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Available School Fund

School Land Board votes to transfer $300 million to Available School Fund

From the Trib:

The School Land Board voted Tuesday to release $300 million into the Available School Fund for public schools.

The money will be released in two $150 million installments, one in February and the other on June. The funds had been caught in a standoff between the Legislature and the School Land Board, which operates out of the General Land Office and oversees the state’s public school land.

A constitutional amendment proposed in 2011 by state Rep. Rob Orr, R-Burleson, allowed the board to put a portion of earnings from investments on real estate assets into the Available School Fund, which along with property and sales taxes helps pay for public education.

Voters passed the amendment last November, but the little-watched School Land Board decided not to distribute the money in July. Land Commissioner Jerry Patterson, who sits on the three-member board, said it wanted to protect the funds for upcoming investment opportunities.

“It’s the age-old question of whether you save the money to send your kids to college or borrowing when they do,” he said at a House appropriations meeting in December.

Usually the proceeds from the sale and management of public school lands would go into a $26 billion trust whose revenue feeds into the Available School Fund. Proposition 6 made it so that the School Land Board, if it chose, could bypass that step and put money directly into the fund.

Background here. Given Commissioner Patterson’s previous opposition to the transfer of these funds, I was curious how he voted, since the story didn’t specify. I sent an inquiry to his office to check, and was told that he did vote no. You can read Commissioner Patterson’s statement here, the crux of which is as follows:

Texas Land Commissioner Jerry Patterson, chairman of the board, cast the lone vote against the payment. He said the decision was frustrating because lawmakers passed a flawed budget last session that addressed short-term problems without providing a coherent long-term vision.

“We need to strive to do better,” Patterson said. “Spending down our kid’s trust fund to pay today’s bills is a path I don’t want to go down any further. Fortunately, the fund is healthy enough to protect Texas schools from one year of bad budgeting.”

I sympathize with that, but I don’t have a whole lot of optimism about better budgeting. Anyway, the money that the Lege assumed would be there after the constitutional amendment passed is now in fact there, so that’s one thing less to worry about.

Land Board throws the Lege a curveball on school finance

Oops.

In the waning days of the 82nd Legislature, state lawmakers came up with a plan to help cushion the blow of $5.4 billion in cuts to public education.

State Rep. Rob Orr, R-Burleson, proposed a constitutional amendment that he said could bring an additional $300 million to public schools. It unanimously cleared both the House and Senate. Orr’s measure became Proposition 6, which voters passed in November.

But that money has hit a roadblock on its way to public schools — and what looked like an easy fix for hard-pressed budget writers last May has turned into a headache that awaits their return in January.

The amendment allowed the School Land Board, which operates out of the General Land Office, to put a portion of earnings from investments on real estate assets into the Available School Fund, which along with property and sales taxes helps pay for public education. Last week, the little-watched board that oversees the state’s public school lands decided not to distribute the money. Commissioner Jerry Patterson, who sits on the three-member board, said it wanted to protect the funds for upcoming investment opportunities.

Usually the proceeds from the sale and management of public school lands would go into a $26 billion trust whose revenue feeds into what’s called the Available School Fund. Proposition 6 made it so the School Land Board, if it chose, could bypass that step and put money directly into the fund.

“We anticipated this funding for public education,” said Jason Embry, a spokesman for House Speaker Joe Straus, R-San Antonio. “We’re evaluating the impact on the budget and working with Commissioner Patterson to ensure there is no impact to public schools.”

Whether lawmakers should have expected the money is a matter of dispute. But the $300 million made it into the budget as part of general funds used to support school operations, contingent upon the constitutional amendment’s passage in November and the School Land Board’s approval of the transfer. During the special session last June, the Legislature added a provision to the appropriations bill that reduced general revenue funding to public education by $300 million if the amendment passed. It was to be replaced with the same amount from the Available School Fund with the board’s approval — but there was no provision to add that money back in if that didn’t happen.

“I was told that there would be $300 million going into the Available School Fund. Everything was put in place to allow to that to happen,” said Orr, who said the General Land Office agreed to transfer the money if the amendment passed. “I believe it needed to happen, so I’m not sure why it didn’t.”

Patterson said he did not recall committing to a transfer of the money and that his office had been unable to find “any evidence or documents or memos or testimony” that he did.

“I don’t have any control over what was written into the budget or what was made contingent. I don’t know who wrote that in there or why,” he said. “Somebody wrote a contingency rider assuming the answer would be yes.”

See here, here, and here for some background. If you look in the comments on those posts, you will see that Commissioner Patterson was never on board with this idea, so if the Lege was assuming that the School Land Board was going to go along with this idea, well, you know what they say about those who assume. I don’t think I realized till I read this story that the Lege had actually appropriated the $300 million based on that assumption; I must have been assuming that they would have made a supplemental appropriation at a later date once the Land Board signed off on it. Let that be a lesson to me. They’ll have to make a supplemental appropriation now, so you can add another $300 million to the Lege’s tab of unmet obligations from 2011. Good thing the Rainy Day Fund is full, because we’re really going to need it next year.

“Rather than trying a real solution to school finance they keep doing the little gimmicks and sleight of hands,” said David Bradley, the Beaumont Republican who chairs the Board of Education’s finance committee. “The Legislature is the problem. It’s totally improper for them to be pulling that kind of money out of these trust funds to use for general revenue funding.”

I hate having to agree with David Bradley, but he’s right. It’s on the Lege to fund school finance, and with the job they’ve been doing it’s no wonder we’re back in court a mere seven years after the last lawsuit was decided. I’m sure this seemed like free money to them – I admit, my first reaction was along those lines – and maybe that helped salve a bit of the guilt from having slashed $5.4 billion (and having voted to slash over $10 billion) from public education. But it was never a solution even if it did work.

House approves a little more money, Senate readies its budget

Just a little.

Texas House budget-writers voted Monday to free up an additional $3 billion for key state services through such moves as speeding up tax collections, delaying payments and suspending the back-to-school sales tax holiday.

The bills next go to the full House, which Appropriations Committee Chairman Jim Pitts, R-Waxahachie, predicted could be willing to add $4 billion to $5 billion to a bare-bones spending plan it passed earlier this month.

“I think that we can come up with that number, and I think we can still pass the bill. It’s non-tax. It’s not additional fees than what was already assumed in the introduced bill,” he said.

The proposed two-year $164.5 billion House budget would cut 12.3 percent, or $23 billion, from current state and federal spending.

It would leave school districts short nearly $8 billion of money they would get under current funding formulas; cut Medicaid reimbursement rates so much that nursing home closures are threatened; and slash college student financial aid. Extra funds could be used to soften those cuts.

It should be noted that the bulk of what the House actually did was vote to delay making payments to school districts from August to September, which pushes them into the next biennium. That “saved” $1.8 billion, and while that means it’s $1.8 billion more that can be spent this biennium, it has to be made up somewhere. If we’re lucky, revenue projections will be adjusted upward and that money can be paid back before the next Lege meets. If not, that’ll be another $1.8 billion they find themselves in the hole. This is also why school districts maintain reserves, since they know damn well that the Lege is going to do stuff like this to them.

It remains the case that the Senate is planning to spend more than the House is. The Trib documents some of the Finance Committee’s work.

The proposals from Sen. Robert Duncan, R-Lubbock, total $4.8 billion and include $2 billion in deferred payments, which help balance the budget by moving costs from the end of fiscal 2013 into the beginning of 2014. The state still has to make the payments, but not as part of the new budget. Another $1.4 billion comes from accelerated tax collections, in which the state moves the receipt of some of its taxes — on motor fuels, alcoholic beverages, corporate franchise and sales — from a later budget into an earlier one. Both maneuvers allow the state to pick which payments and which receipts will count for and against the budget they’re writing. Another $593 million comes from unspecified measures that, he said, would not require any changes in law.

The remaining $800 million comes from property sales, fee increases (on custom brokers stamps, process server certificates, a tax on small cigars labeled as a fee), changes in unclaimed property programs, and other measures.

Duncan said that all but a handful of the ideas are already in various bills being considered by the Legislature. He didn’t say whether any of the money on his list was already counted in either the House or Senate budget, or both.

The matter of moving more funds from the Permanent School Fund to the Available School Fund came up as well, though if the divided vote in favor of using it is any indication, it won’t have enough support to make into a ballot referendum. I note also that Land Commissioner Jerry Patterson, who vocally opposes using additional funds from the PSF, advocated using more of the Rainy Day Fund instead. Good for him.

Robert Miller puts the differences between the House and Senate budgets in context.

The House has passed a biennium budget spending $77.6 billion in General Revenue. House Appropriations Chairman Jim Pitts has said that he believes he sees another $4.3 to $4.5 billion in non-tax revenue the House would spend. […] Assume the House budget ultimately increases by $4.5 billion to $82.1 billion. The question is what number will it take to make a deal with the Senate in the Regular Session?

Senate Finance is scheduled to vote out its version of the budget on Thursday and take it to the Senate floor next week. I don’t know the amount of the budget, but I believe that it will be in the $85 to $87 billion range. The real gap between the Senate and House when the budget gets to conference during the first week of May is likely to be $3 to $5 billion. At this point, it is anybody’s guess whether that gap can be bridged by May 30.

All of this is without taking into account the possibility of expanded gambling, for which Texas Association of Business President and CEO Bill Hammond advocated in the Trib on Monday. That appears to be a non-starter in the Senate, but if the House passes a joint resolution, who knows? There’s still a lot that can happen. Abby Rapoport and EoW have more.

UPDATE: Per the comment left by Land Commissioner Patterson, I have clarified the post to more accurately convey his intent. My apologies for the confusion, which came directly from my own confusion about what exactly was on the table.

House moves forward on school fund money

Last week, I noted a bill filed by Rep. Rob Orr that would direct some money from the Available School Fund into the public schools. His legislation has now been approved by committee and is likely on its way to passage; this will include a Constitutional amendment that you’ll see on your ballot this November. While I said this sounded good, not everyone agreed with that assessment:

Land Commissioner Jerry Patterson, who oversees the portfolio affected by the proposal, is among those who disagreed.

“They’re going to raid the fund that was established in 1854, and put in the Constitution as a permanent endowment in 1876, instead of having the (guts) to look at the rainy day fund,” Patterson said after the House Appropriations Committee voted 24-1 for the proposed constitutional amendment and accompanying bill by Rep. Rob Orr, R-Burleson.

State Board of Education member David Bradley, R-Beaumont, last week called the proposal “insane.”

“They want to cook the goose today rather than wait for a lifetime of golden eggs tomorrow,” Bradley said.

Orr noted the fund’s size: “How much is enough? I do not believe it will hamper the fund whatsoever.”

[…]

The only “no” vote on the House committee legislation Thursday was Rep. Mike Villarreal, D-San Antonio, who said he wanted more information.

“I want to make sure that we’re not making desperate, short-term decisions that jeopardize the ability of future generations to provide for our schoolchildren,” he said.

That’s a good question, and I don’t know nearly enough to answer it. Obviously, the only truly viable fix is to actually deal with the structural deficit, and we all know that ain’t happening. If this does endanger any of these funds, then we shouldn’t be doing this. I appreciate Commissioner Patterson’s perspective, but I would like to hear it from someone who doesn’t have a direct stake in it as well. Does the Comptroller have an opinion on this, or maybe someone like Ray Perryman? We need to hear more about this.

And on a related note, the SBOE gets in the act, too.

Today, Bob Craig, R-Lubbock, delivered a letter to Gov. Rick Perry, Lt. Gov. David Dewhurst, and Speaker Joe Straus signed by nine of his colleagues on the State Board of Education. In it, he said he had found the money — $2 billion — to save approximately 40,000 teaching jobs and fully fund new instructional materials for the state’s public schools.

Its source? The Permanent School Fund.

The board manages the $23 billion fund fed by revenue from taxes and offshore oil-drilling leases and whose interest goes to pay for textbooks and basic operations in public schools. The letter urges the Legislature to pass a resolution allowing the public to vote on a constitutional amendment that would transfer $1 billion each year of the biennium to fund public education.

Six members — the board’s conservative bloc — did not sign the letter. One of them, David Bradley, R-Beaumont, called the proposal “insanity” and emphasized that letter did not represent official action from the board. “Mr. Craig is acting in a rogue capacity,” he said, adding “[He] has delivered this letter without any due deligence and has used to the board’s name as an endorsement.”

Bradley said drawing $2 billion from the fund would “have an impact for generations.”

“By spending the money today, we will not have the four billion [in interest] in seven years, or the eight billion in 15 years,” he said, “It’s extremely short sighted.”

I’m inclined to agree with Bradley on this. This isn’t what the PSF is for. I greatly appreciate the desire of these SBOE members to offset the drastic cuts to public education, but that’s got to be the Legislature’s job. The fact that it ain’t gonna happen is deeply unfortunate and will also have a long-lasting impact, but that’s a problem that will need to be addressed in the next election. Trail Blazers has more.

The House finds a few extra bucks

Where has this been all along?

State Rep. Rob Orr, R-Burleson, introduced two bills to the House Appropriations Committee that could add several million dollars to the public schools budget over the next two years.

HB 2646 proposes allowing the School Land Board to transfer at least half of the net revenue it collects from a land trust it oversees to the Available School Fund (ASF), an endowment that puts money directly into public schools in Texas. Orr said that pot of money has risen to more than $2.5 billion in market value and contains more than $1 billion in cash. If that trend continues, the fund could supply the state with an additional $500 million in the next biennium.

“I think it’s irresponsible to have that much cash sitting around when our public schools need that money,” Orr said.

Getting this measure to pass requires companion legislation, so Orr is also sponsoring HJR 109, a constitutional amendment that would allow the General Land Office, which oversees land that belongs to the Permanent School Fund, to distribute revenue directly to the ASF. The resolution would be placed before voters during the Nov. 8 election.

I’m not terribly familiar with the details of these funds, but judging by the reaction to Orr’s bills, which range from “sounds OK to me” to “praise Jeebus!”, I welcome the legislation and hope there’s more where it came from.

There’s also this.

The House’s chief champion of giving poor, elderly and disabled Texans discounts on their utility bills is so frustrated, he wants to kill a surcharge funding the program and use all unspent money as a one-time fix for gaping holes in the state’s social services budget.

“The surcharge needs to be ended. You cannot redirect it … and be honest with the people who are paying,” Rep. Sylvester Turner, D-Houston, said Thursday.

Turner reacted coolly to Senate budget chief Steve Ogden’s suggestion earlier Thursday that the fee money could help pay for Texas’ Medicaid program, presumably on a continuing basis.

“Either you end it or you rename it and call it what it is — a utility tax,” said Turner, vice chairman of House Appropriations.

This is the System Benefit Fund, which is supposed to be used for the purpose of helping the needy pay their utility bills in the summertime but which never gets appropriated for it; the sizable balance of the fund is used to certify the budget. That would be one of the usual accounting tricks the Lege is known for. I too would prefer to see the SBF used for its intended purpose, but if that isn’t going to happen, and history strongly suggests it won’t be, then putting it to use elsewhere is far better than pretending it’s general revenue so it can help balance the budget.

On a more general note, Burka examines the role that House GOP Caucus Chair Larry Taylor may play in determining how far the House will go with ideas for extra revenue. None of this stuff will matter if the slash and burn crowd decides that it’s not really about “living within our means” but about cuts for the sake of cuts.

The business lobby’s guide to balancing the budget

Bill Hammond, the president and CEO of the Texas Association of Business, pens an op-ed with his preferred approach to the budget. The main thing to note is right here:

The state has $72.2 billion available for general-purpose spending during the 2012-13 biennium, leaving a $15 billion gap from the current general revenue spending of $87 billion.

How do we close that gap?

It will take grit and courage to address the shortfall without raising taxes, creating new fees or increasing existing ones.

Difficult? Yes. Doable? Absolutely.

First, let’s hold the line on general revenue spending at its current level of $87 billion for the biennium.

Given that the Pitts and Ogden budget drafts held the line at $72.2 billion, holding it at $87 billion – the amount spent in 2009 – would be a major step forward. It’s still not good, it still doesn’t acknowledge the state’s growth, it still shortchanges education because as Hammond would have it the structural deficit caused by the property tax cut and insufficient business margins tax continues to be ignored, but it’s a hell of a lot better than what’s currently being discussed.

Hammond’s methods for closing the $15 billion gap between what we spent in 2009 and what the draft budgets propose to spend now are a bit shaky. He starts with $6 billion from the Rainy Day fund, throws in another $2.5 billion from the Available School Fund, about which I confess I know very little, and grudgingly agrees to expanded gambling, which he says would generate another billion for this biennium. From there, he suggests some savings, delaying some payments by a day to put them in the next biennium, and waves his hands at “some of the thoughtful recommendations laid out in recent days by organizations like the Texas Higher Education Coordinating Board and conservative think tanks”, none of which suggests more revenue to me. I don’t have a problem with finding legitimate savings, though my opening bid for that would be the LBB recommendations, which do include revenue ideas as well, nor would I object to an accounting trick or two as a last resort, but these suggestions are not compatible with finding enough revenue to “hold the line” at $87 billion.

I don’t want to be too critical, because to me the main point is that Hammond is moving the chains in a direction I favor and is giving the Republicans his organization supports rhetorical cover for using the Rainy Day fund. It’s not where the state needs to be, but I’m more than happy to debate how to spend $87 billion instead of how to spend $72 billion. I hope that by writing this, Hammond is acknowledging that the mainstream consensus position is not with the Pitts/Ogden budget. That by itself would mean a lot.

Hammond’s op-ed can now also be seen in the DMN and at the Trib, where it’s accompanied by counterpoints from the CPPP’s Eva de Lina Castro and Talmadge “Kick Grandma to the street” Heflin. Wonder if he feels weird being in the “center” of this debate. Burka has more.