Summary of Public Comments and Agency Responses Related to Proposed Amendment to 19 TAC Chapter 61, School Districts, Subchapter AA, Commissioner's Rules on School Finance, §61.1012, Contracts and Tuition for Education Outside District
Comment: Representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that the commissioner does not have authority to adopt the proposed amendment to 19 TAC §61.1012 under the statutory authority cited in the proposal (Texas Education Code (TEC), §25.039 and §42.106, and House Bill (HB) 1, Section 1.22, 79th Texas Legislature, Third Called Session, 2006).
Agency Response: The agency disagrees. First, the commissioner has explicit rulemaking authority in TEC, §25.039(b), to adopt rules regarding the calculation of the tuition charge that may be used for the adjustment of property values. The existing rule includes language that describes how the maximum tuition is used to adjust property values for the purpose of reimbursing tuition paid by districts that must pay tuition. The proposed rule amendment explains how that adjusted value will be used in the calculation of state funding subsequent to the implementation of HB 1.
Second, the commissioner was also explicitly authorized to adopt rules for the implementation of HB 1, 79th Texas Legislature, Third Called Session, 2006, in TEC, §42.2516(k). The calculation of state funding, particularly the funding due under TEC, §42.302, was affected significantly by the implementation of the bill.
Third, HB 1, Section 1.22, authorized the commissioner to "treat a reference to a tax rate of $1.50 in Chapter 41 or 42, Education Code, or in a rule implementing those chapters (emphasis added) . . . as a different tax rate consistent with the effect of reducing school district tax rates." Thus, the commissioner is authorized to treat any reference to $1.50 in Chapters 41 or 42, or in rules that implement those chapters, as a different tax rate. Section 42.106 is one of those sections authorized for adjustment in HB 1. The statute and rule both provide that districts that pay tuition will be treated differently from districts that do not. The proposed rule amendment does not change that approach.
Finally, the authors of HB 1 have expressed their intention to the agency in a letter specifically stating that the "purpose of the adjustment was to reimburse districts for tuition reasonably required by a receiving district." Further, the letter clearly states that it was not their intention to create a situation in which a district receives state funds "far in excess of any reasonable amount of tuition paid." The letter from the authors also confirms their understanding of the agency's rulemaking authority under HB 1 to make such an adjustment.
Comment: Representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that adopting a rule at this time to impact the 2006-2007 school year is inappropriate as that school year is completed, audits have been submitted, and the agency approved tuition agreement contracts several months ago.
Agency Response: The agency disagrees. There have not been any changes to the 2006-2007 tuition limits that were posted in the spring of 2006, before the passage of HB 1. The agency is not planning to change the tuition limits for the 2006-2007 school year, but will change the way that the property value adjustment is applied. The amendment will affect only the application of the property value adjustment, not the tuition amount that can be charged. Additionally, the 2006-2007 school year remains subject to adjustment under the "settle-up" process authorized in TEC, §42.253.
Comment: Representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that adopting a rule at this time to impact the 2007-2008 school year is inappropriate as that school year is partially completed and contracts related to tuition agreements were executed before the amendment to the rule was proposed.
Agency Response: The agency disagrees. Due to the proposed amendment, the tuition rates for 2007-2008 were maintained at 2006-2007 levels. The tuition limits for 2007-2008 will not be changed during the school year. New limits for 2008-2009 that conform to the amendment will be published in the spring of 2008.
Comment: Concerning §61.1012(c)(1)(A) and (B), representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that the commissioner does not have the statutory authority to elect not to apply the taxable values, as adjusted by §42.106, in calculating state aid for the purposes of Chapter 42.
Agency Response: The agency disagrees. TEC, §42.106, was written before the passage of HB 1. That section did not anticipate the current school finance structure, in which there are additional tiers of enrichment beyond the school finance system that included reimbursement for tuition paid to another district. In addition, HB 1 provided rulemaking authority with regard to the calculation of funding due under TEC, §42.302, which is intrinsically linked to §42.106.
Comment: Concerning §61.1012(c)(1)(C), representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that the subparagraph exceeds the authority provided to the commissioner by HB 1 to adjust tax rates in certain state aid calculations related to tax compression. The comment stated that HB 1, which specifies that the commissioner can treat a reference to a $1.50 tax rate as a different tax rate for the purpose of reducing school district tax rates to the state compression percentage rate, does not allow the commissioner to select any rate required to limit a school finance benefit to a school district.
Agency Response: The agency disagrees. The amended rule is specifically designed not to require districts to levy taxes in the enrichment tiers in order to be fully reimbursed for their tuition costs. It is not intended to limit any legitimate school finance benefit to a school district.
Comment: Representatives of Moak, Casey & Associates and O'Hanlon, McCollom & Demerath commented that allowing the commissioner to use the adjusted values in the calculation of state aid for taxes collected below the compressed rate (Tier II level 1) and the unadjusted values in the calculation of state aid for taxes collected above the compressed rate (Tier II levels 2 and 3) in the proposed rule will eliminate any impact of the value adjustments in 2007-2008 and after.
Agency Response: The agency disagrees. The amended rule will provide a mechanism that fully reimburses the sending school district for the tuition it pays to the receiving school district. The purpose is to ensure that districts are fully reimbursed for their tuition payments at the compressed tax rate level. The amendment is designed specifically so that school districts are not required to levy taxes above the compressed tax rate in order to be reimbursed for their tuition.
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