Over the course of the last 10 years, the Texas Legislature has at times made investments in public education and, during struggling economic times, reduced education funding. The decade began with a recession that prompted legislators to make punishing cuts in public education funding. It took many years for schools to recover from those cuts. Eventually, the Legislature put significant new dollars into public schools in 2019 and made significant structural reforms. A key question going forward is whether legislators can maintain those investments, especially if the economy heads south.
82nd Legislature (2011)
In 2011, the Texas Legislature faced a projected budget shortfall and reduced public school funding by $5.4 billion. This reduction included a $1.4 billion programmatic cut and a $4 billion cut to the school finance formulas. The formula reductions were applied through a 5.6% across-the-board cut to all school districts during the first year of the biennium and then through an even steeper reduction to the nearly 800 districts receiving Additional State Aid for Tax Reduction (ASATR) in FY2013. Additionally, ASATR was given an expiration date of September 1, 2017.
Following the legislative cuts in 2011, and as the new and more rigorous state assessment system was first implemented, over 600 school districts filed claims against the State of Texas. Districts argued that the system was inadequately funded and had once again evolved into an unconstitutional statewide property tax. Some districts also argued the system was inequitable.
83rd Legislature (2013)
Two years later, the Texas economy bounced back and the shortfall was not as severe as had been projected. The 83rd Texas Legislature took action to restore $3.5 billion of the public education funding that was cut in the previous biennium, but the partial restoration of funds didn’t send those dollars back to districts in the same manner they were cut. Therefore, some districts saw funding restored to their 2010-2011 levels, while others still had significantly less. Only a portion of what was cut was restored, and 2013 ushered in new requirements for school districts to contribute to the Teacher Retirement System, without state funding beyond FY2015.
2013 also brought reforms regarding state assessments and accountability. While the number of assessments was reduced, requirements for schools increased in the preparation of college and career-ready students.
84th Legislature (2015)
By the time the 84th Legislature convened, the District Court had declared the school finance system to be unconstitutional, and the case was appealed to the Texas Supreme Court. The Legislature made minor improvements to the level of funding and structure of the system, but largely decided to wait for the Court to rule.
Legislators added $1.2 billion to the system (approximately $100 per student) through an increase to the Basic Allotment and also passed reforms to provide for tax relief through an increase to the homestead exemption and a reduction to the franchise tax rate. Legislators appropriated $3.8 billion more to schools in order to make up for the loss of local tax revenue from the increased homestead exemption and the loss of revenue from the franchise tax to the Property Tax Relief Fund. However, none of the $3.8 billion resulted in an increase for schools.
85th Legislature (2017)
In 2016, the Supreme Court reversed the District Court’s ruling and declared the state’s school finance system flawed but constitutional. This ruling slowed momentum for school finance reform.
Still, during the 85th Legislature, the Texas House overwhelmingly passed legislation to add almost $2 billion in new funding to the system and make modest reforms to the school finance system. The Texas Senate balked at the funding increase. Instead, during a special session, the Legislature voted to provide $150 million for hardship grants to help districts reliant on ASATR funding transition off that source of funding, and $120 million in school facilities funding, with half of that amount going toward charter schools. The Legislature also created the School Finance Commission to study the school finance system over the next year and a half and recommend changes to the system.
86th Legislature (2019)
The work of the School Finance Commission and significant turnover in the 2018 elections provided new momentum for increased funding and major reforms to the school finance system.
The Legislature passed House Bill 3, which Governor Greg Abbott signed into law in June 2019. The bill invested $6.4 billion in new state funding in public education. It also reduced recapture by about $1.9 billion. The Legislature also approved a significant compression of school property tax rates and created a new 2.5 percent cap on statewide school property tax growth in the future. The cost of property tax reductions is about $5 billion in the first two years, but that cost is expected to grow significantly in the future because the state is committed to further reducing property tax rates as property values rise.
House Bill 3 increased the Basic Allotment from $5,140 to $6,160. It also required that school districts use some of their new funding on employee pay raises. It made a number of changes to the formulas that determine how much funding each school receives. And, significantly, it changed how school districts’ state funding and recapture payments are determined. Instead of basing state funding on property values from the prior year, which has been the custom in Texas, the new law bases it on property values in the current year. This change is expected to make it more difficult for local school districts and for legislators to plan their budgets responsibly.