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Permanent School Fund

Who should be managing the Permanent School Fund?

It’s a good question, and I’m not sure what the best answer to it is.

Lawmakers are proposing a wide range of fixes for the state’s public school endowment, which has lost out on billions in growth during the past decade while paying out less to schoolchildren.

One bipartisan bill backed by high-powered legislators would restore the State Board of Education’s control over nearly all of the investments for the $44 billion Texas Permanent School Fund, reverting to the way it was before a 2001 law change.

Another would allow the School Land Board, which now controls about $10 billion of the endowment, to double the amount it can send annually directly to schools — up to $600 million. Yet another would take most of the money away from the feuding boards and create a new nine-member governing body appointed by the governor to decide how the endowment invests and distributes its dollars.

[…]

A key point in the debate is which governing body should have the authority to retain and invest the state’s oil and gas royalty revenue from leases on state land. Until 2001, the land board collected the money and sent it passively along to the education board to invest. But a law passed that year allowed the land board to retain the money and invest it.

A series of law changes and constitutional amendments since has changed the way money is sent to schools. The education board was tasked with setting a distribution rate based on a complex formula that, in part, depends on how much money it receives from the land board. Lawmakers also authorized the land board to send up to $300 million per year directly to schools, instead of to the education board, but it has no requirement to do so.

The changes created a serious governance issue, said Sen. Kirk Watson, an Austin Democrat who has introduced a bill that would return the royalty revenue to the education board to invest. That bill has the backing of five Republican Senate committee chairs. Republican Rep. Ken King has filed identical legislation in the House.

It also is supported by the education board’s chairwoman, Donna Bahorich, who said it aims to “permanently and efficiently fix the decision-making structure that affects the performance, distributions and expenses. Consolidation of the two pieces of the Permanent School Fund into one decision-making structure would be for the benefit of putting more money to work for the school children.”

See here and here for some background, and here for the Chron’s “Broken Trust” series, which uncovered a lot of these problems. The Land Board has had the worse performance, but the SBOE’s management isn’t perfect, and it was just ten years ago that there were proposals to take PSF management away from the SBOE. At some level, I don’t care who manages the PSF. What I do care about is ensuring accountability and maximizing returns. What are the best practices – what do other institutions that manage similar endowments do, for example – and what are the gaps that need to be addressed? That’s what I want us to focus on.

No more PSF investing for you, Land Board

Seems worth considering.

Austin Lawmakers filed bills this week that would strip the School Land Board of its ability to invest billions of dollars on behalf of Texas schoolchildren.

The bipartisan legislation, submitted Wednesday, comes amid mounting scrutiny over the management of the $44 billion Permanent School Fund, which is run jointly by the land board and the State Board of Education. The two boards are the subject of a yearlong Houston Chronicle investigation that began publishing Sunday, which found that the fund has lost out on as much as $12 billion in revenue, fueled by anemic returns, skyrocketing fees and questionable investment deals.

At the same time, students in Texas have received less annually from the endowment over the past decade, in real dollars, than they did in the two decades prior, even as the overall size of the fund has swelled.

The land board’s role has been especially contentious. It manages its portion of the portfolio — now at $10 billion — by collecting the state’s oil and gas royalty revenues and investing them, primarily in private equity. The land board has only three members, often meets behind closed doors, and since 2006 has committed or invested nearly $3.7 billion with companies run by friends, business associates or campaign donors.

The bills would end that, revoking the land board’s investment power and returning it entirely to the education board. It would still gather fees from royalties, but pass them straight on to the education board.

Consolidating the two will “put more money to work for the benefit of our schoolchildren,” Sen. Kirk Watson, an Austin Democrat who is leading the effort, said in a statement. “The legislature created this flawed structure, and it’s time we fixed it.”

Five Republican Senate committee chairs have signed on to the legislation, including Jane Nelson, Brian Birdwell, Paul Bettencourt, Dawn Buckingham and Bob Hall. Republican Rep. Ken King has filed identical legislation in the House.

See here for the background, and here for the full series published by the Chron. The SBOE had full responsibility for the PSF until 2001, so this would revert things to the earlier setup. Not that the SBOE has been a perfect steward of the PSF, but they’ve been a little better than the Land Board. I would not object to an overall higher level of scrutiny on the whole process. This is at least a step in the right direction.

In a statement, Land Commissioner George P. Bush called the proposal a “power grab.” He said he welcomes reforms, but only if they’re based upon sound financial expertise.

“Without expert evaluation, the school children of Texas stand to lose,” he said.

Bush, who oversees the land board, said after a meeting on Tuesday that he had not read the Chronicle’s reporting and didn’t plan to.

“I’m trying a new strategy in 2019 by not reading my media,” he said. He said his office would review the series’ findings and follow up later.

Remember when George P. Bush was the fresh new exciting face of the Texas GOP? Boy, those were the days.

What’s wrong with the Permanent School Fund?

For starters, it should have more money in it.

It was a grand promise, one our forefathers made 165 years ago to all Texas children, to theirs and ours and those not yet born.

With $2 million and the state’s most abundant and precious resource — its land — they created the Texas Permanent School Fund to forever support public education. It was called a “sacred trust.”

That trust, dedicated to K-12 schools, is now valued at $44 billion, bigger than even Harvard University’s endowment.

It is also broken.

The Permanent School Fund has failed to match the performance of peer endowments, missing out on as much as $12 billion in growth and amassing a risky asset allocation, a yearlong Houston Chronicle investigation reveals.

Outside fund managers have charged the endowment at least a billion dollars in fees during the past decade, records show. Some of them have had professional or personal relationships with Texas School Land Board members, who govern a portion of the fund.

And, critically, the fund is sending less money to schools than it did decades ago, in real dollars. The amount dropped to an average of $986 million annually over the past decade from an average of $1.14 billion in the previous 20 years, in inflation-adjusted dollars. Last year, the fund distributed only 2.8 percent of its value — roughly half the share paid out by many endowments.

That decline, coupled with a 2 million increase in the number of students over 30 years, has slashed the fund’s per-student distribution.

Per student, the fund has paid an average of $207 annually over the past decade compared with $322, adjusted for inflation, over the prior two decades, a drop of more than one-third.

According to the Congressional Research Service, between 1998 and 2017, the average payout from higher education endowments has ranged between 4.2 percent and 5.1 percent. If the Texas fund paid out 5 percent of a four-year average market value, as many endowments try to, Texas schools would have received $720 million more in 2018.

That’s the opening of part one of a promised four-part series. Here’s part two, in which we find that however the fund is doing, the fund managers are doing great.

Since the land board started investing with outside fund managers on behalf of the state’s K-12 endowment in 2006, it has committed or invested nearly $3.7 billion with companies run by friends, business associates or campaign donors.

Those donors together have given more than $1.4 million since 2006 to board members or elected officials with the power to appoint them, a Houston Chronicle investigation reveals.

And they’ve since charged the fund more than $218 million in fees, records show.

While the fees climbed during the past decade, the amount of money the $44 billion Texas Permanent School Fund sends to schools has declined, in real dollars, compared with the two decades prior.

Rep. Donna Howard, a Democrat from Austin, said it’s time to reassess how the school fund is managed.

“Without the right oversight, the PSF is ripe for conflicts of interest,” she said. “We have a responsibility for due diligence here.”

Read the rest, and come back for parts three and four. A better-managed PSF would not solve school finance by itself, but it sure would help. Seems like this is a prime opportunity for some high-profile legislation to improve how this works.

The Land Office in the news

Please enjoy this coverage of a downballot statewide race, which is not something we get all that much of.

Jerry Patterson

Incumbent George P. Bush, the 41-year-old grandson and nephew of U.S. presidents, is facing off against his outspoken predecessor Jerry Patterson, 71, who wants his old job back after leaving it to unsuccessfully run for lieutenant governor.

Despite its low profile, the land commissioner has one of the state’s most critical jobs, especially now as hundreds of communities, including Houston, continue to recover in the aftermath of Hurricane Harvey.

“The (governor), the lieutenant governor and other statewide elected officials, including the land commissioner, are important positions because they touch so many lives,” said David Dewhurst, who served as the land commissioner from 1999 to 2003.

The Texas land commissioner is responsible for cleaning up oil spills in the Gulf of Mexico, raising money for schools, preserving the state’s most iconic landmark, doling out benefits to veterans and helping communities recover from a natural disaster.

“Our land commissioner oversees extensive programs that benefit our veterans, and our oil and gas activities, which are important to provide more funding for public education, particularly when the Legislature has not been as aggressive as it has in the past to provide funding for public schools,” Dewhurst said.

[…]

Tex Morgan, who is running as a Democrat, said that if elected he’ll work to increase awareness about the land office’s duties.

“Too few Texans know the scope or depth of the GLO’s responsibilities, programs and opportunities,” Morgan, 31, said.

[…]

Miguel Suazo, a Democrat on the primary ballot, has repeatedly called out Bush for not demanding that the state tap its rainy day fund, which has about $10 billion available for budget emergencies.

In a January interview with the Bryan-College Station Eagle, Bush expressed support for calling a special session so that the state could provide more money for Harvey relief. A few days after the interview was published, Bush walked back the statement saying he “misspoke.”

Gov. Greg Abbott has said calling a special session is unnecessary.

“I agree that calling a special session is not necessary,” Bush said. “I will continue to work under Gov. Abbott’s leadership as we help Texans throughout the hurricane recovery process.”

Since recovery efforts began, Bush has said the land office is at the mercy of the Federal Emergency Management Agency, which determines eligibility for the recovery programs and distributes the funds.

Bush has three primary opponents, of whom his predecessor Jerry Patterson would appear to be his biggest threat. I feel like he’ll probably win, but let’s remember, Baby Bush was the top votegetter in the state among Republicans with Democratic opponents in 2014. He toyed with the idea of running for Governor before “settling” on the Land Office while he built his resume and bided his time till the old farts got out of his way and he could ascend to the throne vie for the top spot. He was a rising star, the half-Latino face of the Republican future, and now he could actually fail to win re-nomination. The fact that he has non-token opposition at all is remarkable.

(Oh, and also, too: Secret mansions financed by undisclosed loans. I mean, seriously?)

On the Democratic side, Suazo was the first candidate in, while Morgan filed at the last minute. They both look all right, though at this point I don’t know enough about them to make a choice yet. This is one of those races where I’ll probably let myself be guided by endorsements more than anything else. If you have a strong feeling about either Suazo or Morgan, leave a comment and let us know.

Two school finance stories

Tough times in the oil patch mean tough times for school districts in the oil patch.

The U.S. shale boom flooded the state’s public schools with a gusher of cash, but that windfall is disappearing nearly as fast as it arrived, making some newly wealthy districts nervous about their financial outlook amid a crude slump that shows no signs of rebounding soon.

The drilling frenzy caused property tax values to skyrocket in recent years. Mineral-related revenue accounted for about $1.5 billion in school district property tax revenue for the 2014 fiscal year that ended Sept. 30, 2014, according to a new analysis by North Texans for Natural Gas, a loose coalition supporting gas development in the Barnett Shale region.

In addition to property taxes, oil and gas production raised about $676 million for the Permanent School Fund, the state’s education endowment for school districts, and boosted the Foundation School Fund, the primary source of state aid for Texas districts, by more than $1 billion in the 2015 fiscal year, the analysis found.

But the collapse in crude prices over the past year has triggered a slowdown in the oil patch, and many of the districts that reaped large financial rewards from the heady days of $100 a barrel oil are bracing for a decline in their tax bases.

“We don’t have the revenue coming in like we did,” said June Russell, business manager at Grady Independent School District, a one-campus school system 30 miles north of Midland.

[…]

For some school districts that struck it rich in the oil boom, the bounty was short-lived. Under the state’s school financing formula, wealthy districts have to send some of their revenue to the state to be distributed among poorer districts in a system commonly called Robin Hood.

That means a year of fiscal prosperity in a district can trigger a transfer to other districts in a subsequent year.

“The way our equalized funding works, you may get a really good bump one year and you do get some benefit from that, but the following year the state catches up and the excess gets reined in,” said Daniel Casey, partner at Moak, Casey & Associates, a consulting firm that specializes in school finance. “Typically it’s great on the way up, but it’s more challenging on the way down.”

That’s because it’s possible to pay more under recapture than the district had raked in during the fat times. Be that as it may, this is a prime exhibit of why Texas’ school finance system, which relies so heavily on local property taxes. Some school districts wind up way better off than others, and some have incredibly varying finances based on the price of a global commodity. One lawsuit after another has failed to generate a workable solution – “recapture” refers to the so-called “Robin Hood” system of reallocating funds from property-rich districts to property-poor ones, which dates back to the 80s – mostly because the Legislature has never been able to come up with a system that is more dependent on state funds rather than local ones and which treats districts more by need than by whatever it is the current system does. Maybe this latest lawsuit will finally allow for a more substantive fix, because Lord knows this Lege ain’t coming up with one on its own.

Story #2 has more fodder for the charter school debate.

But a new report from one of the state’s leading school finance experts shows that many charters — particularly the state’s largest charter networks — get more state funding, not less, than traditional schools. The report, from education consulting firm Moak, Casey and Associates, says Texas generally sends more money to large charter schools — those with more than 1,000 students — than to similarly sized traditional public schools. If school districts “were funded like charters,” the report says, public schools would cost the state more than $4.7 billion a year extra.

Charter schools have experienced explosive growth over the last decade. There are more than 600 in Texas today, including some of the nation’s best-known charter networks: KIPP, Uplift, IDEA, Harmony, and Yes Prep. Charter proponents often argue that the schools are models of efficiency, achieving better academic results — higher test scores and graduation rates — than traditional public schools while costing the state less money.

But the Moak report concludes that state funding for large charters is inflated because of what Texas calls the “adjusted allotment.” School districts receive state funding based on a $5,140 per student allotment each school year. That allotment is then adjusted based on certain characteristics, including district size and differences in teacher salaries across the state. Smaller districts have a higher per-student allotment than larger districts.

Charter schools get a per-student allotment based on the average of what traditional public schools receive. The higher allotment for small traditional schools inflates the average, and as a result, large charter schools get more per student than traditional schools of the same size.

School finance expert and former University of Houston economist Larry Toenjes told the Observer he thinks the report’s findings are solid. “Charters argue that they receive $1,000 less per student than public schools. You hear it all the time,” Toenjes said. “But when it comes to Texas’ largest charter schools, they’re wrong.”

The Texas Charter School Association disputes that assertion, and it should be noted that Moak, Casey is on the side of the public schools in the ongoing litigation. I haven’t had a chance to read the report myself, so I can’t say more about it than this. The point is that arguments about charters and public schools aren’t binary. They’re comparing ranges, and some parts of each range don’t match up with the rest of it. Just something to keep in mind.

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.

SBOE passes anti-voucher resolution

Good for them.

The Texas State Board of Education voted 10-5 on Friday to urge the Legislature to reject proposals that would result in public funds being allocated for private educational institutions.

The resolution, authored by Board of Education member Ruben Cortez, Jr., D-Brownsville, asks the legislature to “reject all vouchers, taxpayer savings grants, tax credits, or any other mechanisms that have the effect of reducing funding to public schools.” It mirrored an amendment the House recently passed to the state budget by a wide margin banning the use of public dollars for private schools.

[…]

Though the resolution eventually passed, it initially endured stiff opposition from a number of board members – including some who said the issue was outside of the board’s purview.

Member Tom Maynard, R-Georgetown, while stressing that he was a “huge supporter” of public schools, said that the board should leave the issue to the legislature.

“I get the voucher question all the time. And my position is, this isn’t a matter for the SBoE,” he said. “This resolution puts us in a position of commenting on things that are not within our constitutional authority.”

Maynard moved to postpone the resolution indefinitely, which provoked a debate about the role of the State Board in evaluating education policy. Member Marisa B. Perez, D-San Antonio, argued that the issue was central to the Board’s responsibilities.

“Saying that it doesn’t fall under our guise is not an acceptable answer to the teachers who are asking for our support,” she said. “Siphoning money from our public schools and turning them over to our private schools is definitely something we should address.”

The question about going outside the board’s duties is a valid one. The SBOE doesn’t have budgetary authority, but they do play a role in school finance as the trustees of the Permanent School Fund. I don’t have a problem with them passing a non-binding resolution, but I admit I’d feel differently if they had voted in favor of vouchers. I wonder if they were motivated in part to take this action by getting their noses out of joint over their potential loss of charter school oversight.

Only one of the board members explicitly endorsed the proposals condemned in the resolution – Geraldine “Tincy” Miller, R-Dallas.

“I believe in the American right to educate my children in the manner that I want,” she said. In addition to Miller and Mercer, other board members that voted against the resolution were chairwoman Barbara Cargill, R-The Woodlands, Donna Bahorich, R-Houston, and David Bradley, R-Beaumont.

Yes, of course my SBOE member supported vouchers, even though she once said she wouldn’t. Don’t blame me, I voted for Traci Jensen. Hair Balls has more.

Patrick teases his school choice proposals

He doesn’t want to call it “vouchers”, but if it walks like a duck…

“If there’s one message that I want to send, it’s that I want to champion public education,” said Patrick, the new chairman of the Senate Public Education Committee.

Whether the education community is ready to embrace Patrick in that role is another matter.

Through his chairmanship and a recent alliance with Lt. Gov. David Dewhurst, he has the powerful platform he once lacked. His ambitions are pinned on expanding school choice in the state’s public education system. The plan is expected to include vouchers for private schools, a policy previously opposed by every major education association in the state and many within his own party.

Patrick declined to discuss the details of his proposal, which he said he intended to announce before Thanksgiving along with Dewhurst. But he said the legislation would be broader than many might think.

“When people attack me on vouchers, I look at the word voucher as some people see it like I look at a rotary telephone. It’s outdated,” he said. “When we talk about choice today, it’s the choice to choose schools within a district, potentially across district lines. It’s charter schools. It’s virtual schools. It’s online learning. It’s the secular and religious schools in the private sector.”

I suppose anything is possible, but I sure don’t see much in Patrick’s record to support a claim of championing public education. Patrick has relentlessly championed property tax cuts, which has directly led to the funding crisis the state faces today, and public education bore the brunt of that last session. You can’t champion public education without championing a sufficient revenue stream for public education.

But that’s an argument that isn’t going to be resolved any time soon. I want to examine the bits of policy Patrick mentions. Let’s take them one at a time.

– “When we talk about choice today, it’s the choice to choose schools within a district, potentially across district lines.” I don’t know how it is in other districts, but in HISD we already have a fair amount of freedom to pick a school. There may be an application process and some prerequisites to qualify for a specific school, and you may not get your preferred choice, but that’s life. As long as the schools have the resources they need to handle the demand for their services, I have no problems at all with this. As for attending a school in a different district, I’d need to know more. I don’t have any philosophical objections to this, but I am concerned about how the funding would work. If I decide I want to send my kids to, say, Clements High School in Fort Bend County, I’d be sending them to a school whose district doesn’t get the benefit of my property taxes. What mechanism would there be to ensure that districts don’t get swamped by kids outside their borders, and to ensure they can handle the load they do get?

– “It’s charter schools.” I don’t have any problems with the idea of helping out charter schools, but we need to be very clear about what that means, because there are acceptable ways of doing that and there are bad ways of doing that. The previously-floated idea of using the Permanent School Fund as a source for building capital for charter schools is a bad idea, since it runs counter to the stated purpose of the PSF, which is supposed to be invested for maximal return. Shifting funds from public schools to charter schools in a zero-sum fashion is a bad idea. If Patrick wants to find a suitable and stable funding source for charter schools, I’m open to that. Let me hear the details and we can go from there.

– “It’s virtual schools. It’s online learning.” I am deeply skeptical of this. This sounds more like buzzwords than proven craft. While there is value in online learning as a supplement, and a virtual classroom is better than none, I think we’re a long way away from this being the best way to go about doing education. My feeling is that this is the sort of thing that will be pushed as a way to cut costs, without regard to effectiveness. I’m very wary of anything that falls under this classification.

– “It’s the secular and religious schools in the private sector.” And to this I say No. I refer to what Ronald Trowbridge wrote for my opening position. I believe this is an inappropriate use of public funds, and as we have already seen, there are plenty of other ways to promote “school choice” that don’t involve private schools. Let’s talk about those things and see what we can do with them.

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.

What next for Sugar Land prison property?

Now that the Central Unit in Sugar Land has been closed, what will happen to the empty facility?

The fate of the Central Unit site will be decided by the three-member School Land Board, which oversees real estate investments on behalf of the $26 billion Permanent University Fund.

The board is chaired by Texas General Land Office Commissioner Jerry Patterson.

“Our staff is going to look at the land value – the property minus the structure,” land office spokesman Jim Suydam said. “We’ll look at historical considerations and access considerations. It’ll probably be a year before anything happens.”

Sugar Land city officials hope to develop the property to support the Sugar Land Business Park, which is near capacity, city spokesman Doug Adolph said.

[…]

The final decision about the property, however, will be up to the School Land Board. The prison system still owns the property, said Suydam, and the land board could either buy it or serve as a broker to sell it to another party.

Sugar Land city officials hope they get the opportunity to buy the property.

One way or another, you can be certain it will look very different in a few years’ time. That should be good for everyone.

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.

So what is the point of the SBOE, anyway?

Here’s another story about the difficulties of SBOE redistricting, and it’s got me wondering why we bother having an elected body called the State Board of Education.

This legislative session, lawmakers are working on redrawing the 15 districts based on new census data — released every 10 years — but a rise in population has made the task difficult and left some pushing to enlarge the board.

State Rep. Burt Solomons, a Carrollton Republican who heads the House Redistricting Committee, said that by the time the next census is done, some members will represent more than 2 million people.

“That’s unreasonable,” Solomons said.

Solomons said in drawing the new map, which was approved by his committee this month and is waiting to be brought before the House for a vote, it became clear that there is a problem as the population continues to grow.

He said he plans to ask House Speaker Joe Straus to take a look at restructuring the board after the session.

“There needs to be some resolution before the next census,” Solomons said.

His push to restructure the board has drawn support from both Democrats and Republicans.

State Rep. Donna Howard, an Austin Democrat who ran for a spot on the board twice, said its districts are twice the size of congressional districts.

“Nobody knows who their State Board of Education member is unless they’re in the news for misbehaving,” Howard said.

My SBOE member is Terri Leo, who happens to represent one of the smallest geographic districts. I know she’s my SBOE member because it says I’m in SBOE6 on my voter registration card. I also know that at least in the last decade, I’ve never received any form of communication from her about what she or the Board are doing or how I can give her feedback. You’ll note there’s nothing on her rather primitive website for any of that, either. You can make a contribution, however, and you can marvel at the fact that her own website misspells her name (see where it says “What people are saying about Terry”?). Way to set a good example, Terri!

Well, maybe that’s just Terri Leo. Maybe Charlie Garza has a legitimate complaint about how much driving he’d have to do to meet his constituents, and maybe Donna Howard is right about knowing your SBOE member. The problem I have with this thinking is that whatever the merits or demerits of a 15-member Board, we can’t expand it enough to make the geography less of an issue. There are 31 State Senators, and some of them have massive, multi-county districts, too. Hell, so do some of the 150 State Reps. I’m certainly open to the idea of expanding the SBOE if by doing so we can make it more diverse, but if you’ll pardon the expression, the geography issue is too big to solve by this method.

Which leads to my question: Why do we need geographic representation on the SBOE? How are the issues that the SBOE deals with – curriculum standards and management of the Permanent School Fund – different for people in El Paso and Houston? The geographic representation we have now is a joke anyway. My urban neighborhood is stuck in Terri Leo’s far-flung suburban district; because of this pairing and the GOP’s partisan needs, Leo is (and has been in the past) the only person who will be on my ballot next year that is both subject to the redistricting process and a Republican. Travis County, as always, is split apart to ensure only Republicans represent it. I might be more sympathetic if these districts made geographic sense, but they don’t. Given all of the other issues, why do we even bother?

If we must have a State Board of Education, I don’t see how we’d be any worse off with an all-appointed board that was subject to some diversity requirements as well as Senate oversight. Really, given that curriculum expertise and fund management are not skill sets that necessarily go together, it would make more sense to dissolve the SBOE, put the curriculum function into the Texas Education Agency, and create a separate board to manage the PSF. Or forget the TEA, create a separate entity for curriculum oversight like the appointed body I mentioned before. Tell me how this would be less representative or less competent than what we have now.

I don’t think any of that is likely to happen, now or in the future. I won’t be surprised if there’s enough momentum for expanding the Board, to maybe 21 members or some such, to get on the agenda in the future. That may allow for some diversity, which is all to the good, but at best it will make a small and temporary dent in the district size problem. I say it’s better to give up on that and think outside the box. What do you think?

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.

SBOE wants its new textbooks

But it may not get them.

State board members are growing increasingly anxious that lawmakers might not provide funding for new textbooks and instructional material – even though they’re giving the Legislature $1.9 billion from a 157-year-old endowment established to help schools, including providing free textbooks for students.

Board member David Bradley, R-Beaumont, warns that students won’t be able to handle tougher school accountability tests without updated instructional materials.

“It’s a moral imperative that you provide the proper instructional material,” Bradley said this week in an effort to focus attention on the conflict.

A unified board insists that lawmakers spend $500 million on textbooks and instructional material for biology, chemistry and physics in high school, and for English language arts and reading in lower grades, Bradley said.

“This is non-negotiable,” he said.

Some legislative leaders, however, question the wisdom of buying new textbooks when schools face up to $11 billion in budget cuts.

“Right now it doesn’t make a lot of sense to spend money on textbooks and then fire the teachers who would be using the textbooks,” said Rep. Scott Hochberg, D-Houston, vice chair of the House Public Education Committee and school finance expert on the Appropriations Committee.

Personally, I think Hochberg has the better argument here, and with the SBOE being short on friends these days, it’s not clear how they will overcome it. Sure, the new STAAR tests will require new materials, but we can always push back the implementation date on that. Given all the other upheaval that schools and school districts will be facing, that seems like the obvious thing to do. It hasn’t sunk in yet with Senate Education Committee Chair Sen. Florence Shapiro yet, though, as she insists there will be at last $400 million spent on new texts. Something will have to give, that much is for sure. Martha has more.

Still going through the couch cushions

The Senate is looking for funds wherever it can find them.

Hoping to cushion the impact of proposed state budget cuts to public education and health care, Lt. Gov. David Dewhurst said Wednesday that a special subcommittee will be named Monday to find $5 billion in nontax revenue for use in the next two-year budget cycle.

State Sen. Robert Duncan, R-Lubbock, will head the effort to identify alternative methods of balancing the budget through the sale of state property and financial management tools, like making greater use of some state investments.

“Texans have a lower threshold for taxes as a percent of income than residents of other states,” Dewhurst said in an interview. At the same time, he noted that lawmakers are struggling to adequately provide essential services to Texas’ growing population and that additional revenues may be necessary.

Dewhurst said he believes the Legislature might be able to squeeze more money out of real estate investments and the Permanent School Fund, comprising mineral royalties from state-owned lands. Sale of unused state lands might also help bridge the budget gap, he said.

Duncan said the seven-member committee would examine “all state revenue streams in a robust and open way. It is going to be comprehensive.”

“We will look at everything — inside the treasury and outside,” he said. “A fiscal crisis like we are having is not fun but it allows us to evaluate everything. Are there funds that are just sitting there and are not efficient?”

Duncan declined to say specifically whether university investments or school district reserves would be under review, saying only “everything is on the table.”

“I don’t see any low-hanging fruit. It is a tough job,” he said.

I’m delighted to see them make this effort, and to see them set a target for revenue (unlike the House, which will be happy with whatever it comes up with) even if the level is too low. Recognizing that what we have is completely inadequate for what we need to do is encouraging, even if it will fall short. What’s not encouraging is the continued avoidance of acknowledging the underlying problem.

“I’m glad the lieutenant governor is doing this. Desperation requires you to get creative,” said Sen. Leticia Van de Putte, D-San Antonio. But she added that the Legislature was dodging the real source of the state’s fiscal problem — a 2006 tax-swap scheme that led to declining revenues. “The cure is you’ve got to fix the margins tax (imposed on businesses to lower property taxes in 2006.)”

I suppose the optimistic reading of this is that they have to exhaust every other possibility first before they are willing and able to face the facts. Some of them may reach that realization before others.

How hard will it be to keep Senate Republicans, much less Senate Democrats , in line behind a two-year budget that cuts far, far more deeply than the one passed in 2003? For the past 48 hours, lobbyists and social services advocates have been pointing to remarks Tuesday morning by Sen. Kevin Eltife, R-Tyler, as proof it’ll be cussedly difficult.

“We’re playing a game here with people, and I’m not going to be a part of it,” Eltife said at a meeting of the subpanel of Senate Finance Committee that’s chopping Medicaid and social programs.

“I just can’t,” he said, spurning appeals by Subcommittee Chairwoman Jane Nelson, R-Flower Mound, for senators to “start making decisions” on whether to stand by cuts in GOP leaders’ initial budgets.

[…]

After describing the process as a game, he added, “I can’t sit here and decide that I’m going to pend the blind children’s program. I think they’re all priorities.”

Yes they are, and the more people that come to realize it, the better. But as long as we’re in Rick Perry’s world, I don’t know how much it will matter. All I can say is that I have to hope for better. EoW has more.

What to do with the SBOE?

The Lege has many ideas about what to do with the state’s most embarrassing branch of government, some of which are better than others.

State Rep. Roberto Alonzo (D-Dallas), wants the SBOE abolished under his House Bill 881 and all the board’s responsibilities directed to the Texas Education Agency and the commissioner of education. The 26-page piece of legislation transfers each of the board’s entrusted functions to the TEA and commissioner. Similarly, state Rep. José Menéndez (R-San Antonio) has proposed a constitutional amendment to dissolve the SBOE and create the Texas Education Commission in its stead. According to House Joint Resolution 91, the governor would appoint the new 15-member TEC from populous and rural areas. Members would also be required to have at least a decade of education or business experience.

I can’t say that I support either of these bills. The SBOE is awful, but I don’t see how converting them all to Governor’s appointees helps. The Governor has enough power, and I’d feel the same way with a different Governor as well.

State Rep. Donna Howard (D-Austin), a vocal critic of the SBOE’s social conservative bloc’s politicking and author of SBOE-related legislation, also opposes eradicating the board altogether. Rather, Howard supports milder legislation proposed by state Rep. Diane Patrick (R-Arlington) that would place the SBOE under Sunset Advisory review. Patrick’s HB 862 makes clear the board would not be at risk of being abolished.

Patrick specifically points out that the audit process is not intended for the sole purpose of reducing costs or abolishment, but instead aims to identify inefficient processes and streamline functions. She does not attribute her proposed legislation to the myriad of political and ideological accusations leveled at the board; instead she sees the bill as a means to eliminate redundancy across governmental entities

“In seeking reductions in state spending, it is prudent to examine functions and establish efficiencies within the State Board for Educator Certification and the State Board of Education at the same time the Texas Education Agency is under review in 2013,” Patrick said in an e-mail.

Here’s HB 862. This is an approach I could support, though I’d like to know more about what the sunset process would actually mean for the SBOE. In theory at least, I like this idea.

Former education committee member Howard has filed two SBOE bills; one that would strip the board of its authority to manage the multibillion Permanent School Fund and another that would require SBOE elections to be nonpartisan, just as local school board elections are.

“It’s important to look at the overall situation, not just have some kind of kneejerk response,” Howard said. “In regards to the PSF fund bill, it’s not about punishing the SBOE. It’s not about politics or ideology. It’s about making rational, reasonable decisions about how we should oversee public education in Texas in order to prepare our students for a 21st century economy.”

Legislation for the former proposal are HJR 85 and HB 1140, and HB 553 for the latter. As with judicial elections, I do not understand the allure of erasing the partisan identity of the candidates. It’s not like the interest groups that support the candidates would go away or be unaware of what colors an individual candidate is flying. All it will do is make the average voter less able to tell anything about them. I just don’t see how this makes a positive difference. I’m inclined to support the removal of PSF management from the SBOE – it seems like a misfit for a board that’s supposed to design curricula – but again, I’d like to know more about it first, and I’m leery of anything that would rely on gubernatorial appointments.

Conversely, some lawmakers hope to grant the SBOE even more power over education this legislative session. As previously reported by the Texas Independent, state Rep. Fred Brown (R-Bryan) proposes eliminating the Texas Higher Education Coordinating Board and transferring the board’s functions to TEA, which deals with K-12 public education. Under Brown’s HB 104, the SBOE would oversee the newly formed entity, instilling the 15-member board with a greater scope of authority. The lawmaker characterizes the bill as a way to streamline the state’s education process while also conserving the budget.

“They are smart people,” said Brown, who has no reservations about handing the controversial SBOE more influence than ever before. “They have to have a passion for what they do, or else they wouldn’t run for office in first place.”

Fred Brown is the same guy who’s pushing school district consolidation, in case that affects your opinion of it. I for one see no reason to expand the SBOE’s scope or powers in any way.

No clue what the odds of any of these bills are, but they’re out there so we should keep an eye on them. What do you think about these proposals?

More charter school stuff

Now that you’ve listened to my interview with Chris Barbic, here are a couple more charter school-related articles of interest. First, from the Trib, a story about charter schools getting help for facilities from the Permanent School Fund.

Fledgling charter schools, like any other start-up business, have difficulty establishing credit. Because the schools must renew their charter with the state every five years, banks can view them as a risky investment, said Cinnamon Henley, executive director of the Austin Discovery School, a charter that opened in 2005.

Without access to financing for buying or building new facilities, charters are subject to the whims of the rental market, which can make budgetary planning difficult.

Some state lawmakers are pushing to change that with legislation allowing some charter schools to be eligible to access the Permanent School Fund.

Proceeds from several sources — including revenue from taxes and offshore oil-drilling leases — go into the $23 billion fund, which is managed by the State Board of Education. Interest from the fund feeds the Available School Fund, which helps pay for public school textbooks.

The proposal to expand access to the fund has prominent backers, including state Sen. Florence Shapiro, R-Plano and chairwoman of the Senate Education Committee, who introduced the legislation. Her House counterpart, Rep. Rob Eissler, R-The Woodlands and chairman of the Public Education Committee, filed a companion bill last week.

Not everyone is on board: Traditional school districts do not like the idea. The Texas Association of School Boards opposes opening the bond guarantee program to charters, said Dax Gonzalez, a spokesman for the association, adding that charter schools are generally deemed to be poor credit risks.

“We’ve had around 280 charters awarded over the last few years,” Gonzalez said. “Out of those, 71 are no longer operating anymore. That’s about a quarter of charters that have been abandoned or closed down. That doesn’t show that they are going to be around for the state to recoup their investment.”

I’ve discussed this before, and my feelings haven’t changed. I don’t think the PSF is the right vehicle for this, because I don’t think it’s a sufficiently sound investment on the state’s part. There should be a way for charter schools with a good business plan and/or a track record of success to get state resources for facilities, but it should be created and funded by the Legislature. If that gives some charter school supporters in the Lege heartburn because of the budget crunch, that’s just too bad. If you want this to happen, you can find or create a revenue stream for it.

We also have this op-ed from the Sunday Chron about why Houston is such a hotbed for quality charter schools. The three people referenced are Soner Tarim, founder of the Harmony schools, Mike Feinberg of KIPP, and Barbic.

Houston’s charter school sector, which accounts for a rapidly growing 16 percent of public school enrollment, is among the biggest in the nation, and almost certainly the best. So why does Houston host three great charter chains, along with what may be the best urban school system in the nation? I recently asked Tarim, Feinberg and Barbic, and got answers that would not surprise any student of entrepreneurship. Just like Silicon Valley, Houston’s education miracle shows the importance of entrepreneurs, capital, transparency and political leadership favorable to competition.

To start with, entrepreneurs see a need, and as Soner Tarim points out, with a rapidly growing and increasingly low-income student population, “there was such a need.” But there was also great talent. Houston has attracted entrepreneurial educators from across the globe, many, like Tarim, drawn by the University of Houston, Rice and nearby Texas A&M. Other educational entrepreneurs were not new to the country, but were new to Houston. Feinberg, Levin and Barbic were among an army of young, idealistic TFA corps members from out of state drawn to Houston to save urban schooling. Houston has the nation’s largest TFA chapter. Unlike many cities, Houston welcomed TFA rather than seeing corps members as taking jobs from locals.

So what makes Houston different? First, the Houston Federation of Teachers never had the power to keep out TFA or hamstring KIPP and other charters. But that still left a bureaucracy, which, as Jay Mathews writes, resented KIPP’s notoriety and success. Before KIPP became a charter, the Houston Independent School District central office investigated KIPP, and at one point reassigned its classrooms. Political leadership saved the day. HISD Superintendent Rod Paige publicly praised KIPP and intervened when bureaucrats attacked. Paige also had HISD serve as an incubator for YES Prep. As Barbic recalls, “A lot of superintendents would have seen that innovation and tried to kill it, but Paige did the exact opposite.” Paige’s successors have followed his lead, fashioning a public school system that can compete with the charters.

In many cities opponents manipulate zoning and building rules to keep charter schools from finding sites, but Houston has few regulations. Not coincidentally, it also has low construction costs and cheap land. As Mike Feinberg points out, “Fifteen acres in Houston is about the same cost as one acre in Los Angeles.” That meant that once school leaders like Feinberg, Barbic and Tarim refined their operations at one or two campuses, they could expand cheaply and rapidly.

This expands somewhat on what Barbic mentioned in the interview about how charters coexist with HISD and in an ideal world each would push the other to be better. I don’t think you can fully discuss this subject without noting that our entrepreneur-friendly environment here is also attractive to a range of hustlers and con men and that the charter school business has seen its share of each as well. That would make a good subject for a longer analytical piece, not a short op-ed. Greg has more.

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.

The Pitts budget

Here it is, and if it is a shock to you, you haven’t been paying attention.

The House’s starting-point budget proposal would provide for a total budget of $156.4 billion in state and federal money, a decrease of $31.1 billion, or nearly 17 percent, from the current budget period.

The budget proposes nearly $5 billion less for public education below the current base funding. It is also $9.8 billion less than what is needed to cover current funding formulas, which includes about 170,000 additional students entering the public school system during the next two-year budget cycle. Pre-kindergarten would be scaled back.

Higher education funding, including student financial aid, would be slashed.

The proposal wouldn’t provide funding for all the people projected to be eligible for the Medicaid program and would slash Medicaid reimbursement rates for health care providers.

Community supervision programs would be cut and a Sugar Land prison unit would be closed. Funding would be eliminated for four community colleges including Brazosport near Lake Jackson.

Thousands of state jobs would be cut.

I’m not sure where to provide a link for this, because HB1 has not been filed yet, according to TLO. If I understand correctly, Pitts’ outline was just give via printouts. Be that as it may, there are a couple of things to keep in mind. One is that this isn’t a bill. Rep. Pitts’ stated objective was to show what the budget would look like if there were no increases in revenue and the Rainy Day Fund were unused. The Senate is working on its own budget outline, which by all reports does assume that the Rainy Day Fund will be tapped for some amount, so it will be different.

Most importantly, now everybody, including all those freshman Republican legislators, know exactly what they’re up against. No more hiding behind vague and meaningless platitudes about “cutting waste” and “smaller government”, because this is what all that means. Now is the time for everyone who will be on the business end of these proposals to make their displeasure known, starting with school districts.

Cypress-Fairbanks ISD Superintendent David Anthony estimated that his district could lose $80 million under the budget blueprint.
“That would significantly impact everything we do in the district,” he said.

The state’s third largest school district has already cut more than $70 million, including some 800 positions, over the past four years.

“We’re very lean already,” Anthony said. “Future cuts will impact the services we provide. We want to maintain quality. If you continue additional pressure and cuts, eventually it breaks.”

Scaling back pre-kindergarten programs would deliver a big low for Houston ISD because about 80 percent of the students come from low-income families, district spokesman Jason Spencer said.

Here’s more on that:

Lawmakers, though, would have to rewrite school-funding formulas because the House leaders’ plan falls $9.8 billion short of obligations to school districts and charter schools.

“They’ve got to pass a major school finance bill with major cuts in it,” said school finance expert Dan Casey, who predicts renewed interest in a lawsuit against the state “if you see cuts of this magnitude and no changes in standards.”

The House budget would push Texas into uncharted territory, he said.

“There isn’t anybody – even the more veteran legislators – that have been through those kinds of reductions,” Casey said.

[…]

Under the House plan, public schools, which teach reading and arithmetic to future workers, would receive no extra money to cover enrollment increases. Nor would districts be given more state funds, as currently required, to offset declining local property values.

“That’s catastrophic for any fast-growing districts, like a Frisco or a Lewisville,” said Casey, a former adviser to the Legislature on school finance who now has a thriving private consulting practice.

The budget would eliminate funds for the nation’s largest experiment in teacher merit pay. Also zeroed out would be the main remedial program created by Texas in 1999, as it required students in certain grades to pass achievement tests to be promoted.

“You’re going to have the same rising standards and less financial help for the support that will make students successful,” Casey said.

Somewhat bizarrely, both Rick Perry and David Dewhurst made claims about protecting the vulnerable and providing a “world-class education” in their inauguration speeches. Neither of those things is remotely possible under the Pitts outline. The question is what happens next. The answer, as always, is to make your voices heard. I know of one group in HD134, organizing via Facebook, that’s meeting to “petition support from our newly elected representative, Sarah Davis, to support funding for public education”. I have no idea what effect that or any other such effort may have, but if you don’t make it clear to your Reps and Senators that you didn’t vote for this and will vote against anyone who supports these kinds of cuts, they’ll have no reason to think there’s any problem with doing so. We have 132 days to make sure they know. Reactions from various Democratic lawmakers are beneath the fold. The Trib has more on the budget in general, while Grits, Postcards, and the Trib again discuss the criminal justice impact of the outline, and the LBB webpage now has some budget docs.

(more…)

True culture warriors never sleep

There’s no possible way that this can end well.

The [State Board of Education] will consider a resolution next week that would warn publishers not to push a pro-Islamic, anti-Christian viewpoint in world history textbooks.

Members of the board’s social conservative bloc asked for the resolution after an unsuccessful candidate for a board seat called on the panel to head off any bias against Christians in new social studies books. Some contend that “Middle Easterners” are increasingly buying into companies that publish textbooks.

A preliminary draft of the resolution states that “diverse reviewers have repeatedly documented gross pro-Islamic, anti-Christian distortions in social studies texts” across the U.S. and that past social studies textbooks in Texas also have been “tainted” with pro-Islamic, anti-Christian views.

I don’t even know what to say. This is a train wreck wrapped in a freak show inside a clown car. In the name of sanity, go throw a few bucks at Rebecca Bell-Metereau and Judy Jennings. This crap needs to end. The Trib has more on that.

It must be noted, as Abby Rapoport does, that the SBOE actually has some serious business on the agenda as well.

Each year, the board determines what percentage of the $22-billion fund’s returns will get paid out. This time around, we’re expecting a state budget shortfall of $18 billion—or possibly higher. Every dollar the board sends out means a dollar the legislature doesn’t have to spend. That frees up general revenue funds in the rest of the state budget. The board had initially said it would give somewhere between 1.5 and 3.5 percent. “I think the one and a half percent caught some folks’ attention,” Bradley who chairs the board’s financial committee, told me. Now, he says, the staff recommends the board send between 3 and 3.5 percent.

That’s as much as $1.2 billion over two years.

Then there’s another $1.1 billion that the board owes schools—”catch-up” money from last cycle, when the fund got too low to pay out.

There’s likely going to be a fight though. One of the chief purposes of the fund is to buy materials like textbooks. However, as part of its proposed budget cuts, the Texas Education Agency has offered to postpone buying English/Language Arts books that were expected to arrive in the fall of 2011. And you might remember the board already postponed asking for science textbook funding.

And for all you people who like pre-k: pre-k materials are part of this block of funding. So it’s not just grade school and high school kids who might have to go without. The board members will almost definitely argue with the agency and the commissioner about the proposed cuts.

That’s definitely worth watching. Hopefully, it will not get lost in the coverage of the craziness.

The charter schools make their case

Specifically, David Dunn, the executive director of the Texas Charter School Association, makes the case for public funds for charter school facilities in this op-ed from the weekend.

One of the major obstacles to critical education reform in Texas is the lack of facilities for the thriving charter school movement here. Even though charter schools are subject to the same state accountability standards and oversight, they receive no money for their facilities. We are making do with our current circumstances, but charter school students deserve better than portable trailers, transformed grocery stores or vacated churches.

Our membership believes that the State Board of Education should carefully analyze the fiscal impact to the state and release specific charter lease agreement details. Policymakers, editorial boards and various stakeholders across the state have been mixed on their assessment of the SBOE idea. However, the opposition to investing in charter facilities seems to be based on outdated perceptions of charter schools.

Since charters were created by the Texas Legislature in 1995, they have considerably improved their operations and academic performance. Internally, the charter movement holds high expectations to deliver on our contracts with the state. We educate kids or we get out of education. Every member of our association signs a quality pledge and completes a rigorous self-assessment to continually improve their schools.

I have no idea what that “quality pledge” is all about, but the fact remains that there are plenty of lousy charter schools out there. I’d be more inclined to buy what Dunn is selling if he’d be more honest about that.

Our membership is encouraged that the State Board of Education and Texas lawmakers are looking for ways to help. TCSA is optimistic about the idea, but we have additional ideas to assist charter schools with facilities. The Texas Legislature should provide charter schools with greater access to existing public school facilities, particularly in school districts with vacant schools or unused property. Charter schools should have the same access to bond guarantees through the Permanent School Fund as traditional public schools. Extending this privilege to charters would have no cost to the state, and provide immense savings to charters by reducing the cost of issuance and lowering interest rates. Charter facilities leased by a private owner to a public, open-enrollment charter school should become exempt from real property taxes for the duration of the lease agreement, with the savings passed onto the school. Without a doubt, we will keep pressing on all fronts.

Look, I’m not necessarily opposed to any of these suggestions, but it would be nice if Dunn or someone like him would address the criticisms of the SBOE’s decision to allocate money for charter schools from the Permanent School Fund. Why shouldn’t these funds be allocated by the Legislature, instead of having the SBOE make a questionable end run around the state constitution? Answer me that, and then we can talk about the other stuff.

The SBOE and charter schools

Some members of the State Board of Education want to get into the charter school business.

Representatives for Texas’ 460 independent charter schools asked the State Board of Education on Wednesday to tap into the state’s education trust fund and for the first time provide them classrooms and facilities for their students.

The charter school operators also expressed support for board member David Bradley’s proposal to take up to $100 million from the $22 billion Permanent School Fund and use it to purchase or build facilities that the board would lease to charter schools.

[…]

While several board members expressed interest in the facilities idea, others had questions, citing the large number of charter schools that have failed since being first authorized 15 years ago.

“Once the board awards a charter, we have no control over the school after that – and that causes me great concern,” said board member Bob Craig, R-Lubbock. “I just don’t see this as a good investment,”

He said 71 state licenses for charter schools have been revoked, removed or returned since the program began.

Board member Pat Hardy, R-Fort Worth, said the board would have the same concerns as banks and other financial institutions that have been reluctant to lend money to charter operators to build schools or remodel buildings.

A more pointed objection was raised by SBOE Chair Gail Lowe.

Board Chairwoman Gail Lowe , R-Lampasas, said she is a proponent of charter schools and would like to help them cover their facility costs.

But the assets of the fund, which was established by the state constitution in 1876 , have to be invested for the benefit of all Texas schoolchildren for generations to come. Given that mandate, Lowe said, she is not convinced this investment would be in the best interest of the fund, even if only a relatively small amount is dedicated to the program.

“Regardless of what percentage it is, it is still incumbent upon a fiduciary to determine what is in the best interest of the fund,” Lowe said.

The Trib and Abby Rapoport have more on this; board member Bob Craig also pointed out the risk of litigation if someone decides that Bradley’s proposal does not meet the mandate Lowe points out. This proposal by Bradley first surfaced last month, and so far I haven’t seen a good response to the concerns that member-elect Thomas Ratliff and State Rep. Scott Hochberg raised in that story:

Newly elected board member Thomas Ratliff, R-Mount Pleasant, who will take over from former chair Don McLeroy, R-Bryan, in January, said the board has no business going into the rental business.

“If they want to do it, they better do it quick, because I don’t think the votes will be there on the board in January,” he says. “Charter school facilities are a legitimate issue. But it’s a problem for the state Legislature to solve. … If a charter school has a good business model, than it should be no problem getting a loan in the commercial space. And if not, why would we want to invest?”

[…]

On the House side, Hochberg says the alternative stretches the SBOE far out of the bounds of its authority over the public school fund. Common sense dictates that the best-possible investment mix to maximize Permanent School Fund revenues will change constantly, as the market changes. Real estate in general might be a great investment today and a terrible one a month from now. A board decision to lock itself into specific properties for the specific purpose of renting only to charters can’t possibly be the best business decision for all market environments — if it makes sense at all, Hochberg says.

“Let’s say you decide to invest a certain amount in real estate, and you buy a building and rent it to Wal-Mart — and then the market changes, so you decide to change investments and sell it. You can do that. But what if a charter school is in there?” Hochberg asks. “They’re not supposed to be in a specific business — they’re supposed to be investing in the long-term interest of the children of the state of Texas.”

It is interesting how Bradley, who is one of those “the government is the problem, the free market is the solution” conservatives wants to use the government to solve a problem with the free market, isn’t it? Things can look a little different when the free market isn’t being kind to something you like, I guess. Having said that, I don’t think Bradley’s plan is completely nuts. I think that if there were sufficient controls in place to ensure that good charter schools could thrive while bad ones could be quickly shut down, there’s an argument to be made for the state helping out with the facilities end of things. I think that’s a job better suited for the Lege, however. Having an answer for Ratliff and Hochberg would be nice, too.

In the end, the SBOE decided to go for it. After initially voting to adopt an asset allocation plan as a committee that did not include any charter school funds, the Board then went ahead and allocated some funds for this plan.

The measure passed 7-6 with two members absent: Mary Helen Berlanga, D-Corpus Christi, and Rick Agosto, D-San Antonio. Agosto voted against the measure in committee yesterday and could have killed it today by voting the same way. Berlanga’s position on the issue is unknown, but she often votes against the conservative members who pushed the measure.

The board’s bloc of social conservatives usually consists of seven Republicans on the 15-member panel, including chairwoman Gail Lowe, R-Lampasas. While Lowe voted against the plan, the bloc succeeded in pulling a Democratic vote from Rene Nunez, of El Paso. Other members voting for the plan included David Bradley, R-Beaumont — who spearheaded the idea — Don McLeroy, R-Bryan; Ken Mercer, R-San Antonio; Terri Leo, R-Spring; Cynthia Dunbar, R-Richmond; and Barbara Cargill, R-The Woodlands.

The allocation was contingent on a favorable opinion from the Attorney General and “express legislative authority”. I have a feeling the Lege is more likely to expressly yank their chain on this, but I guess we’ll find out soon enough. Until then, consider it one last parting gift from the McLeroy/Dunbar axis of ideology. Abby Rapoport has more.

The SBOE is more than just a clown show

The clown show part we know about, but the State Board of Education is also responsible for managing the state’s $20 billion Permanent School Fund, and as they politicize scholastic issues it seems politics may be playing a role in that important function, which was nearly taken away from them this year, as well. Read this twopart report from the Texas Freedom Network for the details. Note the name Rick Agosto, the San Antonio Democrat who is a little too cozy with the wingnut faction. Does he have a primary opponent yet?