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TEA Correspondence

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

July 20, 2009

Re: Funding for local option homestead exemptions – additional information

To All Administrators Addressed:

Commissioner Robert Scott recently announced that sufficient funds have been identified to allow recognition of the local option homestead exemption (LOHE), as allowed by Section 42.2522, Education Code, for the 2008–09 school year. Since that time, the Texas Education Agency (TEA) has received several inquiries about the relationship between that the increased state funding that results from recognizing 50% of the optional homestead exemption and the current “target revenue” school finance system.  This message is to inform you of flexibility the agency will allow in recognition of the LOHEs during this school year.

Under the current school finance formulas, funding for most school districts is limited to a target level of revenue based on their compressed tax rate, which for most districts is $1.00.  As a result, recognition of the LOHE does not deliver any additional maintenance and operations (M&O) funding on the compressed tax rate for most districts at tax rates below $1.00. Instead, the benefit is limited to state funding for enrichment tax effort above the compressed tax rate and debt service taxes.

Because the current school finance system limits the benefit of recognizing the LOHEs , districts will be allowed to request a waiver of certain provisions of the revenue target system to permit the use of the additional funds generated by the recognition of the LOHEs for M&O purposes. The waiver will not generate any additional funding for a district, but will allow the district to use these funds according to local needs. A district requesting such a waiver will be required to acknowledge that additional funds delivered pursuant to such a waiver will not increase its revenue target for any subsequent school year.  Districts that intend to request this waiver must notify the State Funding division no later than August 1, 2009. 

Please call me at (512) 463-9268 or Leo Lopez at (512) 463-9242 in the State Funding Division if your district is interested in applying for a waiver.

Sincerely,

Helen Daniels, Director
State Funding Division

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