1. Session V – February 26, 2015

2.  Texas ranks second behind California in the number of students enrolled in public schools.  With a 21.6% increase over a 10 year period, Texas enrollment is the second fastest growing of the 15 most populous states. (Arizona-1 st at 22.1%).

3.  Education funding in Texas will support more than 4.88 million students this year in public schools.  Texas is expected to continue to grow at a rate of 1.7-2.0% annually. This equates to between 82,000 and 96,000 students.  From these new students, 80% are enrolling in fewer than 10% of the Texas school districts. Over the past five years, Lake Travis ISD has grown 34%.

4.  There were 1,025 regular school districts and 202 charter school holders operating in Texas in fiscal year 2013.  The total 1,227 school districts and charter school operators in the state ranks Texas first among the 50 states in the number of operating school districts.

5.  Texas is characterized by its large number of very small, primarily rural school districts, counterbalanced by a handful of very large urban and suburban districts. # of Districts # of Enrolled Students Percent of Students 825< 1,600 9% 18> 50,00029% 3841,600-49,99962%

6.  Over the past 10 years, the racial and ethnic composition of the student population has changed dramatically. Population GroupPercentage Change (10 years) Current State Composition Current Lake Travis Composition Hispanic+37.6%51.0%19.9% Anglo-9.3%30.0%70.0% African American+4.9%14.0%1.0% Other Ethnicities+114.3%5.0%9.1%

7.  For the 2014-15 school year, school district property wealth in the state of Texas averaged about $343,000 per student.  Out of the 1,227 districts and charter school operators, 156 have wealth per student above $504,000 and are therefore subject to recapture (“Robin Hood”).

8.  School districts subject to Robin Hood at the $504,000 level serve about 8% of the state’s students.  For 2014-2015, Lake Travis ISD has a wealth per student level of $805,860.  For 2014-2015, Lake Travis ISD is equalized (“recaptured”) on 37.06% of every tax dollar collected at the tier 1 funding level.

9.  Legally Adopted Budget- General Operating Fund$ 93,317,477 Food Service Fund$ 3,530,825 Debt Service Fund$ 28,579,298 Total Budgeted Funds$125,427,600

12.  The Foundation School Program (FSP) is the principal vehicle for distributing state aid to school districts.  The FSP is a shared funding model, depending on contributions from both state and local tax revenue sources to fund the level of entitlement generated under the statutory formulas.  At an overall state level, the state share is currently at the 46% level, leaving the remaining 54% to be paid out of local property taxes.

14.  The FSP has two main components, operations funding and facilities funding, each of which is tied to the tax effort of school districts.  The operations funding component of the FSP provides school districts with assistance in financing their maintenance and operations based on the following three components: 1. Tier 1 2. Tier 2 3. Property Tax Relief

15.  Statutory formulas are used to calculate basic aid under Tier 1. The current basic allotment amount is $5,040 per student in average daily attendance (ADA).  A school district is responsible for funding a portion of its Tier 1 entitlement. This portion is called the Local Fund Assignment (LFA).

16.  The LFA is the amount of tax collections generated at the tax rate of $1.00.  If a district’s LFA exceeds its Tier 1 entitlement, the district is said to be “budget balanced.”  A district that is budget balanced is also necessarily subject to the provisions of the Texas Education Code (TEC), Chapter 41 (State Equalization).

17.  Tier 2 provides a “guaranteed yield” (GY), or guaranteed level of funding, to school districts to supplement the basic funding provided for by Tier 1.  The GY ensures that school districts generate a specified amount of state and local funds per student in weighted average daily attendance (WADA) for each cent of tax effort above the tax effort required to meet the LFA, up to an amount set by statute (17 cents).

18.  The passage of HB 3646 (81 st Legislature) in 2009 modified Tier 2 to provide for two levels of GY funding.  Level 1 (L1) equals an amount set by the General Appropriations Act that is the greater of :  Austin ISD’s property wealth per student ($61.86 per WADA) or  The amount of a district’s tax revenue per WADA per cent of tax effort generated for this level of GY funding (LT-$79.53 per WADA)

19.  A district may generate L1 funding for only six pennies above the $1.00 tax rate. These pennies are called “golden pennies” because they are the pennies of tax effort for which a district is able to generate the highest level of enrichment funding.  Districts can access four of the six pennies at the discretion of the local school board. Because of restrictions in the Texas Tax Code, access to the fifth and sixth pennies of enrichment usually require voter approval. Because of this stipulation, I like to refer to these two pennies as “silver pennies.” The passage of

20.  Level 2 (L2) equals a fixed amount set by statute ($31.95 per WADA).  The L2 pennies of tax effort are sometimes called copper pennies because they generate a lower level of enrichment funding than the golden and silver pennies. Enrichment at this level requires voter approval. The district can access an additional eleven pennies at the L2 funding level. The passage of

22.  In fiscal year 2006, when districts were required to compress their property tax rates by one-third over a two-year period, the state developed a “hold-harmless” mechanism to guarantee that districts would not lose revenue as a result. get.”  Each district was guaranteed by the state the same amount of total revenue per WADA as they received in either the 2005- 06 or 2006-07 school year, whichever amount was greater. This total revenue per WADA amount is commonly referred to as a district’s “Revenue Target.” The passage of

24.  If a district’s (now compressed) local revenue and state aid through the Basic Allotment does not generate sufficient funding to meet this revenue target, the state provides hold harmless funding-termed Additional State Aid for Tax Reduction (ASATR).  Pursuant to legislation passed by the 82 nd Legislature, ASATR will expire in statute at the end of fiscal year 2017 (LT-$5.7 million). The Legislature began phasing out this funding stream in fiscal year 2013. The passage of at

25.  The Facilities Funding component of the FSP consists of the Instructional Facilities Allotment (IFA) Program and the Existing Debt Allotment (EDA) Program. These programs assist school districts in funding facilities by equalizing Interest & Sinking (I&S) tax effort.  State aid under the IFA and EDA programs provide GY of $35 per penny of tax effort per ADA, within limitations prescribed for each program. Chapter 41 districts do not qualify for IFA or EDA program funding.

26.  To receive IFA program assistance, a district must apply to the Texas Education Agency (TEA). IFA supported debt must support the construction of instructional facilities.  A school district does not need to apply to receive EDA funding. The TEA determines the EDA Funds to which a school district is entitled based on I&S tax collections and bond data that the agency receives through the Public Education Information Management System (PEIMS) reporting system.

27.  The Available School Fund (ASF) is a constitutionally dedicated fund for the support of the public education system. It is funded from distributions from returns on investment of the Permanent School Fund (PSF) and also receives 25% of the state’s motor fuels tax revenue.  The ASF funds the state’s instructional materials purchases (through a transfer to the state Instructional Materials Fund) and an annual per capita distribution to school districts.

28.  FSP-Tier 1 Entitlement:$48,898,607  FSP-Tier 2 Entitlement:$ 3,065,030  FSP-Property Tax Relief:$ 3,658,006  Other State Aid Programs:$ 3,444,795  FSP-Facilities Entitlement:$ 0  Total State & Net Tax Revenue$59,066,438

29.  Recapture, also known as “Robin Hood” Payments, is a mechanism in state funding formulas that ensures that a district’s property wealth per student does not exceed certain levels, known as equalized wealth levels (EWL).  A district that is subject to recapture is often referred to as a Chapter 41 district because the provisions governing recapture are found in the TEC, Chapter 41.

30.  There are three equalized levels of property wealth per WADA that limit the access of school districts to the tax revenue generated by local Maintenance & Operations (M&O) tax effort. Equalized Wealth LevelTax Rate 2014-15 Wealth per WADA 1 st EWL$1.00$504,000 2 nd EWL$0.06Unlimited 3 rd EWL$0.11$319,500 Total Tax Effort$1.17

31.  A district has five options available to reduce its property wealth per WADA. Option 1: Consolidate with another district. Option 2:Detach property. Option 3:Purchase attendance credits from the state. Option 4:Contract to educate nonresident students from a partner district. Option 5:Consolidate tax bases with another district.

32. State Equalization Summary for Lake Travis ISD: Recapture at the $504,000 Level (1 st EWL)$27,727,145 Recapture at the Unlimited Level (2 nd EWL)$ 0 Recapture at the $319,500 Level (3 rd EWL)$ 0 Total 2014-15 Recapture Payments to TEA$27,727,145

34.  The Texas Education Code limits issuance of additional ad valorem tax bonds if the tax rate needed to pay aggregate principal and interest exceeds $0.50 per $100 of assessed valuation of taxable property within the district.  For 2014-2015, Lake Travis ISD has a debt service tax rate of $0.3675.

35.  Lake Travis ISD outstanding debt portfolio as of February 15, 2015 General Obligation Bonds Series Date of Issue Maturity Date Interest Rate Bond Rating Outstanding at 2/15/2015 200603-23-0608-15-364.5-5%AA+$ 19,589,308 2006A09-14-0608-15-164-5%AA+$ 1,265,000 200805-29-0808-15-204-4.5%AA+$ 1,775,000 201208-15-1202-15-423-5%AA+$139,220,000 201302-28-1302-15-361.5-5%AA+$101,210,000 TOTAL$263,059,308

36.  In 2011 special legislative session, the state legislature passed Senate Bill 1(SB1) that reduced the FSP by $4 billion over the biennium. An additional $1.4 billion was cut in other state programs such as the Pre-K Program and the Technology Fund Allotment.  Result of SB1 to Lake Travis ISD: 2011-122012-132013-142014-15Total ($3.3) M($4.8) M($4.1) M($3.8) M($16.0) M

37.  For LTISD taxpayers, their annual property tax expense is considerably smaller than it would be without the Local Optional Homestead Exemption (LOHE) provided by our School Board.  Here’s how the calculation works: Average LTISD Residence$425,000 20% Exemptionx 20% Value Subject to Exemption$ 85,000 Per $100 Tax Value/ 100 Adjusted Value for Exemption$ 850 LTISD Tax Ratex 1.4075 LTISD Average LOHE$ 1,196

38.  Under current Chapter 41 equalization calculations, the state bases the school district’s recapture payment on 100% of taxable value even when the district is collecting taxes on only 80% of the taxable value.  The Local Optional Homestead Exemption (LOHE) “penalty” that Lake Travis ISD will incur for 2014-2015 is $3.1 million.