With funding tight, legislators weigh options on school finance

With the 2017 session underway, Texas lawmakers will have to decide just how — and whether — they're going to approach a major fixer-upper: the school finance system.

School district officials have repeatedly asserted that funding is arbitrary and inequitable across public school districts and that it does not allow many schools to meet the state's academic standards. The state's contribution to public education has declined as the local share has increased, a sore spot for school districts taxing at the maximum rate allowed by state law and still coming up short.

The current system is held together by a number of short-term fixes that have not been updated or reformed in decades. The Texas Supreme Court upheld the funding system as constitutional in May, and at the same time put the onus on state lawmakers to reform it — but few believe a major overhaul will come without a court order.

Even if legislators decided to tackle an overhaul of the whole system, experts say there is not enough money in state coffers to increase state spending, lower local spending and relieve Texans upset about rising property taxes. For now, some lawmakers are backing a simple plan to increase money to all school districts through the general appropriations bill, instead of taking apart the complex school finance system. Others have filed bills to tweak individual weights in the system, which provide additional money for disadvantaged student populations. 

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Adding to the melee, Lt. Gov. Dan Patrick is expected to back a bill in the next week tying school finance reform to education savings accounts, or ESAs, which would give families public money to use for private school tuition and other education expenses.

"Private school choice" bills have generally not come up for a vote in the House, even when passed in the Senate. Critics argue that these bills decrease public education funding instead of boosting it. Proponents argue ESAs would alleviate overcrowding in "failing" public schools by removing students from the system at a fraction of the cost it would take to educate them in a public school.

Patrick has said he would be open to a special legislative session to address school funding. Gov. Greg Abbott made it clear he wants the matter to be determined during the regular session.

Legislators will also have to decide this year whether to re-up a program that provides extra funding for fewer than 200 districts that would otherwise have lost money in previous school finance rewrites. When the Legislature reduced property taxes by a third in 2006, it guaranteed school districts at least the same state funding they received for the 2005-06 school year by creating the Additional State Aid for Tax Reduction initiative.

That aid expires Sept. 1, but the districts still receiving the money are clamoring for an extension. “At some point, it does need to go away for the sake of more equity. But it can’t fall off a cliff at this point in time,” said Guy Sconzo, executive director of the Fast Growth School Coalition, which represents the fastest-growing districts in the state. “It does the entire system no good if any part of the system effectively goes bankrupt.”

So far, five legislators have filed bills to extend the funding program. State Rep. Ken King, R-Canadian, filed House Bill 811, which would extend funding through 2020-21. Sen. Lois Kolkhorst, R-Brenham, proposed an extension through 2022-23. Both lawmakers were members of their chambers' public education committees last session.

King, who is on the short list to chair the House Public Education Committee this session, said some districts are still getting a large chunk of their overall funding through this program and that they cannot be cut off immediately. "I'm going to put a mechanism in place for school districts to roll off of the aid in 2021 and hopefully replace the dollars with another school funding system," he said.

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Other school finance advocates oppose the extension, calling it a "Band-Aid" that exacerbates the inequity among districts.

"It maintains an already inefficient portion of the system," said Ray Freeman, deputy executive director of the Equity Center, which represents property-poor districts. Instead, he said, legislators should reform the base formulas so districts have access to a stable source of funds.

The Houston Independent School District will be a major focus this session because its voters in November rejected sending $165 million in local property taxes to poorer school districts. In the Texas finance system, districts with a wealthier tax base spend local money to help educate students in districts with less property tax money, as part of the “Robin Hood” or “recapture” system.

Texas Education Commissioner Mike Morath has warned that the state will probably move commercial properties from Houston ISD tax rolls to those of a nearby district. Houston legislators will be under pressure to find a way to ease the burden, as those property owners could face higher tax rates in their newly assigned districts.

David Thompson, an attorney representing Houston ISD, said a legislative win for Houston on school finance could also mean a win for other districts. “There are particular issues that would address some of the concerns in Houston and at the same time be helpful for schools across the state,” he said.

The state should update its formulas for determining which districts get transportation funding, and the state should also provide full-day pre-K funding for all districts, Thompson said.

“Everybody starts by saying, ‘There’s no money.’ There is," he said. The state should allow the local dollars people are already paying to stay in education, instead of "siphoning local property taxes" for non-education purposes, he said.

But some legislators are saying Houston ISD voters dug themselves deeper into a school funding hole and should live with the repercussions. "I don't think the Legislature has a lot of appetite to let Harris County out of recapture when everybody else is paying it," King said.

Advocates for districts agree the state should pony up for schools because the state’s share of public education spending has been gradually decreasing as local property taxes rise.

State Sen. Kirk Watson, D-Austin, has proposed several bills that would decrease the burden on property taxpayers. “What we’ve seen is that the Legislature is relying more and more on the value increase of property," which raises local property tax revenues and lowers the need for state money. Senate Bill 290 would ensure the state guarantees a minimum level of funding in the appropriations bill, directly through the basic allotment.

School finance experts agree that increasing the basic allotment, the base funding each district receives per student, is likely to be the most popular way of changing the system. The House Public Education Committee recommended this approach in its interim report.

“The amount we set for the basic allotment drives the entire school finance system and, given our current system, increasing that amount would be a prudent move to help all districts,” said State Rep. Trent Ashby, R-Lufkin. “It’s important to note, this method can also be achieved through the General Appropriations Act alone, so it may also be the most realistic thing the Legislature can do this session without having to pass a stand-alone bill.”

It’s likely to be a favored proposal in the House, Ashby said. But like many other plans, it requires more dollars to public education, a difficult challenge this session, given that lawmakers have less money to spend than they did when they last met in 2015.

Increasing the basic allotment enough to get Houston ISD out of "recapture" this year would cost the state an additional $4.5 billion per year, according to Sheryl Pace, of the Texas Taxpayers and Research Association. "They could increase it a little bit, but not nearly enough to get Houston out of recapture," she said.

“The reason why some groups push [increasing the basic allotment] is because it doesn’t make anyone mad and doesn’t give anyone a new advantage over anyone else,” said Paul Colbert, a former Houston state representative who wrote many of the current school finance laws in the 1970s and 80s.

Now a consultant to the Equity Center, Colbert is calling upon lawmakers to update several aspects of the school finance system to represent districts' financial realities, instead of using decades-old data.

The Equity Center is floating a proposal to legislators that would redistribute funds equitably among districts without necessarily costing the state more money.

That proposal would scrap the temporary fixes holding the finance system together in favor of funding districts based on five categories, including weighted attendance of special education, bilingual education and low-income students, Freeman said. The sum of those allotments would then be multiplied by the district’s tax rate to come up with the amount of funding.

Districts that raise more revenue than their calculated allotment would be subject to recapture, just as in the existing system, Freeman said. 

Read more about school finance here:

• Had the state kept its share of school funding constant for the past 10 years, voters might not be griping about rising property taxes. The state is spending more than it used to, but it's spending less per student.
• In May, the Texas Supreme Court issued a ruling upholding the state’s public school funding system as constitutional, while asserting it could be better.

Disclosure: The Fast Growth School Coalition and the Equity Center have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.