Texas School Finance Reform

1. Texas School FinanceReform The Time Is Now January 25, 2019 Christy Rome Texas School Coalition

2. January 8, 2019 Texas School Coalition

3. Texas Commission on Public School Finance

4. Themes from the Commission • Governor Abbott’s Goals (outcome-based funding, innovative methods, and explores alternatives to burdensome property tax) • Does money matter? Some say HOW MUCH money matters, others say it is HOW you spend it. • Promising practices exist, and programs with demonstrated success seem to be obvious choices, but the Commission has learned that many of those programs and practices carry high price tags that many districts can’t afford or are not able to sustain. • Comprehensive Teacher Quality & Placement Initiatives, Teacher Excellence Initiative (specifically Dallas ACE Program) • Focused Instructional Leadership Initiatives • Quality Early Learning Programs • Two-way Dual Language Programs Texas School Coalition

5. Funding for Impact:Equitable Funding for Students Who Need It the Most • Outcomes-based funding • New funding • “Reallocations” • Modifications to existing system • Revenue/property tax relief Texas School Coalition

6. Outcomes-based Funding $1.8 billion for biennium Texas School Coalition

7. Proposed New Funding $2.56 billion for biennium Texas School Coalition

8. “Reallocations” Saves State at least $7 billion for biennium +one-time $1.8B =$8.8 billion Texas School Coalition

9. Modifications to Existing System Known $3.2 billion cost, though savings from golden penny yield change could save state more than that amount Texas School Coalition

10. Revenue/Property Tax Relief ??? Texas School Coalition

11. Final Recommendations Texas School Coalition

12. Questions from the final recommendations Will reallocations be the “new money,” or will new money will be applied on top of reallocated dollars? Will some districts end up with less money? Will any of this matter to legislators? Texas School Coalition

13. "Those who cannot remember the past are condemned to repeat it." -George Santayana ”Those who fail to learn from history  are condemned to repeat it.” – Winston Churchill Texas School Coalition

14. 64th Texas Legislature 1975 Texas School Coalition

15. 1995 Texas School Coalition

16. 2004 Texas School Coalition

17. From the Courthouse to the Capitol Texas School Coalition

18. Recent (post-West Orange-Cove ruling) History on Teacher Pay Raises Texas School Coalition

19. Recent (post-West Orange-Cove ruling) History on Property Tax Rate Compression • HB 1 in 2006 compressed property tax rates by one-third • Districts were promised Additional State Aid for Tax Reduction (ASATR) to help them reach their “target revenue” amount and make up the difference in their loss of revenue due to the lower tax rate • New business margins tax implemented by HB 1 to pay for the tax rate compression never performed up to projected levels, causing a funding deficit for the Property Tax Relief Fund • In 2009, federal dollars became available and filled the deficit • In 2011, with no federal help, largest education cuts in state history. • Schools absorbed $4 billion in school finance formula cuts and $1.4 billion in programs cuts. • In 2011-2012, across-the-board reduction of 5-6% • In 2012-2013, cuts ranged from 1-9%, depending on ASATR. Texas School Coalition

20. 2011 - largest education cuts in state history • Schools absorbed $4 billion in school finance formula cuts and $1.4 billion in programs cuts • In 2011-2012, across-the-board reduction of 5-6% • In 2012-2013, cuts ranged from 1-9%, depending on ASATR amount, and those cuts remained • In 2017, ASATR funding expired completely, and the promise to make up the difference was forgotten Texas School Coalition

21. Share of State and Local Funding Local State

22. School District Adopted M&O Tax Rates Over Time $1.17 $1.05-$1.16 $1.04 Texas School Coalition

23. Recapture then and now… 1st year of Robin Hood: 34 Chapter 41 districts 2018-2019: 371 Chapter 41 districts 2018-19 Texas School Coalition

24. Recapture Payments from 1994-2019 2019: $2.7 billion Source: TEA Summary of Finance

25. Recapture Payments from 1994-2021 2021: $3.8 billion Sources: TEA Summary of Finance & TEA Legislative Appropriations Request

26. For the sake of comparison… Revenue by Source (All Funds, Excluding Trust) 2018-2019 amounts from TEA Summary of Finance; 2020 & 2021 are estimates from TEA LAR Lottery Proceeds https://comptroller.texas.gov/transparency/reports/revenue-by-source/

27. January 9, 2019 Texas School Coalition

28. Governor Abbott’s Property Tax Plan Revenue cap of 2.5% per year for cities, counties, and school districts 2/3 voter approval required for increase above 2.5% (and for the authorization of new debt) Even with voter approval, increases in excess of the cap are limited to specific purposes, such as teacher compensation Even with voter approval, increases may not exceed statewide population & inflation growth Texas School Coalition

29. Texas School Coalition

30. Governor Abbott’s Proposal • Teacher Quality Allotment, to pay the best teachers more, especially those that teach in the “most difficult classrooms” • Financial incentives to improve state outcomes, especially for achievement among low-income students in 3rd grade and high school • School finance reforms to bring about a system that ensures “similar children receive similar funding, regardless of where they live” with the elimination of the Cost of Education Index (CEI) with the compensatory education weight based on a spectrum of need, and weights for English Language Learners (ELLs) that extend to five years • 2.5% Tier 1 M&O Revenue Cap with promised state revenue to “ensure districts do not lose money as a result of this compression of tax collections.” Texas School Coalition

31. Popcorn Recapture Source: “Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms” Presentation from The Office of Governor Greg Abbott Texas School Coalition

32. Popcorn Recapture Source: “Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms” Presentation from The Office of Governor Greg Abbott Texas School Coalition

33. Popcorn Recapture • Rather than recapture being based on a district’s wealth per WADA, this concept would be one that funds districts up to their entitlement and then recaptures any funds above entitlement • Governor Abbott notes that 90 recapture districts currently have funding levels below formula entitlement (that means the remaining 127 have funding above it) Source: “Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms” Presentation from The Office of Governor Greg Abbott Texas School Coalition

34. Comparing the base bills filed in the House and Senate The State Budget

35. The Overall Budget Notice the $3 billion difference…it’s important. Texas School Coalition

36. Economic Stabilization Fund (ESF) With a projected $14.7 billion in the ESF… House spends $633 out of the ESF (so far), with one-third of that for TRS health care. In Supplemental Appropriations (SB 500) Senate uses $2.5 billion from the ESF, with at least $1.2 billion of that for Harvey recovery in 2019 ($906 million for schools) and $100 million for school safety/hardening Texas School Coalition

37. Comparing the House and Senate Base Bills $3 billion difference Texas School Coalition

38. Base Appropriations Bills - FSP Base Foundation School Program (FSP) rider for House and Senate looks similar. Both include enrollment growth ($2.4 billion) and increase in Austin yield for golden pennies (estimated at $2.2 billion). Basic Allotment is unchanged in both bills (same $5,140 from 2015) House includes $9 billion on top of base for school finance, recapture reduction, and property tax relief. To accomplish that, could increase the Basic Allotment, increase early education funding and teacher compensation. We don't know how that amount would be divvied up among those priorities. Senate includes $6 billion on top of base, with $2.3 billion for property tax reduction and $3.7 billion for a $5,000 pay increase for classroom teachers (see SB 3). Texas School Coalition

39. Senate Bill 3 – Teacher Pay Raise $5,000 across-the-board increase in salary over what the teacher would have received in 2019-20 school year for every full-time classroom teacher $5,000 provided for every full-time classroom teacher employed by the district – with funding provided through an allotment or a credit against the district’s recapture Does not increase the Minimum Salary Schedule, so therefore does not apply to other district employees subject to the MSS (or not) and does not provide funding for districts to make the increased contribution to TRS on the additional $5,000 Texas School Coalition

40. Other School Finance Factors for the 86th Legislature Special Education School Safety Harvey Outcomes-based funding A whole new way to fund schools? Increases to the BA and increases in the state share are meaningless unless accompanied by additional funding District winners and losers Sustainability of revenue sources Texas School Coalition

41. 1984 1993 2006 2019 9 years 13 years 13 years Texas School Coalition

42. Christy Rome Executive Director Texas School Coalition 512-732-9072 Christy@txsc.org www.txsc.org Texas School Coalition