House Bill 3 (HB 3) Guidance

June 03, 2019 • Amy Campbell

hr laws

Editor's note: the source of the funding estimates have changed since we first published this article. The link to the funding source data below is from the Legislative Budget Board.

House Bill (HB) 3 is headed to the governor’s desk for signature and districts—especially those with a July 1 fiscal year start—are eager to determine how best to comply with compensation-related changes. The bill includes many other changes, including a “do not hire” registry, more robust teacher-mentor program and funding, and optional teacher incentive allotment, and TASB HR Services will release more information and guidance on these topics at a future date.

The compensation requirements in HB 3 are broad and give districts significant flexibility in deciding how best to implement pay increases. The few guidelines specified in HB 3 are:

  • For each year that the basic allotment increases, districts must spend 30 percent of new funding from the state on compensation increases to full-time district employees other than administrators.
    • 75 percent of the new money must be spent on classroom teachers, full-time librarians, full-time school counselors, and full-time school nurses, prioritizing differentiated compensation for classroom teachers with more than five years of experience.
    • 25 percent of the new funding may be used as determined by a district to increase compensation paid to other full-time district employees who are not administrators.

Because HB 3 increases the basic allotment, the teacher minimum salary schedule also will increase. While TEA has not yet published a final schedule for 2019–2020, the Texas Association of School Business Officials (TASBO) has shared an estimated schedule.

Determining funding amount

The House Public Education Committee released revenue estimates from the Legislative Budget Board. Districts should use caution in basing compensation decisions on these early estimates. Rather, districts should calculate new funding estimates based on guidelines captured in HB 3. TASBO has released detailed guidance on how to calculate estimated new funding, and their staff will continue to release new information as it becomes available. Some districts have identified new funding amounts that are less than TEA estimates. It would be safest for districts to use the higher of the two amounts for measuring compliance.

Considerations for the 30 percent spending requirement

HB 3 specifies that compensation can include benefits such as insurance premiums, so a district increasing its employer contribution for health insurance could include those costs for the designated employees. However, the spending requirement excludes administrators and has different levels of spending required by job group (i.e., 75 percent for teachers, counselors, librarians, and nurses, and 25 percent for non-administrators), so trying to identify which benefits contributions apply to which group would be a significant challenge. The timing also would prove difficult, given many districts need to adopt pay increases in advance of open enrollment, so a district would not know the number of employees receiving an employer contribution for health insurance until too late.

The bill language does not specify which jobs fall in the category of administrator for purposes of including or excluding them from the 30 percent spending requirement. Many districts granting a 2.5 or 3 percent increase may meet the 25 percent spending requirement for non-administrators by looking only at the cost of increases for hourly/nonexempt staff (e.g., clerical/paraprofessional and auxiliary pay groups). If that threshold is met with hourly staff alone, the district can avoid parsing out specific jobs in their administrative/professional job group. If the threshold isn’t met with hourly staff, a district would need to capture increase costs for jobs such as speech-language pathologist and educational diagnostician that wouldn’t be considered administrators but could be counted toward the 25 percent spending requirement.

HB 3 makes reference to the rules applying to “full-time employees” but does not further define this. As such, it would be safest to only include pay increases for full-time employees to measure compliance with the 75 percent/25 percent spending requirements. However, a district should consider teachers teaching at least four hours a day as full-time. If adding up pay increases for true full-time employees does not meet the required spending threshold, it’s possible an argument could be made to include anyone working enough hours to be considered full-time in the position they’re in. For example, if 25 hours is considered full-time for a cafeteria worker in a district, it’s possible their pay increases could be counted toward the threshold. However, HB 3 language neither expressly allows or excludes this, so districts should consult their local counsel for more detailed guidance.

Finally, the term “compensation” in the bill can be construed broadly to include all wages paid, including extra duty stipends. Stipends paid in lieu of reimbursement, such as travel and cell phone stipends, should not be included when measuring compliance with the spending requirements.

Considerations for prioritizing differentiated compensation

As part of the 75 percent spending requirement, HB 3 requires “prioritizing differentiated compensation for classroom teachers with more than five years of experience.” However, no specific guidance on how a district should differentiate compensation was provided in the bill. As such, districts should determine how best to accomplish differentiation to meet their needs and accomplish their strategic goals. Here are just a few examples:

  • Improving pay to market for teachers between 10 and 15 years to support recruitment of experienced teachers from other districts
  • Improving pay for teachers with 20 years of experience and above to address turnover and support retention
  • Reducing compression between years that have very small dollar amounts separating them

No amounts or percentages are specified in the bill, so districts can make decisions on increase levels that best meet their needs. Whatever increases are given should prioritize differentiation for teachers with more than five years of experience and the increases should support the district’s strategic goals.

Amy Campbell is the director at TASB HR Services. Email Amy at

Tagged: Compensation, "Pay increases", Salaries