School Finance Committee hearing

The Joint Interim Committee to Study the Public School Finance System conducted its final hearing on Monday, September 24. The Committee heard invited and public testimony on issues related to state revenue and innovative practices.

A copy of the written testimony submitted on behalf of the Coalition during this hearing can be found here.

State Revenue Sources
Jennifer Schiess of the Legislative Budget Board (LBB) began the hearing by providing an overview of the sources of funding for education in Texas. The Foundation School Program receives a sum certain appropriation from the state and has several dedicated revenue sources, such as the Texas Lottery. The Available School Fund has 3 constitutionally dedicated sources: the distribution from the Permanent School Fund at the rate set by the State Board of Education, 25% of the motor fuels tax, and the optional distribution from the General Land Office (GLO) that was approved by Texas voters last fall. Schiess noted that the GLO has yet to make that $300 million distribution anticipated in the appropriation amount adopted by the Legislature.

Comparisons were drawn between the amount brought in under lottery proceeds ($2 billion for the biennium) and recapture, which is expected to be $1.7 billion for the biennium.

Chairman Jimmie Don Aycock (R-Killeen) asked whether recapture would increase this year due to the increasing number of schools who are coming becoming eligible under Chapter 41. Schiess said it would increase, but that due to the lag, it would take a little time to catch up within the system.

Rep. Donna Howard (D-Austin) made the point that as more money comes in under recapture, the State is funding less of the responsibility. The State is relying more on local property taxpayers in certain districts.

Senator Dan Patrick (R-Houston) followed up on that point and asked what happens when recapture goes up and therefore the General Revenue appropriation required by the State goes down. Schiess explained that the funds become unrestricted and that we don’t have any way to track how that flexibility with funds is applied (whether it funds education or not).

Senator Leticia Van de Putte (D-San Antonio) asked some specific questions about new Chapter 41 districts that were property poor when target revenue was enacted. Through an exchange with LBB, Van de Putte surmised that the State is the beneficiary of increased recapture, not local school districts. Chairman Aycock chimed in on this exchange and said that the school districts will have the same amount on a per student basis as they would have had the boom not occurred (with the exception of golden pennies).

The remaining testimony on this panel addressed current and proposed sources of state revenue. Talmadge Heflin of the Texas Public Policy Foundation (TPPF) explained that his organization believes that the local property tax should be completely eliminated and replaced with an increase in sales tax and an expansion of the sales tax base. Texas would be the first state to adopt such a model, and Heflin said that it would eliminate concerns over Robin Hood while keeping the same level of local control, because he said the Legislature has already completely eroded all local control in the system.

Dick Lavine of the Center for Public Policy Priorities (CPPP) testified in support of a more balanced approach to revenue to provide stability for the system. He provided specific suggestions for changes that could be made to various tax exemptions and abatements. He recommended a regular review for each exemption to ensure that it continues to achieve the goal for which it was intended to the degree to justify the exemption. Lavine cited Chapter 313 as an example because he said wind farms are not producing the number of jobs for which those abatements were intended. Along with supporting a balanced system of revenue, Lavine also supported a balance of local control that would provide some mechanism for people in local communities to choose to tax themselves a little more to invest in their local schools.

Senator Robert Duncan (R-Lubbock) spoke about the erosion of local control over property taxes and why that has led him to the conclusion that a statewide property tax would be the best solution to fund schools, as it would only change the point of collection. Senator Duncan explained that in his view, the biggest problem in current system is the volatility, and that in turn leads to hold harmless provisions which skew the whole formula-based system. His proposal from last session includes a statewide rate of $1 with a 5-year phase-in for districts taxing below $1, and allows for up to 17 cents of local enrichment. The proposal would have eliminated ASATR and hold harmless of any nature.

Dale Craymer of the Texas Taxpayers and Research Association provided his take on the various proposed statewide tax fixes and alternatives. Craymer provided a balanced view on the research regarding pros and cons of each of the options, along with the shifting tax burdens each option would carry. Craymer noted that statewide taxes alone do not automatically create equity because equity is a matter of how the revenue is distributed, which is subject to formulas.

Rep. Howard made the point that equity should be tied to adequacy and should be achieved by bringing everyone up to a certain level, rather than bringing any districts down to a lower level.

Chairman Aycock posed a series of questions regarding county education districts and the possibility of matching various grouping of districts with higher wealth and those with lower wealth to create a hybrid level of local control.

Innovation
The final invited panel of the day focused on innovation and reform. Former Governor of West Virginia, Bob Wise, who now serves as the President of the Alliance for Excellent Education offered testimony about how the use of technology can encourage innovation and flexibility to better meet the needs of students in school. Dr. Marguerite Roza of the University of Washington shared her research and views regarding how lower funding amounts for schools can in-turn force innovations and reforms within schools. She suggested that eliminating all hold harmless measures would bring about innovative practices.

Finally, TXSC Legislative Chair Dr. Karen Rue of Northwest ISD provided testimony on innovative practices being employed in her district through the use of technology. Dr. Rue provided an eye-opening presentation on the capabilities of students and their belief that technology isn’t something to learn, but merely a tool to assist them with their learning and everyday life. The presentation showcased some of the impressive learning occurring in Northwest ISD that is representative of what is happening in many other districts throughout the state.

 

Texas Tribune Festival

This weekend, the Texas Tribune Festival took place in Austin. This event was attended by policymakers, and those interested in the policymaking process. The event kicked off on Friday afternoon with a panel of four superintendents, including our very own Karen Rue of Northwest ISD.

On Saturday, five panels were focused on the topic of public education, including two in particular that may be of interest to TXSC members. Summaries of those panels can be found below. For more complete coverage of all the panels on the education track, you may also want to read the live blog maintained by the Texas Tribune throughout the event.

The Future of School Finance
Featuring David Dunn, Executive Director of the Texas Charter Schools Association; Kent Grusendorf, Executive Director of Texans for Real Efficiency and Equity in Education (TREE); David Hinojosa, Southwest regional counsel for the Mexican American Legal Defense and Educational Fund (MALDEF); and David Thompson, Partner at Thompson and Horton.

This panel consisted of representatives from four of the six plaintiff groups in the school finance lawsuit. David Thompson laid out the constitutional claims that are a part of the Fort Bend ISD suit, while David Dunn explained the inequities charter schools believe exist in the system due to their lack of facility funding. David Hinojosa explained MALDEF’s position by using a comparison between two neighboring districts, where he said the same standards apply to schools with very different tax rates and very different access to funds. Hinojosa also said that they are asking the state to reasonably raise the floor, and that they are not seeking to bring any district’s funding level down. Kent Grusendorf explained that his group is focused on efficiency, and that they have taken no position on equity or adequacy for school districts; an efficient system would produce equity and adequacy for students.

David Thompson noted that while there may be different views on the issues, every group believes the current system is unconstitutional. He also pointed out that the only way the courts have addressed inefficiency in the past was in terms of district boundaries, and not along the lines of teacher contracts and class size limits that are being brought forward by TREE. Grusendorf noted that consolidation is a difficult political issue, and that is the reason why it was not mentioned in their claims. That, and his uncle, Bill Grusendorf, he noted. Grusendorf stated that the heart of inequity is students and parents trapped in failing schools.

Questions were also posed by the audience about a the possibility of a statewide property tax, but that notion was quickly dismissed when David Thompson explained the requirement for two-thirds of the Legislature to vote in favor of that option, followed by an approval by the majority of Texas voters.

A Preview of the 83rd Legislative Session
Featuring Representative Dan Branch, R-Dallas; Representative Dan Huberty, R-Houston; Senator Judith Zaffirini, D- Laredo; and Senator Dan Patrick, R-Houston.

A panel of four legislators who will most likely play leading roles in public and higher education during the 83rd legislative session provided some insight on what we could expect in 2013.

Senator Patrick stated that he would not get into details about school choice, but that “we have to give families trapped in poor performing schools a way out” and “we have to provide student with disabilities options, especially those with autism.” On the issue of school choice, Senator Zaffirini said that vouchers may work in one area, but not in another; there is a difference in how a policy would apply to rural and urban areas of the state.

Rep. Huberty spoke about what a difference we will see in the House Public Education Committee next session, given the number of members who will not be returning, especially those in leadership positions on the committee. He also said “we have to change the mentality that it’s all about the runs and how much my school district gets.”

Senator Patrick noted that legislators heard about thousands of teachers being laid off, but said then that didn’t happen. He said that everyone had to tighten their belts last session because you either raise taxes or you reduce expenses. Patrick said the Legislature made cuts, but that they were not too deep.

Rep. Branch also described what he called “crocodile tears” from school districts that then gave 3% pay increases to staff out of their big fund balances, which he said flies in the face of saying that schools were somehow damaged. Branch said the focus should be on the issue of student population growth and ensuring needs of new students can be met.

The moderator posed a question about school district fund balances, which he equated to the State’s Rainy Day Fund. He asked legislators if it was fair to force districts to spend out of their “rainy day funds” if the State refused to do so. Rep. Branch said it should be shared responsibility between the State and districts. Rep. Huberty said that some districts have fund balances with 100% of what they spend on a regular basis and that those districts still said they needed more money. He said fund balances increased by $1 billion amongst districts statewide in 2011. Huberty also noted that this was in part due to a requirement from TEA that a certain balance be maintained by each district, and said the Legislature should work on providing flexibility in that area.

Rep. Huberty said the real problem is equity and that some districts are forced to tax at the $1.17 cap without having any funds in reserve. However, Senator Patrick noted that there are some Robin Hood districts in his area who are forced to send funds to neighboring districts that were able to give pay raises while the Robin Hood districts were not. Patrick said that was unfair and that the system is “a mess.”

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