Less than 24 hours after the 86th Legislature wrapped up its work, local education leaders described House Bill 3’s school-finance reform as landmark legislation, while noting that much is still to be learned about the intricacies of the omnibus bill.
Northside Independent School District Superintendent Brian Woods, who leads Bexar County’s largest district, hailed HB3 as transformational.
“The people who say that this is the biggest change to school funding in 100 years are potentially right,” Woods said. “[To make a] big sweeping statement, it is a big deal. It really is legitimately a big deal.”
The 308-page bill makes a number of significant changes, including increasing the base funding allotted per student by more than $1,000 – from $5,140 to $6,160 – and bumping the state’s share of public education from 38 percent to 45 percent. The $11.6 billion legislation puts about $6.5 billion into public education and $5.1 billion into cutting school district property taxes, funds full-day pre-K for eligible students, and requires district to use some of the additional revenue to increase compensation for teachers, nurses, librarians, and counselors.
But, Woods pointed out, there are parts of the legislation that school districts are still examining, the effects of which won’t be known for some months.
“When you look at the impact on [district’s] budgets, it is very complex,” he said. “Someone is going to have a very hard time saying to you with a straight face, ‘This is the exact impact to us.’ There is a lot in the bill that needs rule-making [from the Texas Education Agency] and a lot of it that needs fleshing out.”
Local districts would all see a boost in funding, according to estimates released by the Legislative Budget Board for fiscal years 2020 and 2021. Several districts including Edgewood, Harlandale, South San, Southwest, Somerset, Lackland, and Randolph Field ISDs, are projected to get an increase of more than $1,000 per student counted in average daily attendance in fiscal year 2020.
The Bexar County district with the smallest increase in fiscal year 2020, Northside ISD, would still receive a bump of $427 per student counted in average daily attendance. Woods estimated that’s about a 4 percent budget increase.
North East ISD estimates it will receive about $27 million in new revenue in fiscal year 2020.
“This is the first new money that NEISD has received since 2011,” Interim Superintendent Sean Maika stated in an email. “Some of that money is allocated to specific programs or comes with stipulations. It will take weeks to unpack all of the information, and some details are still forthcoming.”
North East ISD and San Antonio ISD would see an impact on future recapture payments made to the state. NEISD had been projected to pay about $2 million back to the state in fiscal year 2020 and closer to $28 million in fiscal year 2021. With HB3, the district won’t have to pay any money back to the state. SAISD also was projected to pay about $400,000 to the state in fiscal year 2021, but HB 3 erases that amount.
Alamo Heights ISD, which has long made recapture payments, will pay less. Estimates reduce AHISD’s recapture payments by about $7.7 million in fiscal year 2020 and by $8.5 million in fiscal year 2021.
Alamo Heights Superintendent Dana Bashara expressed gratitude for legislators’ focus on school finance reform, but said she and her district are still sorting through how the legislation will actually impact students. One high note for her district: a lower rate of recapture, Bashara said.
“I am not thinking at this point that it is going to free us up to [put] new monies into new programming for the district,” Bashara said of the new state funds. “I’m thinking optimistically as I’m looking at these numbers, but it is going to allow us to get by next year without being in a deficit situation.”
In San Antonio ISD, the funding boost will have an immediate impact, Superintendent Pedro Martinez said. At the district’s first budget workshop earlier in May, Martinez and district staff estimated SAISD would face a budget shortfall of about $16 million, even after cutting some costs elsewhere.
With a projected increase in state funding of about $36.5 million from House Bill 3 in fiscal year 202o, Martinez said the district will be able to cover the estimated shortfall. However, he warned, the projected increase in state funds won’t be as large as expected because of other costs the district will take on from new legislation.
Another bill, Senate Bill 12, increases school district’s contributions to the state teacher pension fund. This will end up costing SAISD about $5 million, Martinez said.
“We feel confident that we will be able to cover that shortfall, provide compensation increases, and make investments in our programs,” Martinez said. “Stepping back, I do feel this is an exciting time to be in the state of Texas – not only is there a significant investment in education, and I talked to colleagues who have been here for more than 20 years and they said they have never seen this kind of an investment – but also the fact that there is some very transformational policy changes that are part of the legislation, and what I’m referring to specifically [is a]significant investment in teachers.”
A provision of the legislation requires districts to use 30 percent of their revenue gain toward increasing the compensation of full-time employees who are not administrators. This includes teachers, librarians, counselors, and nurses. Local districts will begin hammering out these increases in the next few weeks as school boards finalize budgets for the coming school year.
Districts are supposed to prioritize increases for classroom teachers with five or more years of experience. HB3 also introduces a program that allows districts to start a merit pay system that would reward the highest-achieving teachers with bonuses.
SAISD operates a master teacher program that provides up to $15,000 in stipends and additional responsibilities to teachers who have a proven track record of success. SAISD officials hope to have 600 teachers in this program by next year, and Martinez said the district could use this program to apply for newly available state funds as part of the merit pay initiative.
House Bill 3 also includes funding for full-day pre-K for eligible 4-year-old students.
Northside ISD recently voted to expand its pre-K program to a full day for qualifying students. Before HB3’s passage, the state funded half-day pre-K programs for eligible 4-year-olds and districts would have to find money to cover the rest if they wanted to offer a full day program.
“We had already made a move to start-full day pre-K and it will certainly help us to move that along,” Woods said. “It won’t change our plans for [the 2019-20 school year], but could change our plans to accelerate programs beyond that.”
The school finance legislation also introduces a new way to measure poverty in Texas students. The method is one that was developed in SAISD, using census blocks to provide more nuance to define poverty rather than just identifying a student as economically disadvantaged.
Woods described this change as potentially the biggest philosophical alteration to the way the state funds schools. Legislators put more money into educating impoverished students and chose to define poverty by looking at median income, educational attainment, home ownership rates, and single-parent households.
A significant portion of the school finance legislation is devoted to cutting property taxes from school districts. The bill would lower property tax rates in all Bexar County school districts. School districts assess property taxes from two totals – the maintenance and operations rate, which helps foot the bill for regular operations of the district, and the interest and sinking rate, which covers the cost of district debt from various projects including bond issues.
In districts where the maintenance and operations portion of the tax rate is set at the maximum level of $1.17 per $100 of property value, the rate will be lowered to $1.06 in fiscal year 2020 and $1.05 in fiscal year 2021.
This would cut an annual school district tax bill for a homeowner with a house valued at $150,000 by $165.
In districts such as Northside, North East, Judson, and East Central, where this portion of the tax rate is set at $1.04 per $100 of property value, the rate will drop to $0.97 in fiscal year 2020.
This would cut the school district tax bill for a homeowner with a house valued at $200,000 by $140 per year.
In the future, a new cap on this rate will be in place because of HB3. From 2021 forward, districts with property values growing at 2.5 percent or more each year will have their tax rates automatically decreased to collect only at the 2.5 percent cap. The state will reimburse districts for additional funds to which they are entitled.
Eduardo Hernandez, superintendent of Edgewood ISD, noted that this property tax relief – his district’s maintenance and operations tax rate is expected to drop from $1.17 to $1.05 by fiscal year 2021 – will help taxpayers in his district.
“We are in an area where people have to ask the question about how they are going to pay their taxes,” Hernandez said. “It is going to help out their bottom line at home.”
Hernandez said Edgewood ISD also will benefit from another provision of the legislation that extended funding for career and technical education (CTE) to seventh and eighth grade. Up until now, the district has been funding middle school CTE programs. This change will allow EISD to extend its programs to more students, Hernandez said.
The bill also provides an incentive for districts to provide up to 30 additional days of schooling into the summer. It was a welcome addition, Martinez said, adding that SAISD already offers summer programming and this legislation will provide better financial support for it.
South San Superintendent Alexandro Flores said he was “tentatively excited” about the legislation and the options it introduced, including the provision that allows districts to offer additional days. However, he said, it is essential to consider what would happen if funding were not available in the future.
“When I’m hearing all the available options like teacher incentive pay, … the possibility to expand school from 180 to 210 days for the school year, a lot of these pieces are definitely great options but what you always have to look out for is what if the funding goes away in two years,” Flores said. “You have to take a very conservative approach.”
Even as the bill makes its way to the governor’s desk, some lawmakers questioned whether this is a sustainable model for funding public schools in Texas.
“Just like 12 years ago, this Legislature has failed to provide a long-term funding solution that will maintain both our commitments to homeowners and to school children,” State Rep. Trey Martinez Fischer (D-San Antonio) said in a statement. “In the coming years, Texas leaders will face difficult economic choices. When those leaders turn to our budget, they will be challenged by the near impossibility of identifying the $13.4 billion dollars in general revenue that the [Legislative Budget Board] estimates HB 3 will cost in the next biennium.”
School officials posed similar questions, saying that while they are thankful for the generosity of lawmakers this session, they hope it continues in the future when Texas’ economy is not doing so well.
Bashara noted that Alamo Heights ISD will plan cautiously for the future, knowing that additional revenue flowing to individual districts from HB3 won’t be set in stone.
It is a question that lawmakers should be mindful of and that citizens need to ask legislators about in the interim, Woods said.
“The reason we were able to afford this was because of the strength of the state’s economy, and obviously all of us want that to continue, but if we were able to take that decline, what happens here?” Woods said.
