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Foundation School Program

Property tax revenue up, school funding down

Welcome to Texas.

An early projection has Texas decreasing state funding to public education, and largely using local taxes to fill the gap.

In its preliminary budget request ahead of next year’s legislative session, the Texas Education Agency projected a drop in the state’s general revenue for public education by more than $3.5 billion over the next couple of years, in part because the revenue from local property taxes is expected to skyrocket. General revenue only makes up part of the state’s education funding.

Texas Education Commissioner Mike Morath confirmed this projection in front of a state budget panel Wednesday morning as he laid out the state agency’s budget request through 2021.

The Foundation School Program, the main way of distributing state funds to Texas public schools, includes both state general revenue and local property tax revenue. Local property values are expected to grow by about 6.8 percent each year, and existing statute requires the state to use that money first before factoring in state funding.

Just a reminder, it doesn’t have to be this way. There are lots of things that could be done differently, but they all require legislative action, not to mention state leadership. There is one thing we can all do to facilitate this kind of necessary change, and that’s to vote for candidates who want to make that happen. Start with Mike Collier, who has plenty of ideas for how to fix this mess, but don’t stop there. We have a years-long record to tell us what we’re going to get if we have the same old same old in government next year. Vote to do something different or quit complaining when you don’t get it. The Chron editorial board has more.

Texas Lottery Commission dies and is reborn

And we have our first curveball of the legislative session.

Is this the end?

The House voted Tuesday to defeat a must-pass bill reauthorizing the Texas Lottery Commission, a stunning move that casts doubt on the lottery as a whole and may potentially cost the state billions in revenue.

House Bill 2197 began as a seemingly routine proposal to continue the operations of the commission that oversees the lottery until September 2025. But opposition mounted after one lawmaker called it a tax on the poor, and the House eventually voted 82-64 to defeat the measure.

A short time after the vote, the House called an abrupt lunch recess and could reconsider the measure if any lawmaker who voted against it offers such a motion. Unless lawmakers reconsider, the commission would begin a one-year wind down, and cease to exist by Sept. 1, 2014.

“There are more members than I thought who are against the lottery and just have a psychological aversion of it,” said Rep. Rafael Anchia, D-Dallas, who sponsored the failed bill.

The state Senate has yet to consider the matter, but it can’t because the so-called “sunset bill” on the Lottery Commission initiated in the House.

For now, there’s no one to operate the lottery, which means a potential loss of $1.04 billion in annual revenue for the Permanent School Fund and $27.3 million to cities and counties from charitable bingo.

The state budget already under consideration in the Legislature has factored in the $1.04 billion — and losing the lottery proceeds would create a deficit lawmakers would need to fill.

Here’s HB2197. I think it’s fair to say no one saw this coming. Here’s more from the Trib:

During a spirited debate on the bill, state Rep. Scott Sanford, R-McKinney, got a round of applause in the House as he spoke against the bill, calling the lottery a “predatory tax” and “a tax on poor people.”

As soon as the vote was over, House leaders were already discussing possible workarounds to keep the programs going. Anchia said the House may reconsider the vote.

Texans spent $3.8 billion on lottery tickets in the 2011 fiscal year, according to the Legislative Budget Board. The majority of that was paid out to players and retailers, with $963 million transferred to the Foundation School Account. Another $8.1 million was transferred to the Texas Veterans Commission.

Anchia warned that charity groups around the state would be outraged at learning they could no longer host bingo games.

“VFW Bingo’s dead now,” Anchia said. “They’re going to have to go back to their constituents and explain why bingo is illegal.”

I don’t disagree with what Rep. Sanford says, though I wonder if he will feel the same way when the payday lending bill comes to the House floor. In the end, however, everyone sobered up after taking a lunch break.

In a 91-53 vote Tuesday afternoon, the Texas House passed House Bill 2197, continuing the the Texas Lottery Commission. An earlier vote Tuesday had failed to continue the commission.

Bill supporters spent the hour after the first vote impressing on those who voted against it the impact of cutting $2.2 billion from schools. The House Republican Caucus hastily assembled to discuss the situation.

“I think when people took a sober look at the budget dilemma that would ensue, they voted different,” said state Rep. Rafael Anchia, D-Dallas, the bill’s author.

Several lottery critics in the House saw the day’s drama as a victory, setting the stage for a more thorough debate on the lottery in the future. Public Education Chairman Jimmie Don Aycock, R-Killeen, said he originally voted “no” largely to make clear his opposition to gambling. Once that statement was made, it made more sense to back the Lottery Commission for now.

“I don’t like gambling, but I do like school funding,” Aycock said. ‘It was, for me, at least, a signal vote. I sort of anticipated I would switch that vote when I made it.”

State Rep. Lon Burnam, D-Fort Worth, said school funding was also the primary motivator for his switch.

“When you weigh principle vs a billion dollars in public ed, I set aside my principle for a billion dollars in public ed,” Burnam said. “I still hate the lottery.”

I had always wondered why they vote on bills three times in the Lege. Now I understand. Having had their fun and having made their statements of principle, if the Lege is serious about wanting to eliminate the Lottery, let’s go about it in the next session by filing a bill and letting it go through the usual committee process, mmkay? Thanks. BOR, who notes that failure to pass this bill could have led to a special session, and Texpatriate have more.

How does school finance work, anyway?

The Trib has a useful guide to this incredibly complex topic.

Here’s our layman’s guide to figuring out the current system, compiled with the help of experts at the Texas Taxpayers and Research Association, the Equity Center and the Texas Education Agency.

The state’s 1,030 traditional school districts operate with a combination of federal, local and state revenue. In the 2008-09 school year, the federal government paid $4.7 billion, the thinnest slice of the pie at 10 percent. At $20 billion, the state paid 42.9 percent of the total funding for schools, and local districts paid 47.1 percent, $22.2 billion (the state’s portion includes money “recaptured” from local property taxes; more on that later).

Most federal money comes through Title I, the law intended to help districts educate economically disadvantaged students. That money is distributed based on the number of students who qualify for free and reduced meal plans — and almost all districts in the state receive some amount of Title I funds. They can also receive specialized federal grants, including those for students with disabilities, English-language learners, preschool programs, migrant students and vocational education.

Texas allocates most state funding for schools through a mechanism called the Foundation School Program, which was created in 1949 to distribute money from the state’s Available School Fund. Now the program distributes operating funds to school districts via two streams that each contain a local and state component. A portion of state facilities funds also comes from the Foundation School Program. The Available School Fund contains earnings from something called the Permanent School Fund, which was established in 1876 and is made up of revenue from land sales, fuel taxes and leases on offshore oil lands. It also finances instructional materials and technology for schools outside of the Foundation School Program.

It goes from there, so go read the whole thing. There’s a good chance that the entire system will be overhauled this session, as the current shortfall combined with the structural deficit and some glaring inequalities in how funds are distributed have made an increasing number of people aware of its deficiencies. Abby Rapoport takes it from there.

Before 2006, the state gave money to school districts based on how much it would cost to educate students in the districts. Schools got extra money for students who were more expensive to educate, but they also got more money for other costs. For instance, small schools got extra money because, if your district only has 500 students, you can hardly take advantage of buying in bulk. The costs per student are higher. Logical enough, right? It was called funding by “formula.”

The problem in 2006 was that the formulas were out of date. The “cost of education index,” which was supposed to account for the costs of teacher salaries and other expenses, was based on data from 1989. Districts that had been rural in the ’80s were still funded that way—even if they’d become booming suburbs. The formulas didn’t offer enough money to districts. But at least the distribution of funds was based on the cost of educating students. Formula funding, which the state had used for decades, was imperfect. It made sense, though.

Sense went out the window in 2006. Updating the formulas would take time—and huge amounts of money—and it would raise all sorts of political fights between members. Rather than go for a systemic solution, the Legislature opted for what they said would be a temporary quick fix. They would add money and freeze district funding at a certain amount per average daily number of students. (They weighted the counts for expensive-to-educate students, like those who are bilingual or special needs.) Most education advocates supported reform because it offered them more state funding. There was even a modest pay raise for teachers. Districts were too desperate to sweat the long-term implications. “They hadn’t gotten any new money in a long time,” said Rep. Scott Hochberg, a Houston Democrat and the Legislature’s leading school-policy wonk. “If you’re on the side of the road and you don’t have any gas and someone comes along with half a gallon, you take it, and you go on down the road as far as you can even if it doesn’t get you to where you’re going.”

The new funding amounts, frozen at 2006 levels, quickly became irrelevant to actual costs. The amounts—now called “target revenue”—were based partially on how much a school district received in formula funding in previous years, but they also took into account how much a district could raise in its own tax base. That heavily advantaged wealthy districts. The result, five years later: While some districts get upwards of $8,000 per average attendee, others make do with less than $5,000.

“We supported the bill with the understanding that it was a first step,” said longtime education consultant Lynn Moak, whose firm, Moak Casey, represents some of the biggest school districts in the state. “We could see pretty clearly that the bill was going to have major problems in the future.”

The future turned out to be pretty near.

Again, read the whole thing.

What the funding cuts to public education will mean to your school district

Read this and see.

Summary of HB 1 (Public Education Reductions)

The House introduced its initial version of the General Appropriations Act (House Bill 1) for the 2012-13 biennium on Wednesday, January 19. While it is the first draft of the state budget with many hearings and floor debates to come, it does indicate that substantial budget reductions to public education are likely.

In addition to eliminating almost all discretionary grant programs ($1.3 billion in General Revenue over the biennium) in this first draft, HB 1, as filed, reduces the Foundation School Program by $10 billion below what was requested by the Texas Education Agency. Some of the grant programs that were eliminated in the 2012-13 biennium include: the technology allotment ($270.9 million), New IFA ($52 million), property value decline protections, ADA decline provisions ($22 million), DAEP funding, the Reading, Mathematics, and Science Initiatives ($16.1 million), the Early High School Scholarship Program ($43.2 million), the Pre-Kindergarten Grant Program ($223.3 million) , all of the grant programs funded under the Student Success Initiative ($293.2 million) , the High School Completion and Success Initiative ($86 million), the LEP Student Success Initiative ($19,4 million), the DATE program ($385.1 million), science lab grants ($35 million), middle school PE grants ($20 million), virtual school network ($20.3 million), the steroid testing program ($2 million), school bus seat belt program ($10 million), the optional extended year program ($14.1 million), teen parenting ($19.7 million), and the AP Incentive Program ($28.4 million).

I confess, I don’t know what a lot of that alphabet soup means, but it doesn’t matter. After the brief intro, which lays out three different possible ways that the $10 billion reduction might be distributed, is a table of each school district, listed by county, and the amount that it would lose under each scenario. As daunting as $10 billion sounds, seeing the individual reductions for each ISD makes it even scarier. The firm that put this together is the source of that 100,000 teacher layoff figure I keep harping on. As you see stories like these two appear over and over across the state, you’ll know where they’re coming from.