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The Texas Commission on School Finance met to hear recommendations from the Revenues Working Group. The next meetings of the Commission will be December 11 & December 19 at 10 a.m., with the goal being to complete their report to the 86th Legislature.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Brister opening remarks

  • Cannot get a quorum for next week
  • Will try a couple meetings in middle of the month
  • Drafting group named
  • Majority can add to or subtract from the report
  • West said there needs to be diversity on the drafting group
  • Would prefer to do disagreement by letter rather than dissenting opinions
  • As much as possible want report to be unanimous
  • Next meeting on Dec. 11 & Dec. 19 at 10am

Bettencourt Presentation on Revenue Working Group Recommendations

Nicole Conley-Johnson Recommendations

  • Outlined 9 options:
    • Consider increasing the Motor Fuels Tax to update closer to other states with 20% going to the ASF
    • Dedicating the interest from the ESF to fund the onetime hard costs for schools
    • Replacing the high cost gas tax with a natural gas production rate
    • Reinvest projected property growth into the basic allotment
    • Increase the alcoholic beverage tax by 50% – Texas has the 46th lowest tax on alcoholic beverages
    • Provide a local option sales tax to provide property tax relief
    • Consider Expansion of the sales tax in some form
    • Consider an annual registration fee for hybrid vehicles
    • Consider ways to maximize tax on internet and dedicating that to education
  • Expects roughly $10-12 billion in funding to education system through these recommendations

 

Discussion

  • Williams – once we hit $31 billion in sales tax, what % of transportation goes to education
    • Bettencourt – everything above that goes to GR
  • Williams – the severance tax is paid on price or by barrels?
    • Bettencourt – based on price, fundamentally we are talking increase in production
  • Ellis – there are some fairly in-depth calculations in here, are these based on new numbers or previous?
    • Conley-Johnson – based on the best and newest numbers we have from the comptroller’s office
    • Conley-Johnson – thanked Representative Bernal and his staff to obtain the information
  • Huberty – if we utilize a 2.5% M&O rate, and there is a 6.7% in TEAs LAR, if their expenditure costs go up would it require school districts to hold a TRE?
    • Lopez – the 2.5% is not a cap on district revenue, just the amounts the compressed rate can grow
  • Huberty – the estimate is at 6.7% it would require a school district to hold a TRE
  • Brister – part of the governors proposal is to correctly size the basic allotment to avoid sending money to the state to have it be sent back to the district, and ensure all entitlements are being given. We are not capping the amount they can spend, but limit tax growth and replace it with state dollars
    • Lopez – the entitlement is still driven by enrollment, but the 2.5% is a cap on the compressed rate raised locally
  • Killian – do not see where the revenues would be made up by the state
  • Huberty – the first recommendation would be from GR, we are suggesting in 19-20 the budget would grow on the sales tax side which is to be determined and we are saying we will take a portion of that, the second recommendation from ESF, which are the two big revenue sources. The issue with recommendation 2 should we be picking a number or set a floor and ceiling for the ESF. I think it is critical to have this as a recommendation, but lets not tie the legislatures hand, we know what the governor has suggested, and an expectation but allow for an accordion schedule
  • Bettencourt – on page 19 the point is that because the overall cap could be set at a point that we couldn’t go above it.
  • Huberty – comfortable with property tax relief, but we need to have options specifically related to this option
  • Killian – just dedicating the recapture money into the basic allotment it would provide tax relief
  • Brister – the effect would be an average increase
  • Bettencourt – believes Huberty is correct that that is the path to proceed down and allow TEA to score this in more detail
  • Bernal – these are the effects on the school finance system, all of a sudden, we are focusing on property tax relief first and hoping it will pay for the methods we heard all interim
  • Brister – the number one question is what we want to happen, and then how much does it cost, you are right, we cannot decide on the perfect system and figure out how to pay for it
  • Bernal – we did start off with what improvements we want to make, and both of the previous committees came up with costs that we can drive out
  • Ellis – related to the governor’s plan, it needs to be scored, but there are philosophies that need to be addressed in there, and at the end of the day there is an expectation on what is expected of the commission
  • Conley-Johnson – if the entitlements exceed recapture, how are we going to make up the gap and put more into the system, and where is the revenue to sustain the costs over time
  • Brister – the cap spreads out the jump each year, the way we are going to slow it down by stop cutting the state share of education
  • Huberty – understand Nicole’s perspective, we collectively said we need to put more money into the system. Believes the cap is good as long as there are parameters. The other options are ones that need additional input from the industries being affected
  • Conley-Johnson – if we cap the local share the state needs to make that up and these are solutions to do that
  • Huberty – if we set an outcomes expectation the legislature will need to source the funds through ideas like this
  • Brister – this is not about saving the state money, and there could be ways of drafting the report to include some of the alternate ways of funding if the need exceeds the available revenue
  • West – need to be mindful that additional revenues will be generated but there will also be other needs from the state
  • Blonde member – agrees with utilizing the alcohol tax rate would be useful and appropriate
  • Williams – the property taxes are not sustainable, and we need to price out some of the options we have heard, but we need to have the same sense of urgency on methodology as we have for property taxes. We need to ensure that there is enough new money to account for the recommendations to methodology we have
  • King – do not like making GR a critical piece of funding because it could change. Concerned with severance tax because it is one specific industry being directly taxed and it needs to be sustainable
  • Killian – do not think it is out place to tell legislators where this money comes from, we should be including options as we discuss them, I don’t think that some of the weights put in expenditures are based on data, not sure we have a good mind on what it costs to produce those
  • Huberty – some of those numbers were pulled from last session and we should be able to work into those
  • Bernal – there is a lot of agreement on this dais on specific outcomes and we should be able to look at specifically funding those issues ensuring that the things that we all agree upon get done

 

Closing Comments

  • Brister asked for a motion to create ad hoc drafting committee (Huberty, Bettencourt, Williams, and others who would like to participate)
  • Motion by Bettencourt passed without objection
  • Von Byer, TEA – reminded committees of open meeting requirements – over 6 members is quorum