Committee Substitute House Bill 506, a 50-cent debt test bill, by Representative Eddie Rodriguez, is on the House calendar for second reading on Wednesday, May 6, 2015. The Committee Substitute contains a provision related to district eligibility that calls for the Commissioner of Education to determine if a interested district meets or exceeds high enrollment growth criteria established by the Texas Education Agency.
C.S.H.B. 506 amends the Education Code to increase the limitation on the property tax rate imposed by a school district to support the issuance of bonds from 50 cents per $100 of valuation to an amount per $100 of valuation that is 20 percent greater than that rate if the district meets the following criteria:
- has an interest and sinking fund tax rate of 45 cents or greater per $100 of valuation;
- is a high enrollment growth district, as determined in accordance with commissioner of education rules adopted for purposes of the instructional materials allotment adjustment for a high enrollment growth district;
- has a current Financial Allocation Study for Texas (FAST) rating from the comptroller of public accounts of at least three stars on a five-star scale, or the equivalent of that rating under any subsequent system developed by the comptroller;
- has adopted a capital improvement plan in accordance with the bill's provisions; and
- demonstrates to the attorney general that the terms of the proposed issuance will result in total interest costs to the district that are at least five percent less than the total interest costs that would result if the district were to issue an alternate debt instrument that defers interest costs, such as a capital appreciation bond.
The limit is referred to as a 50-cent tax rate “test” because a proposed bond issue (in addition to existing debt for a district) must currently be certified by the Texas Attorney General’s Office as being fundable by a debt tax rate of no more than 50 cents (per hundred dollar valuation) over the payment term for a proposed bond issue. This is an issue that has significantly escalated in the past decade as Texas has experienced rapid population growth and is not expected to abate as Texas’ population is to projected to double in the next three decades.
I&S tax rates have increased significantly as state aid support for facilities has fallen by about 65 percent in the past decade, based upon an analysis of state aid revenues to debt-related expenditures in the Debt Service Fund. In school year 2004-2005, only four Texas school districts had an I&S tax rate of 45 cents or more. In the current 2014-2015 school year, 66 districts have an I&S tax rate of 45 cents or more. Because state aid funding levels for facilities have declined in total over recent fiscal year, funding for new facilities is now entirely a local taxpayer decision when casting votes for proposed bond referendums.
The 50-cent debt test bill is being referred to as a fiscal efficiency
bill due to cost savings related to reduced total interest costs that would be achieved in districts that participate in the provisions in C.S.H.B. 506.