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F I S C A L I M P A C T R E P O R T

SPONSOR Stewart

DATE TYPED 02/14/05 HB 855

SHORT TITLE LOCAL OPERATIONAL SCHOOL LEVY ACT

SB

ANALYST Padilla-Jackson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

Indeterminate*

Local Opera-

tional School

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Indeterminate*

Local Operational

School Fund

(Parenthesis ( ) Indicate Revenue Decreases)

*See discussion under Fiscal Implication section.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 855 proposes to create the Local Operational School Levy, which would allow a local

school board to adopt a resolution authorizing the imposition of a property tax for school district

operational purposes. The tax would be imposed upon the taxable value of property in the

school district, not to exceed $4.00 on each $1,000 (or four mill) of taxable value of property in

the school district and the tax must be submitted and approved by a majority of voters in the dis-

House Bill 855 -- Page 2

trict. The tax cannot exceed two mills or be for a period of more than ten years at each election.

The bill’s provision would have the Department of Finance certify the tax, and be imposed, ad-

ministered, collected in accordance with the provisions of the Oil and Gas Ad Valorem Produc-

tion Tax Act, the Oil and Gas Equipment Ad Valorem Tax Act, the Copper Production Ad

Valorem Tax Act, and the Property Tax Code.

The bill would also create the “local operational school fund” in the state Treasury. The amounts

in the fund and the interest earned from investing the fund are to be appropriated for the purposes

of the Local Operational School levy Act. The state would provide a guarantee for a school dis-

trict that has imposed a tax pursuant to the Local Operational School Tax Levy equal to 2.5 per-

cent of the tax rate, multiplied by the forty-day program cost. If the balance in the local opera-

tional school fund in any fiscal year is insufficient to pay the sum of the distribution amounts de-

termined to be due to all the school districts entitled to a distribution, the amount necessary to

pay all distribution amounts in full shall be transferred from the state-support reserve fund.

The bill defines the forty-day program cost as the program costs for any school district as calcu-

lated using membership on the fortieth day of the applicable school year in that school district.

FISCAL IMPLICATIONS

The total fiscal impact of this bill is indeterminate as the property tax raised would be contingent

upon voter approval in each school district. TRD notes that in tax year 2004, statewide net prop-

erty taxable value was approximately $35 billion and, therefore, a two mill property tax rate

would generate approximately $70 million. A four mill property tax rate would generate ap-

proximately $140 million. They also note that the property tax system currently provides

schools with approximately $287 million annually.

ADMINISTRATIVE IMPLICATIONS

A minimal impact is anticipated from TRD.

OTHER SUBSTANTIVE ISSUES

TRD comments suggest that this bill should be subject to yield control, similar to a number of

other school levies. They note that the yield control statutes limit increases in property tax reve-

nue that result from reassessment and encourages assessors to maintain assessed values at "cur-

rent and correct" levels. County assessors may be reluctant to reassess properties not subject to

yield control, which could lead to inequitable assessments and property tax bills.

OPJ/yr