Outgoing Lawmakers: Boost Public Ed Funding to Fix School Finance

Texas House budget and public education leaders said Wednesday that the best way to overhaul the state’s school finance system is to increase the base amount of money it gives to each district per student.

While costly, boosting the “basic allotment” — currently $5,140 per student — would help ease systemic funding inequities among the state’s 1,200 school districts and reduce the growing number of wealthier districts that are required to send money to the state to help buoy poorer ones, according to state Reps. John Otto of Dayton and Jimmie Don Aycock of Killeen. The two Republicans, who are both retiring before the 2017 legislative session, chair the House Appropriations and Public Education committees, respectively.

The panels are meeting jointly Wednesday and Thursday to hear from various experts, organizations and the public on how to fix key provisions of the state’s complex, patchwork method of funding public schools. The assignment came from House Speaker Joe Straus in early June, weeks after a momentous Texas Supreme Court decision that upheld the system as minimally constitutional while also deeming it “undeniably imperfect” and urging lawmakers to make improvements.

Otto and Aycock added that the benefits of increasing the basic allotment could go beyond reducing the number of districts that must make “recapture” payments under the state’s Robin Hood plan.

They said the move could also lower the amount of money the state is required to send to a small share of school districts every year since the state forced them to cut property taxes. (Long-held opposition to the Robin Hood plan has gained some momentum recently with Houston ISD, the state’s largest school district, facing its first recapture payment.) 

The "hold harmless" provision

About 175 districts stand to lose $225 million annually when that “hold harmless” provision, known as Additional State Aid for Tax Reduction, or ASATR, expires next September. Officials from those districts urged the panels Wednesday to extend the provision, or at least make up for the funding loss if they let the provision expire. (One district, Lefors, counts on ASATR for half of its funding.)

The state should quit pumping money into such “hold harmlesses,” Otto said Wednesday. 

“All we’re doing is making matters worse,” he said. “If we were putting that money in the basic allotment, at least we’re treating everybody fairly.”

He added that local districts should be able to decide how to use the extra money.

Until the Legislature boosts that base per-student funding level, “it will be harder and harder to phase out” the "hold harmless" provision and address other parts of the system, Aycock said.

With more than 5 million public school students, even a small increase in the basic allotment will cost a lot — more than $1 billion for every $100 increase, according to Chandra Villanueva, a school finance analyst at the left-leaning Center for Public Policy Priorities.

But she described it as the "most politically viable thing that can done in the short term to address recapture and ASATR." 

A variety of priorities in 2017

Whether the Legislature will pay up is a big question, and not only for public schools. State coffers are not as flush as they were last year when lawmakers boosted public education funding. And the Republican-dominated Legislature is entertaining a variety of competing priorities like border security. In the Senate, Lt. Gov. Dan Patrick is renewing a push to use taxpayer money to help parents send their kids to private or religious schools or teach them at home. 

“We have more of a challenge coming up this time,” said state Rep. Donna Howard, an Austin Democrat.

Still, Howard said, “there are some things we can do to make [the school finance system] more equitable.”

“At a minimum,” she said the state should return revenue from school property value increases to public schools. As those have shot up across the state, generating more money for schools locally, the amount of money the state must send to them has plummeted.

Rising property values have saved the state about $14 billion over the past decade, Otto told the panels Wednesday, citing calculations from the Legislative Budget Board. Local revenue has made up an increasing share of public education spending during that time.

“Essentially the burden is shifting to the locals, and the state is benefiting from that,” Otto said.

If the state were investing more, school property tax rates would be much lower, officials from state agencies and schools said Wednesday.

Calling for a "complete overhaul"

Nicole Conley, chief financial officer for Austin schools, told the panels the district would be able to slash its tax rate by 35 cents per $100 valuation if it didn’t have to pay recapture. That would save the average Austin homeowner $1,400 annually, she said, urging a “complete overhaul” of the system while acknowledging that is unlikely. 

"I do think that a complete overhaul will be something that is going to require a substantial investment from the state; I’m not quite sure about your temperament and readiness to get there," she said, adding that lawmakers have become "over-reliant" on recapture.

She suggested capping the number of districts required to pay recapture and providing transportation funding to those that still have to, which the state doesn't currently do.

The panels spent significant time Wednesday questioning Conley and a trustee from Houston ISD, where officials are urging local voters to reject a November ballot measure that stipulates how to make a $160 million-plus recapture payment in hopes that state lawmakers will exempt the district next year. The obligation drove a $95 million budget shortfall the district is closing by cutting funding to some campuses, along with administrative and tutoring positions and a teacher bonus program.

Trustee Mike Lunceford said Houston, with a huge share of kids who are needy and more expensive to educate, was never meant to pay into the system. He also complained that the state doesn't account for some 15,000 students in calculating how much the district owes in recapture as the state only funds half-day pre-kindergarten but the district pays for full-day. And the calculation includes property the district is not allowed to tax under a homestead exemption, he said. 

“HISD paying recapture is proof the system is broken,” he said.

Read more of the Tribune's school finance coverage:

• The state’s escalating dependence on local tax dollars to fund public schools is expected to be a focus during a joint hearing of two House committees Wednesday and Thursday.
• Citing a recent Texas Supreme Court decision that upheld the state’s public school funding system while deeming it “undeniably imperfect," state House Speaker Joe Straus ordered representatives to study the school finance system.  
• Texas has deemed an increasing number of schools as property-wealthy, requiring them to give up a share of their local tax dollars to help buoy poorer districts. 
• Analysis: Voters in the state's largest school district can say no to sending money to other school districts, putting Texas lawmakers in a bind and — maybe — raising their own school taxes in the process.

Disclosure: The Center for Public Policy Priorities has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.