adjusted Value for Exemption $ 850LTISD Tax Rate x 1.4075

LTISD Average LOHE $ 1,196

Texas School Finance Funding Challenges-LOHE

Under current Chapter 41 equalization calculations, the state bases the school district’s recapture payment on 100% of taxable value even when the district is collecting taxes on only 80% of the taxable value.

The Local Optional Homestead Exemption (LOHE) “penalty” that Lake Travis ISD will incur for 2014-2015 is $3.1 million.

session v – february 26, 2015. texas ranks second behind california in the number of students...

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