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So what happens if there isn’t a school finance deal?

You may recall that having to change the school finance formula to distribute the billions of cuts to public education is causing problems with the budget. What happens if no changes are made to the formula? The Trib contemplates the question.

So what would doing nothing look like? Without legislation that provides a mechanism to allocate the billions of dollars in cuts, the state would have to pay districts under existing law. That would mean borrowing from the second year of the biennium to fully fund the first year. When the money dwindles in the second year, Commissioner of Education Robert Scott would have to ask the Legislative Budget Board to tell the Legislature to vote on using the Rainy Day Fund to fill in the gap. He also has the authority to decompress property tax rates, which would allow school boards to make up the difference in state funding with local revenue.

The former is the expected choice — an appointee of Gov. Rick Perry isn’t likely to endorse a property tax hike — and it would probably happen when the 83rd Legislature, which meets in 2013, is up and running. Tapping the Rainy Day Fund in that situation would require approval from three-fifths of the House and Senate. If they decided not to access the fund, Scott would distribute what’s left of state money through what’s called proration, which would proportionally allocate funding according to districts’ statewide property value, with the idea that the state would pay back its share during the next budget cycle. That could potentially leave districts under proration for only a few months. Or he could opt for a combination of decompressing tax rates and proration.

There are serious drawbacks to avoiding school finance legislation, said veteran school finance expert Lynn Moak, who runs the consulting firm Moak, Casey, and Associates. The 1993 statute governing proration, he said, addresses scenarios in which the state comes up short by relatively small amounts in the second year of the biennium and isn’t designed for a multi-billion dollar reduction.

“It wasn’t written against the background that we intentionally screw things up by not having a school finance bill and appropriations bill that match,” he said. “It never visualized the kind of situation we’re talking about.”

There is also uncertainty as to how proration would work with target revenue and the “hold harmless” guarantee the Legislature made to districts with the 2006 property tax reduction. “We haven’t done this since property tax relief funding, and statutes on proration and relief weren’t written together,” Moak said.

So as is the case with the Senate budget and Medicaid, the most likely scenario is that the Rainy Day Fund gets tapped to cover the shortfall. How it is that this could possibly be better public policy than just tapping it now to avoid the shortfalls, and fixing the structural deficit that will lead to future shortfalls, is an exercise best left to the geniuses at conservative think tanks who believe that the time to act is always during the next crisis, which thanks to their preferred policies will be just around the corner. This is more than a theoretical concern:

The Texas House’s barebones budget proposal would run out of money for public schools by early 2013 and for Medicaid soon after unless lawmakers add money to the plan and revise education funding formulas, the chamber’s chief budget writer said Thursday.

“There’s a lot of holes in that budget that we need to fill,” House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, told his colleagues after postponing bills that would use accounting maneuvers and other changes to provide more revenue.

The House needs to take up the repeatedly postponed legislation next week, he said. The legislative session ends May 30.

[…]

Besides agreeing on a funding level for the overall budget — and finding the revenue to pay for it — lawmakers must agree on a school finance plan that would allow them to spend billions of dollars less through the next two years.

Otherwise, current school funding formulas would entitle school districts to current spending levels, Pitts said. At those levels, under the House budget proposal, Pitts said the money would run out by February 2013 or perhaps months earlier.

“That means the schools cannot operate. The teachers will not be paid,” Pitts said.

The House proposal would give schools $8 billion less through the next two years than they’d get under current funding formulas. The Senate proposal’s cutback would be half that.

A Legislative Budget Board staffer said in a memo that if education were underfunded and formulas weren’t changed, the LBB would propose spending money from the rainy day fund for fiscal year 2013 to meet the gap. If the Legislature didn’t do so, the education commissioner would pro-rate state aid.

A special session is looking pretty likely, so there is still a chance to do something about this. Otherwise, Medicaid also runs out of money at about the same time as the schools. What it comes down to is simply this: We can spend Rainy Day funds now to plug this hole, or we can spend it later. We will continue to be in this position until we fix the underlying problem. And that will never happen until we have a different Legislature. Burka, EoW, and Abby Rapoport have more.

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