HBA-MPM H.B. 3418 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3418 By: Grusendorf Public Education 4/9/2001 Introduced BACKGROUND AND PURPOSE Under current law, the state guarantees a yield of $35 per average daily attendance (ADA) for up to 12 cents of interest and sinking (I & S) tax effort to equalize existing school district facilities bonds under the existing debt allotment (EDA). The state guarantees the same amount for up to just over seven cents under an instructional facilities allotment (IFA). Approximately 90 percent of the state's student population resides in districts eligible for the EDA. The EDA and IFA are both problematic in that the amount of annual debt service eligible for state assistance is limited to the actual amount due in a trigger year rather than the actual amount due in the current year. For example, if a district has an unusually low amount in the trigger year because only one semiannual payment was required, the district's state aid is calculated using that amount for the life of the bonds. The EDA does not pay on any debt for which taxes were first levied after the 1998-1999 fiscal year. Consequently, any district that is ineligible for an IFA must fund its new debt outside of the guaranteed yield system. Many districts are unable to build a significant facility within the 51 cent rate test without the guarantee of state assistance. These problems are made worse by the fact that as of 1999-2000, Tier 2 funds of the foundation school program are no longer available for facilities. House Bill 3418 increases the I & S limit from 12 cents to 29 cents, provides for an automatic roll forward of the years covered to include debt payments that can be certified to the district prior to January 1 of the legislative year, makes Tier 2 funds available for facilities, and prevents districts from using the same local effort to receive state assistance under Tier 2 and under IFA or EDA. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 3418 amends the Education Code to provide that an allotment to a school district under the guaranteed yield program may be used for capital outlay and debt service. The bill prohibits a school district from receiving an allotment under the guaranteed yield program for any tax effort that receives an allotment for assistance with instructional facilities and payment of existing debt. The bill prohibits the guaranteed amount of state and local funds for a new project that a district may be awarded in any state fiscal biennium under the school facilities allotment from exceeding the lesser of: _the amount the actual debt service payments the district makes in each year of the biennium, rather than the biennium in which the bonds were issued; or _the greater of $100,000 or the product of the number of students in average daily attendance in the district multiplied by $250. The bill provides that bonds are eligible to be paid with state and local funds if the district certifies to the commissioner of education prior to January 1 of the second year of the state fiscal biennium the amount of payments due on the bonds in each year of the state's fiscal biennium. The bill increases the maximum existing debt tax rate from $0.12 per $100 of valuation to $0.29 per $100 valuation. EFFECTIVE DATE September 1, 2001.