Region One ESC Financial Advisory Council Meeting October

Region One ESC Financial Advisory Council Meeting October 21, 2016

Recent Sales Tax Growth Sales Tax Revenue Growth Last 21 Months September, 16 August, 16 July, 16 June, 16 May, 16 April, 16 March, 16 February, 16 January, 16 December November October September August July 2 10/21/16 © Moak, Casey & Associates June May April March February January 12, 00% 10, 00% 8, 00% 6, 00% 4, 00% 2, 00% 0, 00% -2, 00% -4, 00% -6, 00% -8, 00%

1 -Year Moving Average Monthly Sales Tax Collections $2 500, 0 $2 450, 0 $2 400, 0 $2 350, 0 $2 300, 0 2013 2014 $2 250, 0 2015 2016 $2 200, 0 $2 150, 0 $2 100, 0 $2 050, 0 $2 000, 0 January March © Moak, Casey & Associates May July September November 10/21/16 3

Oil Slipping WTI on Monday of first full week of the month © Moak, Casey & Associates 10/21/16 4

Revenue Performance FY 2016 – End of Year Biennial Revenue Estimate Projected Change Actual Change Sales Tax Motor Vehicle Tax Natural Gas Tax Oil Production Tax Alcoholic Beverage Tax Cigarette and Tobacco Motor Fuels Taxes TOTAL Taxes © Moak, Casey & Associates 1. 24% 5. 85% - 31. 95% - 35. 92% 4. 21% - 2. 81% 1. 79% -1. 61% -2. 26% 2. 28% -54. 80% - 40. 80% 3. 84% -1. 98% 0. 94% -5. 14% 10/21/16 5

Revenue Performance FY 2017 – as of September Biennial Revenue Year – to – Estimate Projected Date Growth* Growth 4. 81% - 3. 83% 6. 37% - 4. 75% 19. 81% - 14. 66% 11. 77% - 2. 52% 5. 28% -0. 46% Sales Tax Motor Vehicle Tax Natural Gas Tax Oil Production Tax Alcoholic Beverage Taxes to reach FY 2017 revenue 1. 71% - 17. 05% *Motor Growth. Fuels rate needed projection; cigarette tax temporarily excluded due to changes in due dates for payments © Moak, Casey & Associates 10/21/16 6

The Big Revenue Picture Legislature left town in 2015 with over $6 billion unspent • Legislature will return with approximately $2 billion remaining due to downturn in economy • Pressures on health care funding and human services (CPS) will most likely diminish remaining balance even more • Similar to last session, expect Legislature to sweep budget of TEA (most likely several hundred million dollars due to local value growth) • • • Legislature swept $700 million last session More pressures if Legislature decides on more property tax relief measures © Moak, Casey & Associates 10/21/16 7

TEA’s Legislative Appropriations Request • FSP request is for $2. 1 billion less funding $3. 1 billion less General Revenue • Value growth more than covers the additional cost of enrollment growth • 5. 03% annual value growth assumed • Recapture rises to $5. 1 billion for the biennium • • Austin Yield speculation for 2017 -18 Likely increasing 10 -15% ($85 -89) • TEA’s LAR uses $84. 30 for 2017 -18 and $88. 39 for 2018 -19 • 0. 2% increase for most districts • © Moak, Casey & Associates 10/21/16 8

Declining State Share Year Local M&O Taxes State Funding % State 2015 -16 $22. 2 B $16. 8 B 43. 1% 2016 -17 $23. 2 B $15. 8 B 40. 4% 2017 -18 $24. 4 B $14. 4 B 37. 1% 2018 -19 $25. 7 B $13. 7 B 34. 8% 2015 -16, 2016 -17, and 2017 -18 from current MC&A statewide model; 2018 -19 projected without a model © Moak, Casey & Associates 10/21/16 9

Billions State Facilities Support $7 50, 0% 45, 0% $6 40, 0% $5 35, 0% 30, 0% $4 25, 0% $3 20, 0% 15, 0% $2 10, 0% $1 5, 0% ALL DISTRICTS Total Debt Service 6 -1 15 20 14 -1 5 4 -1 20 3 13 -1 20 2 12 -1 20 1 11 10 -1 20 9 09 -0 20 08 20 07 -0 8 7 -0 20 6 06 -0 20 05 20 04 -0 5 4 -0 20 03 20 -0 3* 2* 02 -0 20 01 -0 20 00 -0 20 99 19 1* 0, 0% 0* $0 ALL DISTRICTS Total State Aid for Debt % State Aid for All Debt © Moak, Casey & Associates 10/21/16 10

No Value Growth Scenario • If the values of 2005 -06 had stayed constant through 2015 -16 State Aid would have been $7. 4 billion higher • Recapture would have been $1. 5 billion lower • State cost from state revenue other than recapture would have been $8. 9 billion higher per year • © Moak, Casey & Associates 10/21/16 11

Texas Education Agency Legislative Appropriations Request © Moak, Casey & Associates 10/21/16 12

TEA LAR • In June, Gov. Greg Abbott, Lt. Gov. Dan Patrick, and Speaker Joe Straus directed agencies to reduce budgets by 4% • The agency also outlined nine exceptional item requests — or requests for funding above the amount allocated for the agency budget © Moak, Casey & Associates 10/21/16 13

Suggested Cuts to TEA • Best Buddies (100 percent reduction) • Educator Excellence Humanities Texas (100 percent reduction) • Adult Charter School Pilot (50 percent reduction) • Amachi (50 percent reduction) • Communities © Moak, Casey & Associates in Schools (15 percent reduction) 10/21/16 14

Suggested Cuts to TEA • Advanced Placement Initiative (5 percent reduction) • Reasoning Mind (4 percent reduction) • Fitness. Gram (4 percent reduction) • Teach For America (4 percent reduction) © Moak, Casey & Associates 10/21/16 15

Exceptional Items • Math Innovation Zones grants ($20 million/two FTEs) • High-quality prekindergarten ($117, 675, 458/no FTEs) • Protect students from inappropriate educator relationships via investigation and prosecution ($391, 134/three FTEs) • Implementation of Texas Student Data System ($6, 000/11. 5 FTEs) • E-rate high-speed internet infrastructure for classroom connectivity ($25, 250, 000/no FTEs) © Moak, Casey & Associates 10/21/16 16

Exceptional Items • Ensure student and teacher data privacy and cyber security ($13, 410, 120/17 FTEs and contractors) • Effectively implement low-performing campus turnaround and monitoring of districts of innovation best practices under HB 1842 ($1, 000/seven FTEs) • Restore 4 -percent reduction for STAAR test item release to improve transparency ($4, 173, 842/no FTEs) • Windham School District program expansion ($11, 541, 448/no FTEs) © Moak, Casey & Associates 10/21/16 17

Interim of the 84 th Session of the Texas Legislature Update © Moak, Casey & Associates 10/21/16 18

Hearings • Held its last hearing for the 84 th interim on October 17 with Chairman Aycock at the helm • Senate Education held its last interim hearing in September • Interim reports expected to be released in the coming months © Moak, Casey & Associates 10/21/16 19

School Choice • Lt. Gov. Dan Patrick vowed to pass school choice legislation — education savings grants, tax scholarships -- out of the Senate in 2017 and get it to the Governor's desk. • Both Chambers held interim hearings on school choice but the tone was remarkably different. © Moak, Casey & Associates 10/21/16 20

School Choice • Democrats in both chambers voiced concerns but with an asterisk that school districts needed to do more for students in low-performing schools. • House had some Republicans voice concerns that school choice was for a selected few and was not a state issue. © Moak, Casey & Associates 10/21/16 21

School Finance • Senate debt. discussed school facility funding and • House held a joint hearing between the Public Education and Appropriations Committee • Comprehensive conversation on all aspects of school finance • Deep understanding of issues by chairs – both of whom will not be here next session © Moak, Casey & Associates 10/21/16 22

th 85 Session of the Texas Legislature © Moak, Casey & Associates 10/21/16 23

Dates of Interest • November • January • March • May 14 – Pre-filing of Bills 10 – Session begins 10 – 60 day bill filing deadline 29 – Sine Die (session ends) • June 18 – Last day for governor to sign or veto bills © Moak, Casey & Associates 10/21/16 24

Leadership State Leadership • Governor Abbott • Lt. Governor Patrick • Speaker Straus Legislative Leadership • House • Senate Ed - ? • House Ed – Larry Taylor • Senate Appropriations - ? Nelson © Moak, Casey & Associates Finance – Jane 10/21/16 25

Other Education Issues • • Student/teacher relationships Seatbelts on school buses Bullying Local debt/debt transparency School board governance Dual credit Union dues/payroll deductions © Moak, Casey & Associates 10/21/16 26

Lynn M. Moak Daniel T. Casey Partners Dee Carney Curtis Culwell, Ed. D. Terry Faucheux Rebecca Flores Chris Grammer Kathy Mathias Bob Popinski Larry Throm Maria Whitsett, Ph. D. Joe Wisnoski Associates Thomas V. Alvis, Ph. D. Larry Groppel, Ed. D. Alicia Thomas, Ph. D. Mary Mc. Keown-Moak, Ph. D. Consultants Susan Moak Kari Ruehman Administrative Staff 400 West 15 th Street, Suite 1410, Austin, Texas 78701 -1648 Ph. (512) 485 -7878 Fax (512) 485 -7888 www. moakcasey. com