Finance Advisory Council MeetingMarch 24, 2017

©2017 Region One Education Service Center

HB 1378: Local Government Debt TransparencyDebt Obligation Reporting under Local Government Code, Section 140.008

The 84th Legislature passed HB 1378 to increase the transparency of local government debt. Under Local Government Code § 140.008, political subdivisions, including counties, cities, school districts, junior college districts, special purpose districts, and other subdivisions of state government must annually compile their debt obligation data from the preceding fiscal year and either:

1. report it to the Comptroller of Public Accounts for posting or, alternatively,

2. post the information on their own websites

©2017 Region One Education Service Center

For those who chose the first option above, the Comptroller's office has developed the Annual Local Debt Report (XLS) form and an online submission form to enable entities or their third-party representatives to compile and submit the required information:

• Download, complete and save the Annual Local Debt Report form. Save these forms according to the following convention: "Annual Local Debt Report_Name of Political Subdivision_2016".

• Next, access the online submission form and upload your completed Annual Local Debt Report.

Annual Local Debt Report [comptroller.texas.gov/transparency/local/hb1378/Local Debt Submission Form [comptroller.texas.gov/transparency/local/hb1378/apply.php]

©2017 Region One Education Service Center

Debt Lookup

In accordance with 140.008(d), the Comptroller's office provides the submitted information in an appropriate format. The Local Entity Debt Lookup makes self-reported debt information for each political subdivision available by searching a political subdivision's name, entity type, city, and/or zip code

Local Entity Debt Lookup [comptroller.texas.gov/transparency/local/hb1378/approved.php]

Reporting Deadlines

Political subdivisions shall report the required information via Option 1 or 2 above:

• within 210 days of the end of the political subdivision's fiscal year in 2016;

• thereafter, within 180 days of the end of the most recently completed fiscal year.

Deadlines for Annual Local Debt Reporting (HB 1378)

Note: This table reflects both deadlines: the 210 days from the last day of an entity's 2016 fiscal year and 180 days from the last day of an entity's subsequent fiscal years.

Last Day of Fiscal Year Submission/Posting Deadline for Fiscal 2016

Submission/Posting Deadline for Fiscal 2017 and Beyond

January 31 August 28, 2016 July 30February 28 September 25, 2016 August 27March 31 October 27, 2016 September 27April 30 November 26, 2016 October 27May 31 December 27, 2016 November 27June 30 January 26, 2017 December 27July 31 February 26, 2017 January 27

August 31 March 29, 2017 February 27September 30 April 28, 2017 March 29October 31 May 29, 2017 April 29November 30 June 28, 2017 May 29December 31 July 29, 2017 June 29

Required Debt Obligation Reporting

The Comptroller's office is charged with adopting rules for the implementation of Local Government Code 140.008. These rules are in development and will establish the format, submission and web posting and/or web linking of reporting of political subdivisions' required annual debt information, including that of water districts described in Chapter 49 of the Water Code. This website serves as the Comptroller's standing guidance while rules to implement Local Government Code 140.008 are in development. In meantime, the HB 1378 draft rules can be viewed at:

[comptroller.texas.gov/transparency/local/hb1378/docs/hb1378-draft-rules.pdf]

These draft rules are not finalized. Please contact us with any comments or questions regarding the draft rules at:

[mailto: transparency@cpa.texas.gov]

Frequently Asked Questions

If our political subdivision has no outstanding debt, do we still need to report under Local Government Code, Section 140.008?

Yes. A political subdivision must annually compile and report the required financial information under Local Government Code, Section 140.008. There is not an exception to the filing requirement for a political subdivision with no outstanding debt.

Frequently Asked Questions

Our political subdivision has some debt that is not funded by tax money. Are we required to report this?

A political subdivision must annually compile and report the required financial information, including debt obligations defined as an issued public security under Government Code, Section 1201.002.

A public security "means an instrument, including a bond, certificate, note, or other type of obligation authorized to be issued by an issuer under a statute, a municipal home-rule charter, or the constitution of this state" under Government Code, Section 1201.002(2)

Since the definition of an issued public security is not limited by the source of debt payment, a political subdivision would be required to report its debt obligation information regardless of the source of payment.

Frequently Asked Questions

Are county appraisal districts considered political subdivisions and therefore required to report under Local Government Code, Section 140.008?

Yes. Since a county appraisal district is defined as a Texas political subdivision under Section 6.01(c) of the Texas Tax Code, it is required to report under Local Government Code, Section 140.008.

Frequently Asked QuestionsAre charter schools required to report under HB 1378?

Charter schools required under §140.008 to compile and report outstanding debt obligations will likely include those organized under:

• Texas Education Code Chapter 12, Subchapter B ("Home-Rule School District Charter"); • Texas Education Code Chapter 12, Subchapter C ("Campus or Campus Program Charter"),

and • Texas Education Code Chapter 12, Subchapter E ("College or University or Junior College

Charter School"); as well as • Open-enrollment charter schools operated by certain public institutions of higher

education or other governmental entities as described by Texas Education Code Chapter 12, Subchapter D ("Open-Enrollment Charter School"), Section 12.101 ("Authorization").

The Comptroller encourages all charter schools to participate in the Local Government Debt database.

Frequently Asked QuestionsIf our political subdivision has short term leases and loans or other agreements not requiring authorization, do we need to report these items under Local Government Code, Section 140.008?

Only public securities defined under Government Code §1201.002 (an instrument, including a bond, certificate, note, or other type of obligation authorized to be issued by an issuer under a statute, a municipal home-rule charter, or the constitution of this state) must be reported. If short term leases and loans or other agreements do not meet this definition, they are not required to be reported.

However the intent of HB1378 is debt transparency. Even if they do not meet the definition of public securities above, political subdivisions are encouraged to report bank obligations or direct placements if they have a term over 3 years; were authorized by the voters; or are to be repaid with ad valorem taxation.

If you have any other questions, please email transparency@cpa.texas.gov or call 844-519-5676

Region One ESC Salary Survey 16-17We have completed our annual regional survey whereby districts submit the salary schedules for all positions including stipends. This year we had about 62% of our region’s districts/charter schools participate.

Districts that participated with surveyBrownsville ISD Hidalgo ISD Mercedes Rio Hondo

Donna ISD La Feria Mission United

Edcouch Elsa ISD La Villa Monte Alto Valley View

Edinburg CISD Los Fresnos Point Isabel Weslaco ISD

Excellence in Leadership Lyford PSJA

Harlingen CISD McAllen Raymondville

** Please be advised that information was only share with those districts/charter schools that participated in the survey**

LEA Preparation for 2015-2016 IDEA-B LEA MOE Compliance Reviews

• TEA plans to release 2015–2016 preliminary IDEA-B LEA MOE compliance reviews in early April 2017.

• TEA anticipates releasing final IDEA-BB LEA MOE compliance reviews in May 2017.

• LEAs will access the reports through the secure GFFC Reports and Data Collections application.

• When preliminary reviews are released, the 2015–2016 Exceptions/Adjustment Workbook will also be available in GFFC Reports and Data Collections and on the IDEA-B LEA MOE page of the TEA website.

Timeline for LEA Response to Preliminary Compliance Reviews

LEAs will have five business days from the date the 2015–2016 preliminary IDEA-B LEA MOE compliance reviews are published in GFFC Reports and Data Collections to submit any of the following:

• Applicable federal statutory exceptions• Adjustment to fiscal effort• Local methodology with supporting documentation for validation

and approval in the final calculation

To help LEAs ensure they are prepared to respond within the required five business days, TEA encourages LEAs to begin reviewing and compiling any documentation planned to be submitted to TEA when the Exceptions/Adjustments Workbook becomes available.

Allowable Federal Statutory Exceptions

• The voluntary departure, by retirement or otherwise, or departure for just cause, of special education or related services personnel

• A decrease in the enrollment of children with disabilities• The termination of the obligation of the agency, consistent with this part, to provide

a program of special education to a particular child with a disability that is an exceptionally costly program, as determined by TEA, because the child has left the jurisdiction of the agency; has reached the age at which the obligation of the agency to provide FAPE to the child has terminated; or no longer needs the program of special education.

• An exceptionally costly program to a particular child with a disability is the amount greater than $9290.

Allowable Federal Statutory Exceptions (cont’d)

• The termination of costly expenditures for long-term purchases, such as the acquisition of equipment or the construction of school facilities

• The assumption of cost by the high cost fund operated by TEA under Title 34 of the Code of Federal Regulations (CFR) 300.704(c)

• The adjustment to fiscal effort provision under 34 CFR 300.205

Revised IDEA-B LEA MOE Calculation Tool

The revision involves how the amount of cumulative exceptions/adjustments for intervening years is calculated for per-capita tests.

For both per-capita tests, the total amount listed in the last column (“Intervening Years – Total Exceptions/Adjustments to Fiscal Effort Validated by TEA”) on page 2 of TEA’s calculation tool must be divided by the special education student count for the last compliant school year to determine a “per-capita” amount of cumulative exceptions/adjustments for intervening years.

This per-capita amount should then be multiplied by the total “Special Education Student Count – Compliance Review School Year” (on page 1 of the calculation tool) to determine the adjusted per-capita amount of intervening years exceptions/adjustments.

Revised IDEA-B LEA MOE Calculation Tool (cont’d)

The few LEAs that will be impacted by this change, as identified by the following criteria, have been notified by e-mail:

• LEAs that failed at least one of the “per-capita” tests; and • LEAs that submitted exceptions/adjustments that will be

carried forward until any “failed” test is passed.

Revised IDEA-B LEA MOE Calculation Tool (cont’d)

The revised IDEA-B LEA MOE Calculation Tool has been updated as follows:

• Page 1: Auto-calculations within the tool will auto-populate the allowable per-capita amounts in the “Amount of Cumulative Exceptions/Adjustments, Intervening Years” column.

• Page 2: A new column for “Special Education Student Count – Last Compliant School Year” has been added.

• Instructions have been revised to reflect these changes.

Revised IDEA-B LEA MOE Calculation Tool (cont’d)

As 2015–2016 will be the first IDEA-B LEA MOE compliance review year to consider intervening years exceptions/adjustments, TEA will use this revised calculation method during its upcoming compliance reviews. Likewise, LEAs should use this revised calculation tool to perform their own internal calculations to compare with TEA’s preliminary reviews and to make sure that results match.

Tax Collections for Districts with Chapter 313 Projects

• beginning with tax year 2016, school districts that have active agreements under Chapter 313 of the Texas Property Tax Code and that have companies subject to tax credits must net those credits against taxes due (rather than the company paying the full amount of taxes due and the district then issuing a reimbursement to the company for the amount of the tax credit).

• This change in practice will ensure that additional state aid for ad valorem tax credits under the TEC, §42.2515are issued in compliance with current law.

• The first notice, sent in January 2016 so that affected districts could work with their tax assessor-collectors to prepare for this change, can be found at http://tea.texas.gov/About_TEA/News_and_Multimedia/Correspondence/TAA_Letters/Tax_Collections_for_Districts_with_Chapter_313_Projects/

Tax Collections for Districts with Chapter 313 ProjectsState Funding

• Beginning with the 2016–2017 school year, the Texas Education Agency (TEA) will no longer accept copies of reimbursement checks from the district to the company as documentation of the tax credit.

• Instead, districts must submit a copy of the company’s tax statement clearly demonstrating that the tax credit was netted against current taxes due in order to receive a reimbursement from the TEA.

Tax Collections for Districts with Chapter 313 ProjectsState Funding (cont’d)

• Accordingly, the criteria for acceptable documentation as set forth in 19 Texas Administrative Code (TAC) §61.1019 will be updated to align with statute.

• This change in practice will impact Chapter 42 state aid and Chapter 41 recapture for affected districts as the tax collections used in state funding calculations will now be net of the tax credit.

Tax Collections for Districts with Chapter 313 ProjectsState Funding (cont’d)

• The definition of tax collections in 19 TAC §105.1 will also be updated to align with the change in practice.

• You can find program information, documentation requirements, and the application for Additional State Aid for Ad Valorem Tax Credits under TEC, §42.2515, at http://tea.texas.gov/index2.aspx?id=25769817589&ekfxmen_noscript=1&ekfxmensel=e9edebdf8_25769804222_25769804224

• Direct questions related to required documentation for ad valorem tax credits to Nancy Kuhn at (512) 463-6313 or at nancy.kuhn@tea.texas.gov.

Tax Collections for Districts with Chapter 313 ProjectsFinancial Reporting

• Beginning with the 2016–2017 school year, tax collections reported on the tax information survey (through the Foundation School Program system in the TEASE) should be net of these tax credits.

• Beginning with the 2016–2017 school year, tax collections reported on the Schedule of Delinquent Taxes Receivable (Exhibit J-1) as part of the annual financial report (AFR) should be net of these tax credits.

Tax Collections for Districts with Chapter 313 ProjectsFinancial Reporting (cont’d)

• The AFR format template for Exhibit J-1 in the Financial Accountability System Resource Guide will be updated accordingly to exclude the Chapter 313 tax credits from the district’s reported tax collections.

• Direct questions related to tax collection reporting in the AFR to Paul Moreno at (512) 475-2228 or at paul.moreno@tea.texas.gov.

Upcoming Workshop:

TEA Special Allotment Monitoring Program

Contact Information

Frances Guzman

Region One Education Service Center

Deputy Director for Business, Operations & Finance Support

(956) 984-6290

fguzman@esc1.net