DALLAS -- Texas officials said yesterday that plans to revamp a proposed $750 million revenue bond bank for school facilities appear dead as lawmakers focus instead on directly subsidizing debt payments by the poorest school districts.
State Sen. Teel Bivins, R-Amarillo, said he will propose a $50 million annual program to help districts with small property tax bases to fund capital programs. That, he said, would be more cost-effective than issuing revenue bonds for a bond bank, the alternative some lawmakers have been discussing since voters rejected the earlier bond bank plan and its general obligation issuance on May 1.
Bivins said the subsidy proposal would probably be part of the omnibus school finance bill that lawmakers must finalize by next Friday if they are to meet a June 1 deadline to draft a new school finance law. The failure to do so would result in a court-ordered cutoff of state funding for local education.
Both Bivins and Wardaleen Belvin, special assistant to Lieut. Gov. Bob Bullock said lawmakers have turned against trying to salvage the bond bank program. The lieutenant governor presides over the Senate.
"There's no attempt to use revenue bonds," said Belvin. Instead, she said, lawmakers are leaning toward providing cash for debt service payments as part of a larger plan to pass a law that gives the state's 1,048 district equal access to funding.
Bivins said the $50-million-a-year program would be equal to what the state would have needed to retire GO bonds for the bond bank.
The direct subsidy to the districts would come out of general revenues and could be funded by cuts in other state programs. "We have finite revenue this year." Bivins said in an interview. "It has to come out of that because we're not going to have a tax bill this year."
Unlike the bond bank, the direct subsidies apparently will not help fast-growing districts with facilities funding. "There seemed to be some opposition to that part of the idea," Bivins said.
Under his proposal, the Texas Education Agency would run the debt service subsidy program and be responsible for certifying that a district was eligible to participate. Once approved, a district would be eligible for a subsidy based on its financial resources. The goal is to provide the greatest help to the poorest schools.
Bivins said the subsidy would not cover the debt service on an entire bond issue, but that voters would still have to have approved the entire offering. The bonds would still be secured by a tax pledge of the district.
With voter backing secured, the district would secure the subsidy by entering a "moral obligation contract with the state," Bivins said. As grants, the funds would not have to be repaid.
The contract would detail how much subsidy the district would receive and would probably make future payments conditional on the district's need. For instance, if a poor district were to experience a sudden increase in tax wealth, it might no longer be eligible for subsidy.
Bond dealers yesterday said the Bivins proposal could help the state's neediest schools, and they said they doubted that the revenue bond bank would have worked. Privately, many investment bankers were critical of the bank plan, with some saying it was a threat to traditional school debt issuance.
"There has never been an objection the state providing help with debt service, it was just a matter of how you do it," said Danny Burger, executive director of the Municipal Advisory Council of Texas, the state's industry trade group. "This is one that may have support as an option" for schools.
Bivins said the program would accomplish the same as the school bond bank program that was first passed in 1989. However, he said that it would avoid many of the limitations the revenue bond-financed program has faced.
For instance, state officials have been waiting for nearly a year for the Internal Revenue Service to determine whether the program would be eligible to guarantee the local bonds with the state's triple-A rated Permanent School Fund. Without that IRS approval, districts would have to issue lower-rated bonds at a higher cost.
The revenue bond bank has been structured, by the Texas Bond Review Board, where officials said yesterday they had expected lawmakers this spring to consider modifications to the program, not its elimination, so that it could finally begin selling debt.
"We have not assumed the existing program is dead, because it hasn't been repealed," said Jim Thomassen, executive director of the review board. "Whether there's a use for it, we don't know."
