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TEA Correspondence

A Microsoft Word version of this letter is available for download and PRINTING.

June 17, 2009

Re: Adjustment for Optional Homestead Exemption


With the legislative session now over, the agency has had an opportunity to review the Foundation School Program (FSP) appropriation for state fiscal year 2009. I am pleased to announce that there are sufficient funds to recognize the effect of locally granted homestead exemptions during the 2008–09 school year.

The Texas Education Code (TEC), §42.2522, provides that the calculation of state aid can use the reduced taxable value resulting from recognition of half the optional homestead values only if funds are specifically appropriated for that purpose, or if the commissioner determines that the total amount of funds appropriated to the FSP exceeds the amount that will be distributed before any deduction for the optional exemption.

Although no appropriation was made specifically for the purpose of optional homestead recognition, a surplus of appropriated funds is available this year. This unexpected surplus of appropriations will make it possible for half the optional homestead exemption to be recognized for calculating 2008–09 school year entitlements (tax year 2009) under the TEC, Chapters 42 and 46, and the amount of recapture owed under the TEC, Chapter 41. A new Summary of Finances for the 2008–09 school year indicating the increased state aid will be generated sometime in July using the reduced final taxable value ("T4") certified by the comptroller.

Because of the resetting of the school finance hold harmless based on revenues available during the 2008–09 school year, districts with an optional homestead exemption will realize the benefit of this adjustment even within the current revenue target system. School districts that had a percentage optional homestead exemption in tax year 2009 will be able to realize a financial benefit, but school districts should not expect automatic continued adjustment and should plan accordingly when considering changes to tax rates, authorizing new exemptions, or developing communications related to this adjustment. There is no certainty that a surplus of appropriations will exist in future years and even less likelihood in the first year of a state fiscal biennium.

If you have any additional questions, please contact the State Funding Division at (512) 463-9238.


Robert Scott
Commissioner of Education

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