November 19, Legislative Update. Moak, Casey and Associates. Moak, Casey & Associates 1

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1 Legislative Update Moak, Casey and Associates November 19, 2010 Property Tax Issues Moak, Casey & Associates 1

2 Outline of Selective Property Tax Issues Appraisal Caps And Other Bad Ideas Expansion of Coverage of Cap Composition of CAD Boards Tax Rate Increase Procedures State Property Tax 3 State Property Tax Litigation Impact Pressure for Statewide Homestead Exemption Administration 4 Moak, Casey & Associates 2

3 TRE Results Year Passed Fild Failed Ttl Total Rti Ratio % % % % % Total % 5 State Budget Outlook Moak, Casey & Associates 3

Public Safety and Criminal Justice, $8.63 General Revenue Appropriations (includes Property Tax Relief Fund) Natural All Other, $1.69 Resources, $0.88 General Government, $2.

4 Public Safety and Criminal Justice, $8.63 General Revenue Appropriations (includes Property Tax Relief Fund) Natural All Other, $1.69 Resources, $0.88 General Government, $2.44 Health and Human Services, $24.41 Public Education is 44% of total appropriated Public Education, $40.10 Higher Education, $14.39 Total = $92.54 B 7 Magnitude of the Shortfall LBB Estimate Based on Use of One Time Revenues $12 billion Legislative Estimate early fall $18 billion TTARA Pressures $20+ billion Capitol Gossip $25+ billion 8 Moak, Casey & Associates 4

5 $2, Year Moving Average Sales Tax Collections $1,950.0 $1,900.0 $1, $1,800.0 $1,750.0 $1,700.0 $1,650.0 $1, $1, $1, Elements of the Shortfall Lower Revenue than Expected (Current Biennium) One Time Revenue for Ongoing Programs Higher Expenditures Than Expected (Current Biennium) Anticipated Needs for and Moak, Casey & Associates 5

6 Resources for Budget Makers Current Biennium Budget Cuts $1.250 billion already accepted, talk of additional 2 to 3 percent Rainy Day Fund $9 billion Projected Budget Cuts 10% reductions in LAR Worth about $3.5 billion if fully implemented Revenue Growth ($0) New Revenues ($0) Additional Budget Cuts????? 11 Public Education is 7.7% of amount subject to cuts Appropriations Subject to 5% Cut* All Other, $2.06 Natural Resources, $1.79 General Government, $3.86 Public Safety and Criminal Justice, $7.02 Health and Human Services, $5.56 Public Education, $2.71 Higher Education, $12.08 Total = $35.08 B *Includes GR Dedicated Appropriations 12 Moak, Casey & Associates 6

7 Texas Education Agency TEA LAR Enrollment Growth $2.5 billion Current Biennium Savings $.8 billion Property Value Changes $4 billion Use of Federal Funds $3.3 billion PSF Allocations ($3.0 billion) Net $7.5 billion Increase 13 School Finance Issues Moak, Casey & Associates 7

8 Biennium Budget Instructions for TEA 10 percent reduction from biennium base $42.6 billion foundation program exempted from reductions $261 million in cuts mainly to grant programs offered by TEA 15 How Might the Legislature Reduce Funding for Public Education? Additional potential funding cuts Shift costs to local school districts Reductions to textbook program Additional reductions to grant programs Reductions to the Foundation School Program 16 Moak, Casey & Associates 8

9 How Might the Legislature Reduce Funding for Public Education? Increase District Costs TRS TRS Care Stop providing services, passing costs to districts Textbooks TEA base budget request did NOT include: $495 million for new materials (Pre K, ESL, Grammar and English, Spelling, Handwriting); Supplemental Science materials 17 How Might the Legislature Reduce Funding for Public Education? Additional Reductions To Grant Programs Beyond Those Proposed in LAR Pre K: $209m DATE: $370m Technology Allotment: $266m Student Success Initiative: $249m 18 Moak, Casey & Associates 9

10 How Might the Legislature Reduce Funding for Public Education? Reduce the State Cost of the Foundation School Program Payment delay: $1.9 billion one time savings Formula reductions / reductions to ASATR (ASATR = $2.5 B per year, more than 3/4 of districts receive) Under appropriate and rely on proration Increase state compression percentage Percentage reduction in FSP revenue 19 Pressure Point: School District Efficiency Proposals Comptroller Financial Allocation Study of Texas Coming soon Likely to include web based database of performance and adjusted spending level for schools and districts Education Research Group Continued legislative interest in ERG model 20 Moak, Casey & Associates 10

11 Pressure Point: Fund Balances Current Balances of $7+ billion Why should school districts keep a fund balance when you are asking the state to eliminate their fund balance? 21 Pressure Point: Tax Elections If they can pass an increase, why can t you? Or If your voters want to replace lost funds, they are free to do so. 22 Moak, Casey & Associates 11

12 Pressure Point: Education Jobs Funding $830 million available for Texas Doggett amendment would require assurance of maintenance of education s share of state budget next biennium, Title I distribution Texas submitted modified application, rejected by USDE Two opportunities for funds: repeal of Doggett amendment, delay until post legislative session 23 Pre filed Bills Moak, Casey & Associates 12

13 Pre Filed Bills Immigration Curriculum Charter Schools Assessment / Accountability Discipline Other Concluding Remarks Moak, Casey & Associates 13

14 Why We Are Concerned Current Law Costs $200 million cut, $9 billion increase Revenue Estimate Conservative view with low moderate growth No New Taxes United opposition Property tax negative signals Rainy Day Fund Super majority required 100 votes in the House 27 Starting Point Payment Delays Funding Cuts for Grants Formula Reductions or Proration Balanced Package of Cuts (44% to Public Ed) 28 Moak, Casey & Associates 14

15 29 Moak, Casey & Associates 15

State Funding Shortfall

The State Shortfall, and Sifting through Efficiency Studies Moak, Casey and Associates Friday, January 14, 2011 State Funding Shortfall 2010 11 Biennium 2012 13 Prospects Revenue Available for Certification*