Land Board Vote Cuts $300 Million Out of Texas Public Schools Budget

In the waning days of the 82nd Legislature, state lawmakers came up with a plan to help cushion the blow of $5.4 billion in cuts to public education.

State Rep. Rob Orr, R-Burleson, proposed a constitutional amendment that he said could bring an additional $300 million to public schools. It unanimously cleared both the House and Senate. Orr’s measure became Proposition 6, which voters passed in November.

But that money has hit a roadblock on its way to public schools — and what looked like an easy fix for hard-pressed budget writers last May has turned into a headache that awaits their return in January.

The amendment allowed the School Land Board, which operates out of the General Land Office, to put a portion of earnings from investments on real estate assets into the Available School Fund, which along with property and sales taxes helps pay for public education. Last week, the little-watched board that oversees the state’s public school lands decided not to distribute the money. Commissioner Jerry Patterson, who sits on the three-member board, said it wanted to protect the funds for upcoming investment opportunities.

Usually the proceeds from the sale and management of public school lands would go into a $26 billion trust whose revenue feeds into what’s called the Available School Fund. Proposition 6 made it so the School Land Board, if it chose, could bypass that step and put money directly into the fund.

“We anticipated this funding for public education,” said Jason Embry, a spokesman for House Speaker Joe Straus, R-San Antonio. “We're evaluating the impact on the budget and working with Commissioner Patterson to ensure there is no impact to public schools.”

Whether lawmakers should have expected the money is a matter of dispute. But the $300 million made it into the budget as part of general funds used to support school operations, contingent upon the constitutional amendment’s passage in November and the School Land Board’s approval of the transfer. During the special session last June, the Legislature added a provision to the appropriations bill that reduced general revenue funding to public education by $300 million if the amendment passed. It was to be replaced with the same amount from the Available School Fund with the board’s approval  — but there was no provision to add that money back in if that didn’t happen. 

“I was told that there would be $300 million going into the Available School Fund. Everything was put in place to allow to that to happen,” said Orr, who said the General Land Office agreed to transfer the money if the amendment passed. “I believe it needed to happen, so I'm not sure why it didn't.”

Patterson said he did not recall committing to a transfer of the money and that his office had been unable to find “any evidence or documents or memos or testimony” that he did.

“I don’t have any control over what was written into the budget or what was made contingent. I don’t know who wrote that in there or why,” he said. “Somebody wrote a contingency rider assuming the answer would be yes.”

The backdrop to the conflict is a perennial tug-of-war between lawmakers and the two state boards that control the $26 billion trust known as the Permanent School Fund. Though the School Land Board manages the fund’s real estate assets, it’s the 15-member State Board of Education that decides, with some guidance from the Constitution, how much of the trust to pay out into the Available School Fund. Because it can free up money in other parts of the budget — for example, what happened with the appropriations bill in special session — lawmakers tend to want as much in the Available School Fund as they can get.

“Rather than trying a real solution to school finance they keep doing the little gimmicks and sleight of hands,” said David Bradley, the Beaumont Republican who serves on the Board of Education’s finance committee. “The Legislature is the problem. It's totally improper for them to be pulling that kind of money out of these trust funds to use for general revenue funding.”

The  $300 million at issue — a fraction of the $34 billion allocated to public education for the current biennium — could still end up getting to schools. The School Land Board could change its decision at any of its twice-monthly meetings. Or the money could also come out of the state's general revenue — a separate pot of money with different political strings attached — as a supplemental appropriation when the Legislature reconvenes in 2013. The $300 million would join a list of expenses postponed during the last session, including another $2.3 billion in deferred payments to public schools and an estimated $3.9 billion shortfall in Medicaid funding.

In the meantime, Rep. Rob Eissler, chairman of the House Public Education Committee, said the school land board’s vote was unfortunate.

“Government doesn’t always work the way we want it to,” said Eissler, R-The Woodlands. “Legislative intent doesn't always follow through to the very end.”