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

SPONSOR Campos

DATE TYPED 02/19/05 HB

SHORT TITLE Short-Term Bonds for School Deficiencies

SB 14

ANALYST Kehoe

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$70,000.0

Non-Recurring

Short-Term

Severance Tax

Bonds

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$70,000.0

Non-Recurring Public School Capi-

tal Outlay Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Board of Finance (BOF)

Public School Facilities Authority (PSFA)

Public Education Department (PED)

SUMMARY

Synopsis of Bill

Senate Bill 14 intercepts up to $70 million of severance tax revenues that would otherwise be

Senate Bill 14 -- Page 2

transferred to the severance tax permanent fund for the purpose of correcting deficiencies pursu-

ant to the Public School Capital Outlay Act.

Significant Issues

Senate Bill 14 authorizes the State Board of Finance to issue and sell supplemental severance tax

bonds in an amount not to exceed $70 million when the Public School Capital Outlay Council

(PSCOC) certifies the need for issuance by resolution. The proceeds from the sale of the bonds

are appropriated to the public school capital outlay fund for the purpose of making wards of

grant assistance for correcting deficiencies pursuant to the Public School Capital Outlay Act. All

statutory tests used to finance senior severance tax bonds and notes and supplemental severance

tax bonds and notes must be met before the cash balances, also known as a “sweep”, can be used

for public school capital projects.

The deficiencies corrections program, administered by the Public School Facilities Authority

(PSFA) under the direction of PSCOC, identified $324.5 million in Level I and Level II defi-

ciencies in public school facilities throughout the state. Level I deficiencies describe those life

and safety deficiencies that pose an immediate risk to students and staff. Level II deficiencies

describe those conditions that pose a serious health risk with the potential to deteriorate to a

Level I if not addressed in a timely manner.

As of December 2004, PSCOC has authorized $230.4 million in grant assistance to correct defi-

ciencies of which $100.3 million has been expended. According to statutory intent, deficiencies

correction funding must be expended by June 30, 2007. The additional funding proposed in this

bill should complete the projects described as deficiencies and enable PSCOC and PSFA to ad-

minister future funding based on the new standards-based award process.

FISCAL IMPLICATIONS

The supplemental severance tax bond issuance of up to $70 million authorized in this bill is a

non-recurring expense to the severance tax bond fund. Proceeds from the issuance of said bonds

would be appropriated to the public school capital outlay fund. Any unexpended or unencum-

bered balance remaining at the end of any fiscal year shall not revert to the severance tax fund.

According to BOF, the “sweep” proposed in this bill could result in less distribution in future

years from the severance tax permanent fund to the general fund. If the proceeds proposed in

this bill are not used for the deficiencies correction program or any other purpose, the funds

would transfer to the severance tax permanent fund for investment by the State Investment

Council.

ADMINISTRATIVE IMPLICATIONS

The Deficiencies Correction Program is administered by the Public School Facilities Authority

under the direction of the Public School Capital Outlay Council.

OTHER SUBSTANTIVE ISSUES

As provided by PSFA, the following table depicts the most recent status of projects currently un-

derway in the deficiencies correction program:

Senate Bill 14 -- Page 3

# Projects Status

30

Developing RFP/ Contracts for Design Professionals

31

Project in Design

137

Project Under Construction

83

Construction Substantially Complete

LMK/sb