SB 4

84(R) - 2015
Senate Education
Senate Education
Public Education

Vote Recommendation

  • Positive
  • Neutral
  • Neutral
  • Positive
  • Positive


Larry Taylor


Paul Bettencourt
Donna Campbell

Bill Caption

Relating to a franchise or insurance premium tax credit for contributions made to certain educational assistance organizations; adding provisions subject to a criminal penalty.

Fiscal Notes

State Impact

Estimated Two-year Net Impact to General Revenue Related Funds for SB4, Committee Report 1st House, Substituted: a positive impact of $90,390,000 through the biennium ending August 31, 2017; the positive impact would be substantially higher in the subsequent biennium and would stabilize thereafter.

Additionally, the bill would have a direct impact of a revenue loss to the Property Tax Relief Fund of ($80,000,000) for the 2016-17 biennium and ($184,800,000) in the 2018-19 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.


There would be a one-time technology cost of $250,000 for the Comptroller of Public Accounts in fiscal 2016 for programming and system support costs.

Local Government Impact

Collectively, school districts would experience a net loss of revenue from students exiting to attend nonpublic schools. Revenue implications would vary by district depending upon the number of students exiting and the application of wealth equalization provisions under Chapter 41 to the district.

Bill Analysis

SB 4 would create a tax credit scholarship program by enabling low income students and students with disabilities to be eligible for a scholarship to attend the school of their choice.

Educational Assistance Organizations

SB 4 would add a Subchapter to Chapter 171 of the Tax Code titled "Tax Credit for Contributions to Certain Educational Assistance Organizations."  An organization would be able to apply for certification as an educational assistance organization by meeting criteria of:

1) being a 501(c)(3) organization,

2) being in good standing with the state, being located in the state,

3) allocating at least 90 percent of revenue from contributions designated for educational assistance to scholarships and educational assistance,

4) awarding scholarships and assistance to eligible students who demonstrate need,

5) providing donors with receipts for contributions with specific information

6) demonstrating experience and technical expertise in processing scholarship applications and distributing scholarships

7) agreeing to be independently audited on an annual basis and file the audit with comptroller

8) disbursing within two academic years of receipt contributions received from and designated by taxable entities for scholarships .

The organization is prohibited from only awarding scholarships to particular schools.The comptroller may authorize only 25 educational assistance organizations and would have to notify the organization and follow specific procedures if an organization contests a denial.  The organization must use at least 80 percent to scholarships and 20 percent to other school expenses from the amount required to be allocated to educational assistance. They would not be allowed to provide assistance to nonpublic schools unless there is proven demonstrated need of eligible students by the nonpublic school.

Eligible Students

Students must be in foster care, institutional care,or have a household income not higher than 250 percent of income guidelines for free or reduced price lunch program. They also must have been enrolled in public school the preceding year, be starting school in the state for the first time, or be the sibling of an eligible student. Nonpublic school students must qualify as a student who is not counted towards the public school's daily average attendance during their year as scholarship recipient. School districts must notify parents if their child qualifies for assistance. 

Tax Credit

The bill would implement guidelines for the application and recipient of credit by taxable entities for their contributions to an educational assistance organization, as well as restrictions on how much credit the business can receive. Entities are also authorized to apply for credit against premium tax liability under Subchapter B of the legislation.

Additional Provisions

The comptroller would have the power to revoke the certification of an educational assistance organization should they violate any of the criteria required. The comptroller also must compile a report of net savings to public education and make it available to the public.

Vote Recommendation Notes

Texans have little choice over where their children attend school since the government-run monopoly over public education is based on geographical restrictions. If located in a low-performing school district, Texans must pay significantly more in order to place their child in a different school or private school. Most cannot afford to do so.

SB 4 would move Texas in the direction of greater liberty and limited government by enabling some parents to have a choice in where they send their children to school.  The legislation would implement a more market-based solution by allowing organizations to provide scholarships to children who demonstrate a financial need to a school of their choice.  It reduces government control and gives greater control to parents who couldn't otherwise afford to place their child in a different school. 

In addition, businesses who choose to fund these scholarships have incentive to do so because they are eligible to receive a tax credit for their contribution. This another positive impact on the principle of a free market.

SB 4 would be a step in the right direction toward greater liberty in educational opportunities. This bill affirms the principles of a free market, limited government, and individual liberty. 

Organizations Supporting

Texas Public Policy Foundation