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TEA Correspondence

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

July 16, 2007

Re:   Updates to the 2006-07 Summary of Finances

To the Administrator Addressed:

This letter is intended to explain several changes that have been made to the 2006-07 Summary of Finances (SOF) report in recent months.  The updated reports incorporate information obtained from the Tax Collection Certification submitted by districts this summer and reflect changes in the calculation of state aid.  These changes will be outlined below.

  • Tier II:  The calculation of the district enrichment rate (DTR) for the first level of Tier II was modified.  (See Texas Education Code [TEC] Section 42.302(a-1)(1)). This modification corrected problems with state aid that were occurring in districts that conducted rollback elections in 2006.  Previously, taxes attributed to that portion of Tier II were divided by the 2005 property values provided by Comptroller’s Property Tax Division to derive the DTR.  The formula was modified as follows:


DTR for Tier II, Level 1 = (2005 adopted M&O tax rate x state compression rate) - $0.86, limited to 0.47

  • M&O Tax collections:  The July SOF report reflects the tax collections reported by school districts on the Tax Collection Certification that was due on July 2, 2007.  If your district has not yet submitted this survey, please submit it as soon as possible so that your SOF report can be updated prior to our near-final settle-up process that begins in late August.


  • S2 – M&O tax collections under this scenario were re-estimated by deriving a yield per penny of 2006-07 M&O tax collections (submitted by districts on the survey) and applying that yield to the 2005 adopted M&O tax rate (See TEC Section 42.2516(b)(1)(B).)  This calculation estimates the state aid that a district would have had during 2006-07 based on the school finance system prior to the passage of House Bill 1, 79th Legislature, Third Called Session (HB 1).  Previous estimates of tax collections that districts would have received if tax rates had not been compressed have not incorporated amounts that could be attributed to taxes collected on frozen levies.  The formula was modified as follows:

S2 M&O Tax Collections = (2006-07 M&O tax collections / 2006 adopted M&O tax rate) x 2005 adopted M&O tax rate

  • S3 – Another change made to the calculation of the hold harmless provisions involves a slightly different estimation of state and local revenue for 2006-07 based on the school finance system prior to the passage of HB 1.  (See TEC Section 42.2516(b)(1)(C).)  The estimate of local tax collections is based on the effective tax rates prescribed by the bill.  The Texas Education Agency (TEA) recently received a letter of legislative intent that clarified the calculation of the tax collections, and those changes are reflected on the July SOF.  See the report attached to the district’s SOF labeled “2006-07 Worksheet to Calculate M&O Tax Collection under HB 1” for more detail on how the tax collections are estimated for S3.


If you have any questions regarding your SOF, please contact the State Funding Division at (512) 463‑9238.



Liz Caskey, Director
State Funding Division

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