Chapter 62. Commissioner's Rules Concerning the Equalized Wealth Level

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1 Chapter 62. Commissioner's Rules Concerning the Equalized Wealth Level Statutory Authority: The provisions of this Chapter 62 issued under the Texas Education Code, , unless otherwise noted Authority of Trustees; Duration of Agreements. (a) Trustees of independent school districts may not delegate their authority to enter into agreements necessary to achieve the purposes of the Texas Education Code, Chapter 36. Nor may the trustees authorize any exclusive franchises on the right to negotiate on behalf of the district. (b) Consolidations under the Texas Education Code, Chapter 36, Subchapter B; detachments and annexations under Subchapter C; and tax base consolidations under Subchapter F are permanent in duration and districts may not enter into agreements that purport to limit the duration of the agreement. Nor may the parties create by agreement any right to cancel the agreement. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Election Duties of Board of Trustees. For the purposes of an election ordered under the Texas Education Code, Chapter 36, the board of trustees that orders the election shall perform any applicable duty assigned to the county judge or to the county commissioners court under the Texas Education Code, Chapter 19. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Date of Agreement for Purposes of Determining Election Date. For the purposes of the Texas Education Code, , the date of an agreement entered by the board of trustees of a school district under the Texas Education Code, Chapter 36, Subchapter E or F, is the date that the agreement is certified by the commissioner of education. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Weighted Students in Average Daily Attendance for Purposes of Tax Rate Rollback. In determining the number of weighted students in average daily attendance for the purposes of tax rate rollback calculations under the Texas Tax Code, 26.08, the number calculated under the Texas Education Code, , is adjusted: (1) as provided by the Texas Education Code, , by adding the number of weighted students in average daily attendance attributed to the district through a contract to educate nonresident students under the Texas Education Code, Chapter 36, Subchapter E; and (2) by adding the number of weighted students in average daily attendance attributed to the district through the purchase of attendance credits under the Texas Education Code, Chapter 36, Subchapter D. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Definition of Parcel Detached and Annexed by Commissioner. For the purposes of implementing the Texas Education Code, Chapter 36, Subchapter G, a parcel shall be defined as one or more separately described items of real property, together with the improvements and personal property located on the property, that have the same taxable situs or that are: (1) contiguous to each other; November 2001 Update Page 1

2 62. Commissioner's Rules: Equalized Wealth Level (2) used as a unit or subject to the same predominant use; and (3) located within the boundaries of a single school district. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Election of Trustees of District Consolidated by Commissioner. The election date under the Texas Education Code, (b), is modified to be the first May uniform election date after the effective date of a consolidation order under the Texas Education Code, Chapter 36. Source: The provisions of this adopted to be effective September 13, 1993, 18 TexReg Administration of Wealth Equalization. (a) Identification. Identification of districts subject to the wealth equalization provisions of the Texas Education Code (TEC), Chapter 41, is based on estimates of weighted average daily attendance (WADA) available in July of each year. WADA is projected in accordance with TEC, Chapter 42, Subchapter F, and derived from student counts adopted by the legislature in the appropriation process under the provisions of TEC, (b) Alternative calculation of wealth per WADA. Districts subject to recapture in accordance with TEC, Chapter 41, may utilize an alternative method to calculate a wealth per weighted student for the purpose of determining the amount needed to equalize wealth. (1) The optional alternative method will enable a qualifying district to retain a wealth per weighted student (WADA) after exercising an option pursuant to TEC, (2) or (3), that would achieve a Maintenance and Operations (M&O) revenue (state and local) level equal to the M&O revenue per WADA for the school year, less the current year per capita distribution from the available school fund, other than amounts distributed under TEC, Chapter 31, for the technology allotment. (2) The optional alternative method will compute M&O revenue (state and local) in the school year and in the applicable year, excluding recapture amounts, any Public Education Grant and New Instructional Facilities Allotment state aid pursuant to TEC, and (3) The optional alternative method will utilize a measure of WADA in the school year and in the applicable year that excludes resident students that were not educated in the eligible district. (4) The optional alternative method pertains only to districts that did not offer all grades from kindergarten to Grade 12 in the school year and are imposing a current effective M&O tax rate equal to or greater than their M&O tax rate. (5) The commissioner of education will notify districts that qualify for the optional alternative method of calculating wealth per WADA for the purpose of determining the amount owed to equalize wealth when they are notified of their TEC, Chapter 41, status by July 15 of each year. The commissioner will also provide appropriate worksheets so that eligible districts can determine the financial impact of adopting the optional alternative method. (6) Districts must inform the commissioner by September 1 of each applicable year of their decision whether to adopt the optional alternative method for calculating wealth per WADA for determining recapture costs. They must also complete and return to the Texas Education Agency (TEA) division responsible for state funding the worksheets provided by the commissioner and submit evidence that they will maintain or exceed their M&O tax effort by letter attesting to their proposed tax rate, tax levy, and estimated M&O tax collections for the applicable year. (7) The optional alternative method is in effect for the , , and school years. This subsection, issued under TEC, , 77th Texas Legislature, 2001, expires September 1, Page 2 November 2001 Update

3 (c) (d) Actions to equalize wealth. The commissioner may require specific actions to ensure that the wealth of a district subject to the provisions of TEC, Chapter 41, is properly equalized. (1) Districts subject to the provisions of TEC, Chapter 41, may consolidate with another district in accordance with TEC, Subchapter B (Option 1), detach territory in accordance with TEC, Subchapter C (Option 2), or consolidate tax bases with another district in accordance with TEC, Subchapter F (Option 5). These actions are not subject to change once approved by the commissioner and executed by the participants. The commissioner may require the exercise of other options in addition to options 1, 2, or 5 to ensure that wealth will be properly equalized. (2) A student who transfers to and is educated tuition-free by a district subject to the provisions of TEC, Chapter 41, may be counted as WADA for the purpose of wealth equalization. No agreement with the home district is required, but the district must provide the commissioner with a written statement certifying that no tuition or other benefit has been received in exchange for the student's education. The number of transferring students is converted to a WADA count by multiplying it by the district's current WADA-to-enrollment ratio. (3) A student who transfers as a Public Education Grant (PEG) student pursuant to TEC, Chapter 29, Subchapter G, to a district subject to the provisions of TEC, Chapter 41, may be counted under subsection (c)(2) of this section as WADA by the receiving district for the purposes of wealth equalization. No contract with the home district is required. The sending district may not count the student for state aid purposes. (4) Regardless of any applicable credits, a district identified as subject to the provisions of TEC, Chapter 41, must exercise one or more of the available options to reduce wealth to ensure that wealth will be properly equalized. Costs to equalize wealth. For each year in which one or more options to equalize wealth is exercised, the commissioner determines the cost and the associated cycle. (1) Districts purchasing attendance credits from the state in accordance with TEC, Chapter 41, Subchapter D (Option 3), may obtain a discount in the form of an early agreement credit in accordance with TEC, The discount is limited to 4.0% of the computed cost of Option 3 or $80 multiplied by the number of WADA purchased, whichever is less. (2) Districts paying to educate nonresident students from a partner district in accordance with TEC, Chapter 41, Subchapter E (Option 4), may obtain a discount in the form of an efficiency credit in accordance with TEC, Such discounts may be obtained for certain programs approved by the commissioner and described in the wealth equalization handbook published yearly by the commissioner. The discount is limited to 5.0% of the computed cost of Option 4 or $100 multiplied by the district's WADA for TEC, Chapter 41, whichever is less. (3) For Options 3 and 4, the projected cost estimate provided by the commissioner to the district by February of the year serves as the basis for initial payments made to the state and/or partner(s). For Option 4, payments to the partner(s) must be made between February and August of the year but otherwise may adhere to a mutually acceptable schedule. (4) Unless a school district adopts the alternative method for calculating wealth per WADA in accordance with subsection (b) of this section, a school district subject to the provisions of wealth equalization that pays tuition to another district to educate its students may apply the cost of the tuition toward the cost of the option chosen to reduce wealth. The credit amount per student cannot be greater than the district's cost per WADA. Written documentation must be provided to the commissioner to verify the total tuition paid and the amount per student. The maximum tuition amount that may be charged by the receiving district and the state aid reduction as a result of the tuition charge is described in of this title (relating to Contracts and Tuition for Education Outside District). (5) For each school district subject to the provisions of wealth equalization, transitional state aid for professional staff salaries is computed in accordance with of this title (relating to Additional State Aid for Professional Staff Salaries). Any amount earned by a district is deducted November 2001 Update Page 3

4 62. Commissioner's Rules: Equalized Wealth Level (e) (f) as a credit against the amount owed to equalize wealth. If a credit exceeds an amount owed, the difference is paid to the district. An initial payment will be made as soon as the TEA has estimated an assistance amount. A final settle-up will be made during September of the following year. (6) Initially, the cost to equalize wealth is projected by the commissioner based on estimates of the district's WADA for TEC, Chapter 41, and expected tax collections. For districts exercising Option 3 or 4, the cost estimate may be updated by the commissioner periodically throughout the year. (7) For Options 3 and 4, the projected cost estimate provided by the commissioner to the district by February of the year serves as the basis for initial payments made to the state and/or partner(s). For Option 4, payments to the partner(s) must be made between February and August of the year but otherwise may adhere to a mutually acceptable schedule. (8) For Options 3 and 4, the final cost to equalize wealth is determined by the commissioner when audited tax collections and data elements for the calculation of WADA for TEC, Chapter 41, are final and available, after the close of business for the school year. The calculation of WADA for TEC, Chapter 41, incorporates final values for WADA for TEC, Chapter 42, and, when applicable, current-year data for the number of student transfers. The final WADA for TEC, Chapter 42, is based, in part, on attendance data submitted at year-end through the Public Education Information Management System (PEIMS). When applicable, student transfer data are obtained from the PEIMS fall submission. When applicable, final values for WADA for TEC, Chapter 42, and current-year fall PEIMS data for enrollment are used in the WADA-to-enrollment ratio that is applied to the number of transfers to calculate a corresponding WADA. (9) When final costs for the fiscal year are determined for Options 3 and 4, the payments are compared to the final cost. Districts that have not sufficiently reduced wealth must remedy the shortfall in accordance with the directives of the commissioner before the end of that fiscal year. Districts that have overpaid in the process of reducing their wealth level will receive either appropriate refunds from the state and/or partner district(s) or credits against future costs. Administrative requirements. Districts taking action to equalize wealth must abide by all fiscal, procedural, and administrative requirements published yearly by the commissioner in a wealth equalization handbook including adherence to any adopted schedule and to the submission of forms and contracts. (1) Unless other definitive action (such as submission of a contract) has already been taken by a district subject to the provisions of TEC, Chapter 41, the district must inform the TEA in writing of intended actions to equalize wealth. A "letter of intent" must be postmarked (or have some other postal carrier verification of date mailed) by September 1 of the applicable year. (2) Pursuant to TEC, Chapter 41, Subchapters D and E, any contract submitted for Option 3 or 4 must be submitted to the TEA by certified mail through the U.S. Postal Service or other common postal carrier. (3) Option 3 contracts must be postmarked by September 1 of each year in order to qualify for the early agreement credit. Option 4 contracts and any Option 3 contracts not incorporating the discount must be postmarked by a date specified in a schedule published each year by the commissioner in the wealth equalization handbook. (4) All contractual arrangements must be approved yearly by the commissioner, regardless of continuing or long-term arrangements between contracting parties. (5) Contracts and forms submitted to the TEA that require signatures must be originals. (6) All written correspondence pertaining to TEC, Chapter 41, including contracts and data forms, must be sent to an address published yearly by the commissioner in the wealth equalization handbook. Noncompliance. Noncompliance with the requirements of wealth equalization is determined by the commissioner and may result in corrective action, including detachment and annexation or consolidation in accordance with TEC, Chapter 41, Subchapters G or H, by the commissioner. Page 4 November 2001 Update

5 (1) Refusal by a district subject to the provisions of TEC, Chapter 41, to declare an intent to exercise an option to equalize wealth, to take action to equalize wealth, or to comply with the terms of a contractual agreement will result in corrective action by the commissioner in accordance with TEC, Chapter 41, Subchapters G and H, to consolidate or to detach and annex property. Any such action taken after November 8 of a school year will take effect in the subsequent school year. (2) Noncompliance with requirements other than those listed in subsection (f)(1) of this section may result in loss of an efficiency credit for Option 4, the early agreement credit for Option 3, or in a financial audit. (g) Excellence exemption. An excellence exemption pursuant to the provisions of TEC, , does not apply to options for or requirements of wealth equalization. (h) Property value decline. If a district subject to the provisions of wealth equalization experiences a property value decline, exceeding 4.0%, from the prior tax year and funds made available by the legislature to compensate for such a decline are insufficient, the district's taxable value for the prior tax year will be adjusted so that the allocation of the shortfall is shared among all districts participating in this appropriation in accordance with TEC, The adjustment will be sufficient to exhaust the district's share of the amount appropriated. (1) The cost of recognizing the applicable property value decline is computed as the difference in the cost of equalizing wealth using the property value for the prior tax year and the cost of equalizing wealth using the property value for the current tax year using the same (current year) tax collection amount. This difference is then adjusted for the percent of decline not recognized in accordance with TEC, (2) If the cost of recognizing the applicable amount of property value decline exceeds the amount appropriated, each district with a decline in value will have its value adjusted in proportion to its share of the total property value decline. Statutory Authority: The provisions of this issued under the Texas Education Code, and Source: The provisions of this adopted to be effective June 11, 1998, 23 TexReg 5964; amended to be effective January 2, 2000, 24 TexReg 11751; amended to be effective December 2, 2001, 26 TexReg November 2001 Update Page 5

Manual for Districts Subject to Wealth Equalization

Figure: 19 TAC 62.1071(a) Texas Education Agency Manual for Districts Subject to Wealth Equalization, Revised April 2017 Office of School Finance Spring 2016 Texas Education Agency Manual for Districts