Texas School Coalition President Kyle Lynch provided testimony to the Texas House Public Education Committee on July 25, 2022 in regards to school finance and the implementation of HB 3 (86R) ad HB 1525 (87R).
Mister Chairman and members of the Committee, my name is Kyle Lynch, and I am the Superintendent of Seminole ISD out in West Texas. I’m also the President of the Texas School Coalition.
When HB 3 was passed in 2019, it guaranteed a minimum 3% gain for almost all school districts. Since then, however, the rate of inflation has obviously far surpassed 3%. The Rising costs of living have eaten up the teacher salary increase approved three years ago and schools are struggling to keep up—especially when it comes to retaining quality teachers during this devastating teacher shortage. Not to mention the increased operating costs for school districts such as technology, security, supplies and especially transportation given the record-high price of fuel. Our district spans 1,000 square miles, and we cannot reduce the number of miles our buses must travel. The changes made to the transportation allotment in HB 3 simplified things, but we need further adjustments beyond the dollar per mile to compensate for the increased cost of diesel to power our school buses.
Additionally, quite a few districts qualified for that 3% minimum gain through a Formula Transition Grant, which expires in the fall 2024. Those grants applied to far more districts than initially predicted, which means that between 125 and 150 traditional school districts and charter schools are currently headed for a fiscal cliff once those grants expire.
Not only will our districts not receive additional money to help keep up with the cost of inflation, but we will actually be subject to a funding cut. And we’re facing this cut at the exact moment when federal funds designed to help schools cope with the effects of the pandemic will expire. Yet the steep costs of implementing the accelerated instruction requirements of HB 4545 will continue. We struggle to keep up with that at our current level of funding, much less with funding cuts.
Here is the reality facing districts: Revenue is stagnant, but our expenses are increasing. Unlike cities and counties, schools do not receive an automatic increase in revenue as property values climb.
We work hard to serve not only our students and teachers, but also our taxpayers. So we support the property tax compression enacted by HB 3 to reduce our property tax rate. But once a district hits the floor for how low their rate can go, then increased property values only result in increased recapture—not increased revenue for our students, regardless of how much more local property taxes our community pays.
All the while, the burden of recapture continues to grow heavier. The property tax relief of HB 3 temporarily helped to reduce the growth of recapture as intended, but since its initial reduction, recapture has grown by 25%. Statewide recapture payments exceeded $3 billion for the first time ever in the last school year– Without legislative relief, we expect that number to continue climbing in the future.
There is a solution that would help to address all of these issues: an increase to the Basic Allotment. Increasing the Basic Allotment will help schools keep up with the ever increasing cost of inflation, HB 3 ensures that at least 30% of any increase go toward increased teacher salaries, it will help mitigate the fiscal cliff that Formula Transition districts face, and finally, it will help to reduce Robin Hood recapture.
If the Basic Allotment were increased to match the rate of inflation since 2019, it would be increased by $700 up to a total of $6,860. That does not account for the additional inflation that will likely occur between now and this time next year. And while an increase to the Basic Allotment will ease the fiscal cliff for Formula Transition districts like mine, we would still face future funding decreases.
Every $100 increase to the Basic Allotment would mean roughly a $100 million annual reduction in recapture statewide. That could be boosted further by implementing an early payment discount as it existed in law prior to HB 3. Currently, districts must make their recapture payment by August 15. Because there is no advantage for a district making that payment early, I can assure you that we pay on the last day. It seems it would be to the State’s advantage to receive those payments at an earlier date. In fact, the State offers early payment discounts to corporate taxpayers paying sales taxes. School districts that send over $3 billion in property taxes to the State through recapture should qualify for at least the same early payment discount as corporate taxpayers. This would further help to reduce recapture.
Texas public schools need a legislative solution that will ensure we can recruit/retain quality staff and meet the needs of the students we serve. We look forward to working with you on those solutions.
