Tuesday marks the Legislature’s first foray of 2018 into fixing a problem that has plagued Texas educators and students for decades – school finance.
The State of Texas has been decreasing its financial support for local districts over time. In 2006, its share of the funding mechanism was 50 percent. In 2017, that portion decreased to less than 38 percent, largely as a result of rising property taxes, said State Rep. Dan Huberty (R-Houston), chair of the House Public Education Committee.
Two-thirds of Texas school districts sued the State, arguing that the school funding scheme, which relies heavily on local property taxes, was unconstitutional. In 2016, Justice Don Willett, in writing the majority opinion for the Texas Supreme Court, disagreed, saying the funding system had issues, but met “minimum constitutional requirements.”
“Our Byzantine school funding ‘system’ is undeniably imperfect, with immense room for improvement,” Willett wrote in a 100-page opinion. “Accordingly, we decline to usurp legislative authority by issuing reform diktats from on high, supplanting lawmakers’ policy wisdom with our own.”
Legislators took up the torch in the legislative session starting in January 2017, but failed to pass any meaningful reform. Instead, lawmakers established a committee to study the topic in the interim.
Huberty attempted to pass a more comprehensive fix to the funding scheme, but ended up spiking his own bill when senators added a school-choice provision. He resigned his efforts to serving on the commission, but expressed disappointment, saying he had already served on three commissions with related purposes.
“We were prepared to move the ball forward last session and make meaningful changes,” Huberty said at Tuesday’s meeting.
The Texas Commission on Public School Finance is tasked with three main areas of focus: the purpose of the school finance system and the relationship between state and local funding; appropriate levels for local maintenance and operations (M&O) and interest and sinking (I&S) tax rates; and needed policy changes.
By the end of 2018, the commission will submit a list of recommendations for the next Legislature to take up in January 2019.
The group includes 13 appointees, six of whom are legislators. San Antonio is represented by State Rep. Diego Bernal (D-San Antonio) who serves as vice chair of the House Public Education Committee. For a full list of commission members, click here.
Early discussions indicated consensus won’t come easy as members’ motivations might conflict with one another.
State Sen. Paul Bettencourt (R-Houston) emphasized his desire to look into the system’s dependence on property taxes. Bettencourt in the past session championed legislation to cap municipal governments’ ability to increase property taxes.
“There’s basically been an explosion of property taxation in this state,” Bettencourt said.
Bernal said the commission should focus first on inequities that can exist within one city, saying “two, maybe three Texases” exist within the state based on varying property values among districts.
“I want to make sure we keep an eye on the real, and not the abstract,” Bernal said.
Bettencourt’s focus on property taxes referenced districts’ reliance on seemingly ever-increasing property taxes to fund local school district budgets.
Alamo Heights ISD, deemed a “property-rich” district, receives little state support as a result of its ability to take in revenue from overall property wealth. Roughly 83 percent of the district’s budget comes from local property taxes. Districts with less property wealth, such as San Antonio ISD, receive greater state support.
These two districts reflect two key categories created by a school finance law developed in 1993: property-rich and property-poor districts. This designation is determined by an equation that divides the district’s total property value by the weighted average daily attendance, resulting in property wealth per student.
Districts with large property values and small student populations, like Alamo Heights, come away with large property wealth per student. Districts with smaller property values and a higher quantity of students, like SAISD, have a smaller property wealth per student.
Districts with a property wealth per student greater than $514,000, or districts with a property wealth greater than $319,500 and a M&O tax rate (used to fund general district operations) greater than $1.06 are deemed Chapter 41. These districts pay money back to the State in a system commonly referred to as “Robin Hood” or “recapture.” Alamo Heights ISD falls into this category. In 2016-17, it paid more than $30 million back to the State.
Other districts can also be classified as Chapter 41, but may not have to pay money back to the State. These districts have property wealth per student between $319,500 and $514,000, but have a M&O tax rate below $1.06. Northside ISD and North East ISD both fall into this category.
The majority of San Antonio school districts fall into a third category for property-poor areas. These districts have less than $319,500 in property wealth per student, and, therefore, receive a majority of their funding from the State.
Property-poor districts often have the highest tax rates because of lower property values. Edgewood, Harlandale, Southwest, and Southside ISDs all have less than $4 billion in total property value and have set M&O tax rates at $1.17. In comparison, Northside ISD (with a property value of $44 billion) and North East ISD (with a value of $34 billion) tax at $1.04.
The commission will likely address the state’s declining financial support and the funding system’s reliance on property taxes in meetings over the coming months.
The Texas Constitution requires the state provide “an efficient system of public free schools.” Members of the commission said they are going to pursue this result by examining desired educational outcomes and funding mechanisms at future meetings.
The next commission meetings are scheduled for Feb. 8 and Feb. 22.