"Rube Goldberg" School Finance System Faces New Test

Cutting $10 billion from the state’s bill for public education could push more than two-dozen school districts from the group that receives state financing into the group that writes checks to the state to even things out between richer and poorer districts.

That’s dangerous political territory, but familiar terrain for Texas lawmakers. They’ve been in trouble with the courts over school finance for decades, and generally move to change things only in the face of lawsuits.

But over the years, they’ve also been careful to make sure districts don’t go backward financially, using “hold harmless” provisions to ensure that changes in school finance law don’t cost districts their state aid. By one estimate — from the Texas Taxpayers and Research Association — those requirements now account for $5.5 billion of what the state sends to school districts.

Despite those provisions, and the fact that public education eats up 41.2 percent of the state’s general revenue, the state government paid less than half of the cost of public schooling in Texas.

Texas has a school finance system that would have made Rube Goldberg giggle. It is a mash-up of state, local and federal taxes — the state paid 42.9 percent of the total, the districts paid 47.1 percent, and the federal government covered the other 10 percent in the 2009-10 school year, according to the Texas Education Agency — that is supposed to provide kids in every nook and cranny of the state with the same educational opportunity.

It forces lawmakers to balance the financing of schools where property values are high with those where the values are low, all without dictating local school property tax rates. Not surprisingly, it ends up in court every few years, with the state getting sued by whichever group of schools feels most mistreated at the time.

The state’s red budget could trigger the next round. The Texas Education Agency — directed by Robert Scott, a former aide to Gov. Rick Perry — asked lawmakers for $10.4 billion more than those lawmakers included in their proposed two-year budgets. That’s a little more than $1,000 per student, and the first set of printouts detailing what that might mean to each of the state’s school districts was a sea of negative numbers. According to the Texas Taxpayers and Research Association’s estimates, per-student spending would drop to $7,850 in 2013 from $9,200 in 2010, or about 14.6 percent.

Wealthier districts that already send locally raised tax money to the state — so-called “recapture districts” — would send more. Districts that get money from the state would get less. And depending on how it’s done, some districts that now get money from the state would have to turn around and write checks instead.

According to Moak, Casey & Associates, an Austin-based school finance and accountability consulting firm, a budget cut of that size could shift 30 new districts onto the recapture rolls, bringing the total to 195 districts and raising the amount sent by that group to the state to $1.4 billion from the current $959 million. Daniel Casey, a partner at the firm, who has years of experience in school finance, said the details of what will happen to each school district are unclear until the Legislature decides how to distribute money, what to allow school districts to do with their own taxes and so on. But there’s no way to absorb cuts of that size without affecting the whole system and, some lawmakers and experts say, without putting the state back into court defending its system.

That’s enough numbers to numb most lawmakers, but the politics of it could wake them back up. The most obvious way to make up for the cuts in state aid would be to increase financing from the federal government or to raise local property taxes. The state and the feds are arguing over $830 million in federal funding that Perry refused because of requirements it would impose on state education spending, but even that is not enough to cover a $5-billion-per-year hole.

And the financial problem is only half the trouble; getting the money always, or almost always, forces some change in the balancing formulas.

One trial balloon rises with every school finance crisis, and generally takes 24 to 48 hours to crash to the ground. In the early 1990s, it came from state Sen. Carl Parker, D-Port Arthur. Sen. Bill Ratliff, R-Mount Pleasant, gave it a try a decade later. And this week, it was Sen. Robert Duncan’s turn.

A statewide property tax could replace the local property taxes and end, for the most part, the fight over where the money comes from. The Lubbock Republican shot it down himself, talking to the local Lubbock Avalanche-Journal: “It’s just a discussion. It’s not a proposal.”

Something like that might keep the state out of court on school finance. But it wouldn’t solve the other, bigger problem.

Got $10 billion to spare?