Update on School Finance Trial and 83 rd Legislative Session

1. Update on School Finance Trial and 83rd Legislative Session From the Courthouse to the Capitol

2. 60% of districts are participating in litigation

3. Who’s Who in the School Finance Trial • Texas Taxpayer and Student Fairness Coalition Plaintiffs (Equity Center): 414 districts (1.4 million students); Claims: Equity, Adequacy, and Statewide Property Tax • Edgewood ISD Plaintiffs (MALDEF): 5 districts; Claims: Equity, Adequacy • Fort Bend ISD Plaintiffs:84 districts (1.8 million students); Claims: Efficiency, Adequacy, Statewide Property Tax • Calhoun County ISD Plaintiffs: 88 districts (378,000 students); Claims: Adequacy, Statewide Property Tax • Efficiency Interveners • Charter School Interveners

4. School Finance Trial – key dates • Trial officially began on October 22, 2012 • School district plaintiffs rested their case December 5, 2012 • State rested their case January 24, 2013 • Closing statements and announcement of ruling on February 4, 2013

5. By the numbers • 44 days, spanning 13 weeks for the trial • 16 superintendentstestified in the trial (Districts represented include: Humble, San Benito, Richardson, Everman, Alief, Calhoun County, La Feria, Brownwood, Abilene, Austin, Quinlan, Amarillo, Edgewood, Los Fresnos, Pflugerville, and Frisco) • In addition to the superintendents, 1 Chief Financial Officer, 1 former superintendent, 2 teachers, 2 parents, 4 taxpayers, 4 trustees testified. • 7 state experts offered testimony on behalf of the plaintiffs • 10 national experts testified for the plaintiffs

6. The Claims • Statewide Property Tax • Adequacy • Efficiency/Equity

7. Statewide Property Tax Claim ARTICLE VIII, SECTION 1-e of the Texas Constitution • - No State ad valorem taxes shall be levied upon any property within this State “An ad valorem tax is a state tax … when the State so completely controls the levy, assessment and disbursement of revenue, either directly or indirectly, that the authority employed is without meaningful discretion.” Local Districts must be able to provide local supplementation to fund programming beyond state requirements.

8. Adequacy Claim ARTICLE VII, SECTION 1 of the Texas Constitution • A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools. • Supreme Court already warned of drift toward inadequacy. • Since that time, we’ve seen standards increase and funding decrease.

9. July 6, 2005

10. July 6, 2005

11. Efficiency/Equity Claim • “Constitutional efficiency under article VII, section 1 requires only that districts must have substantially equal access to funding up to the legislatively defined level that achieves the constitutional mandate of a general diffusion of knowledge. ” • Two types of efficiency: • Effective, productive of results, not wasteful (Qualitative Efficiency) • Substantially equal access to funding for children in poor and rich districts (Financial/Quantitative Efficiency, or “Equity”)

12. So what? • Standards have increased and funding levels have decreased. • What does it cost? • Is this an impending crisis or present crisis? • What level funds basic program? $1.00, $1.04, or $1.17? • ASATR is set to expire; will simple or weighted averages be used to determine equity?

13. Judge Dietz’s Ruling • “There is no free lunch. We either want the increased standards and are willing to pay the price, or we don’t.” • “The problems only get worse the longer we wait.”

14. Texas Taxpayer and Student Fairness Coalition • System violates “efficiency” provisions and fails to provide substantially equal access to revenue necessary to provide general diffusion of knowledge • System is not adequately funded (fails to make suitable provision) • System has created a state ad valorem tax • However system does not violate uniform tax provision of the Constitution.

15. Edgewood ISD, et al. Plaintiffs • System is financially and quantitatively inefficient • System fails to make suitable provision for the education of low income and English Language Learner students • System lacks meaningful discretion and therefore constitutes a state ad valorem tax

16. Fort Bend ISD, et al. Plaintiffs • System is inadequate and unsuitable; not structured, operated, and funded to accomplish general diffusion of knowledge • System is inefficient, inequitable, and unsuitable; arbitrarily funds districts at levels below constitutional requirements • System lacks meaningful discretion and therefore constitutes a state ad valorem tax

17. Calhoun County ISD, et al. Plaintiffs • System is inadequate and fails to provide the resources needed to provide a general diffusion of knowledge • Districts must be able to finance cost of adequate education within range of district taxing authority not subject to election • System prevents meaningful discretion and therefore constitutes a state ad valorem tax as districts cannot lower rates and meet state standards, nor can they raise rates as they are either legally or practically unable

18. Intervenors • Texans for Real Efficiency and Equity in Education (TREEE), et al.: Court declared issues are within the discretion of the Legislature • Texas Charter Schools Association, et al.: Court declared issues within the discretion of the Legislature or not to the level rendering the entire system unconstitutional

19. Estimated Timeline • October 22, 2012 – School finance trial began • February 4, 2013 – Trial court ruling announced • March, 2013 – written ruling expected • May 27, 2013 - Last day 83rd Legislative Session • Fall 2013 – Appeal to Texas Supreme Court • Spring 2014 – Possible Supreme Court ruling* • 2014-2016 – Response to court ruling?? * Most likely after primary election in March 2014.

20. The 83rd Texas Legislative Session

21. Re-cap: The 82nd Texas Legislature • State faced projected $25 billion shortfall and proposed $10 billion cut to education. • Cut $5.4 billion from public education ($4 billion from formula, $1.4 billion in programs). • 5.6% across-the-board reduction during 2011-12 • Reduction to ASATR in 2012-13 school year, which affected certain districts far more than others • First time public education funding was reduced in 60 years.

22. Who has changed? • Statewide leadership unchanged – short term stability • Education leadership very different • New Commissioner • New Senate Education Chair • New House Public Education Chair • New Senate Finance Chair

23. Who has changed? Texas Senate • Six new senators • Charles Schwertner (R-Georgetown) • Ken Paxton (R- McKinney) • Kelly Hancock (R-North Richland Hills) • Larry Taylor (R-Friendswood) • Donna Campbell (R-New Braunfels) • Unknown who will replace the late Senator Mario Gallegos. • Plus new leadership of Senate Education (Senator Patrick) and Senate Finance (Senator Williams) • Five of the nine members of Senate Education Committee are new to the committee (Vice Chair Lucio, Campbell, Paxton, Taylor, Duncan)

24. Who has changed? Texas House • Composition • 102 Republicans and 48 Democrats in 2011 • 95 Republicans and 55 Democrats in 2013.  • Almost one-third of the 150 members of the House are serving for the first time. • Over 50% of members are freshmen or sophomores • House Committee Changes • 13 of 36 Committee Chairs did not return • 5 of 11 members of House Public Education Committee (including Chair and Vice Chair) did not return • Will most likely mean new Chair of House Appropriations Article III Workgroup

25. What has changed? • Now you hear “surplus” instead of “shortfall.” Comptroller announced $8.8 billion surplus. • Rainy Day Fund could reach flood stage – projected $11.8 billion balance, with a cap of $13.6 in 2014-15. • However, TEA has not asked for additional funding for schools.

26. What has NOT changed? • Foundation School Program payment was delayed ($1.7 billion) and Medicaid was underfunded by $4.7 billion. • Constitutional state spending limit applies to any amount spent above last biennium that exceeds 10.71% growth rate. • Student enrollment continues to increase by 80,000 students per year, primarily students who are disadvantaged.

27. What has NOT changed? • Budget bills were filed that begin where the last budget ends—with cuts firmly in place • Expiration of Additional State Aid for Tax Reduction (ASATR) still set to expire in 2017. • Unclear if cuts will be restored and if so, how.

28. Possible Restoration of Cuts • Distribution unknown • Cuts were across-the-board in the first year and applied to ASATR in second. • Will cuts be restored in the same manner they were made? • Could ASATR be lost forever and a partial per-capita restoration applied? • Amount Unknown • After $2 billion is applied to offset the cost of the delayed FSP payment (which isn’t even a restoration), how much is left? • Education must compete with many other state interests for funds.

29. Budget Overview • Legislature has $101.4 billion to spend ($92.6 billion in revenue & $8.8 billion in surplus), plus $11.8 billion in Rainy Day Fund • Budget bills filed in House and Senate appropriate $89.1 billion and $88.9 billion respectively. • Supplemental appropriations bills to address some underfunding from last session (August 2013 FSP payment)

30. Budget Overview • No restoration of $5.4 billion cut to public education. • Enrollment growth is funded, but at the lower per WADA rate. • Much of the $2.2 billion for enrollment growth “funded by the state” is made up of a $1.5 billion increase in property value growth (savings for the state, plus increase in recapture, & property values growth is expected to continue).

31. School Choice “Our base has wanted us to pass photo voter ID for years, and we did it. They've been wanting us to pass school choice for years. This is the year to do it, in my view. That issue will do more to impact the future of Texas and the quality of education than anything else we could do.” – Senator Dan Patrick Chairman, Senate Committee on Education

32. School Choice – Patrick proposal • Tax credit up to 25% for businesses that choose to donate to scholarship program for disadvantaged students to attend private schools. • Public schools could also apply for the scholarship funds to put toward pre-K and afterschool programs. Start as a pilot to prove it is effectiveness • Also proposes an expansion of public school choice to include both inter-district and intra-district transfers to schools with capacity • Expansion of charter schools.

33. Accountability Reform • Even more so than cuts to funding, voters are angry over testing and accountability. • Similar to funding, there are lots of moving parts: • 15% requirement • Graduation requirements • Number of tests • How tests are used to hold schools accountable

34. School Safety • Legislators are eager to put measures in place to prevent tragedy and threats to student safety. • While some support more law enforcement in schools, others continue to voice concerns about the role school resource officers play in student discipline.

35. WADA or Water? • Education may not be the first priority of the Legislature this session. • The competition for limited state funds will take place in the shadow of one of the worst droughts in state history.

36. www.txsc.org

37. www.crcstx.org – grassroots network