April 2017 Committee on School Finance Permanent School Fund Item 13

Discussion of Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection

April 20, 2017

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION

SUMMARY:
This item provides the opportunity for the committee to discuss a proposed amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection. The proposed amendment would ensure that the definition of tax collections for purposes of the Texas Education Code (TEC), §42.004, and as used in issuing additional state aid for ad valorem tax credits under the TEC, §42.2515, complies with Texas Tax Code, Chapter 313.

STATUTORY AUTHORITY: TEC, §42.004.

TEC, §42.004, requires the commissioner of education, in accordance with the rules of the State Board of Education (SBOE), to take such action and require such reports consistent with this chapter as may be necessary to implement and administer the Foundation School Program.

BOARD RESPONSE:
This item is presented for review and comment.

PREVIOUS BOARD ACTION:
The SBOE adopted 19 TAC §105.1 effective September 1, 1996, and amended it effective June 6, 2004.

FUTURE ACTION EXPECTED: Proposed amendment to 19 TAC §105.1 will be presented for first reading and filing authorization at the June 2017 SBOE meeting.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES:
The rule in 19 TAC Chapter 105, Subchapter A, establishes definitions for tax collections used to calculate state aid under the TEC, Chapters 42 and 46, and to implement the wealth-equalizing provisions of the TEC, Chapter 41.

Specifically, 19 TAC §105.1 establishes maintenance and operations (M&O) tax collections as those taxes collected during the fiscal year that are associated with the levy of local M&O tax rates, including current and delinquent taxes and any delinquent taxes related to former county education districts, but not including penalties and interest that accrue on delinquent M&O tax levies.

The proposed amendment to §105.1 would update the rule to comply with Texas Tax Code, Chapter 313, and exclude Chapter 313 tax credits from tax collections used to calculate state aid under TEC, Chapter 42, and recapture under TEC, Chapter 41. Additional state aid for ad valorem tax credits issued under the TEC, §42.2515, would be issued in accordance with Texas Tax Code, Chapter 313.

FISCAL IMPACT:
The Texas Education Agency (TEA) anticipates both increases and decreases to state aid under TEC, Chapter 42, and recapture under TEC, Chapter 41, for school districts with Chapter 313 projects. The TEA will assess fiscal implications and include them when the proposed amendment is presented for first reading and filing authorization.

PUBLIC AND STUDENT BENEFIT:
The proposed amendment would align the accounting of tax collections with current law, delivering the correct state aid under TEC, Chapter 42, and calculating the correct recapture amount under TEC, Chapter 41.

PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendment would require school districts to report tax collections in accordance with the amended rule, but there would be no changes to the mechanisms for reporting tax collections.

LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendment would have no new locally maintained paperwork requirements. However, school districts are required to work with their local tax assessor/collector to ensure that taxes imposed on companies with Chapter 313 agreements are net of the Chapter 313 tax credit.

PUBLIC COMMENTS: The official public comment period will begin when the proposal, approved for first reading and filing authorization by the SBOE, is published in the Texas Register.

ALTERNATIVES:
None.

OTHER COMMENTS AND RELATED ISSUES: None.

Staff Members Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer

Al McKenzie, Director
State Funding

Attachments:

I. Statutory Citation (PDF, 13KB)
II. Text of Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection (PDF, 18KB)