Texas school districts cut costs to avoid closure as state funding cuts loom

Doug Rice will take over next school year as principal of a single-campus rural school district east of Amarillo, close to the Oklahoma border. There's just one problem: He's already the superintendent.

He's putting on a second hat to save money since Kelton ISD will likely lose almost half its operating budget next year. A stalemate between the Texas House and Senate crushed any hopes of lawmakers making school funding formulas more equitable and simple this legislative session. That leaves school superintendents preparing to either work with much less in their coffers or risk having to shut their doors and forcing students to transfer to other districts.

Kelton ISD is one of almost 300 districts relying on a pot of money that expires in September. The Legislature this session decided not to extend that funding or provide districts with much relief to help ease the transition.

Rice is planning to use a chunk of the district's savings to make up some of the $900,000 gap in next year's budget. "If nothing else changes, we've got three years," he said. 

The funding challenge facing districts like Kelton, as well as the unique pot of money they are set to lose in three months, stems from decisions by state officials made over a decade ago. In 2006, the Legislature compressed tax rates by a third, after the Texas Supreme Court ordered them to alleviate the high property tax rates in local school districts. They also created a state aid program to make up the extra revenue districts lost by lowering tax rates.

At the beginning, most districts received money through that program, called Additional State Aid for Tax Reduction, or ASATR. Over the years, most of the districts stopped qualifying for the funds, in many cases because of how their enrollment or property tax base grew, or both. 

In the fiscal year that ends Aug. 31, the state estimates it will pay about $400 million to almost 300 districts through ASATR. Then the program will expire.

Earlier this year, both the House and Senate passed a version of House Bill 21, a measure intended to increase funding for most schools and bring the formulas for allocating that money up to date. But the Senate added a "private school choice" provision to the bill, which the House and many public education advocates refused to accept, arguing it would sap money from public schools. The bill died, and so did any real chance in this year's regular legislative session of bolstering funds for districts relying on ASATR.

Many of the districts that still rely on the money are small, rural and mineral-rich, meaning their property values fluctuate with the prices of oil and gas, currently near a low.

Comstock ISD has thinned out its program offerings over the past few years, preparing for the funding drought.

"We don't have football because of costs. We don't have ag because of costs. We don't have band because of costs," said Superintendent O.K. Wolfenbarger III.

He plans to keep cutting back on supplies, using less copy paper, finding cheaper deals on utilities and not rehiring support staff.

"If I start cutting teacher positions ... I've got kids that are going to be in danger of not having the courses they need to graduate," he said.

Comstock ISD is already taxing residents at the maximum rate allowed under state law and cannot collect any additional funds in local property tax revenue. It could be losing around 15 percent of its budget with the state aid program not getting extended.

Critics argue districts knew the state aid program was scheduled to dry up in 2017 and should have been prepared.

"Obviously for those districts, it does create a hardship because they're used to having the extra funding," said Ray Freeman, executive director of the Equity Center, a school finance advocacy group. "But they have known for six years that the funding was going away."

Now, he said, districts that were getting state funds through this external program will get it through the regular funding formulas, just like everyone else.

Freeman said districts should raise property taxes to raise more money, if they have not reached the maximum rate.

But superintendents of those districts said it's not that easy. Many of them are considered "property-rich," meaning they send money to the state to subsidize districts that can't collect as much tax revenue, through a Texas program nicknamed "Robin Hood." Taxpayers can be especially wary of supporting higher tax rates when they know the revenue will go to the state. 

This session, legislators passed a budget that would rely even more heavily on local property taxes, meaning the state would be paying much less than half of public education costs.

Rich Dear, superintendent of Godley ISD in North Texas, said enrollment is growing so quickly taxpayers have already had to foot the bill for new facilities. With ASATR gone, Godley ISD could lose around 15 percent of its current operating budget, Dear said. 

Lovejoy ISD, located north of Dallas, has built four new campuses in the past decade, and operating costs have skyrocketed, said Superintendent Ted Moore. "We're playing the hand we've been dealt. We're doing the best we can to take care of our taxpayers, providing an educational program that's the best we can provide," he said.

Superintendents said they have prepared as well as they could for this situation, scaling back early to cushion their savings.

"We try to operate the district as leanly as possible and as efficiently for our tax base," said Joe Waldron, superintendent of Lefors ISD, located in the rural Texas Panhandle. Administrators there saved between $100,000 and $200,000 per year over the past four years. The money is supposed to go into capital investments — such as repairs to buildings and vehicles — but now it will go toward running schools.

Waldron has cut staff more than 10 percent over the last three years. Teachers and board members are "heartbroken" the state aid program was not extended this session, he said. And most parents will be "blindsided" when they find out their school district is on life support and may only have two or three years to live.

"The important thing is that the school is the only thing in this town," he said. "The school hurts, the community hurts. That's just a fact of rural public education."

Read related Tribune coverage:

• Check out what happened to this session's most high-profile bills.
• As lawmakers debate possible reforms to the school finance system, they might decide whether to continue offering extra funds to districts like Texas City ISD, which last year was forced to annex a struggling district next to it.
• Senate Education Chairman Larry Taylor said that he would not appoint conferees to negotiate with the House on a proposed school finance overhaul. “That deal is dead,” he said.