Off the Kuff Rotating Header Image

school finance

Yes, they really are now pushing a sales tax for property tax swap

Some bad ideas never die.

Texas’ top three political leaders — Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen — threw their support Wednesday behind a proposal to increase the sales tax by one percentage point in order to lower property taxes across the state.

But that’s only if lawmakers agree to limit future local property tax increases.

The proposal would raise the state’s sales tax from 6.25% to 7.25%, generating billions of additional dollars annually for property tax relief, if voters approve a constitutional amendment. But the idea will be a hard sell to Democrats, since the sales tax is considered regressive, meaning lower-income Texans end up paying a larger percentage of their paychecks than higher-income Texans.

“Today we are introducing a sales tax proposal to buy down property tax rates for all Texas homeowners and businesses, once Senate Bill 2 or House Bill 2 is agreed to and passed by both Chambers. If the one-cent increase in the sales tax passes, it will result in billions of dollars in revenue to help drive down property taxes in the short and long term,” said a joint statement from the three Republicans.

Neither chamber has passed HB 2 or SB 2, which would require voter approval of property tax increases over 2.5%.

The House Ways and Means Committee was scheduled to take public testimony on the House’s sales tax swap proposal this week but delayed hearing the bills. Rep. Dan Huberty, R-Houston, who authored House Joint Resolution 3 and House Bill 4621, is considering changing the legislation to use a fraction of the additional money generated by the sales tax for public schools — in order to get more Democrats on board.

The bills are intended to provide another revenue source to help significantly cut down local school property taxes, which make up more than half of the local property taxes levied in Texas.

If the Legislature approves the resolution, the constitutional amendment would go to voters to approve in November, and if voters sign on the tax rate change would apply in January 2020.

See here for the background and my opinion about this lousy idea. Given that a constitutional amendment is needed for this, it will be easy enough to prevent it from happening. The progressive case against swapping out property taxes, which will disproportionately benefit commercial real estate and wealthy homeowners, for regressive sales taxes, is clear cut, and likely to hold a lot of sway with the current Democratic caucus. There’s also polling evidence to suggest that the public doesn’t care for a sales tax increase. I’m a little skeptical of that, since the question was not asked in conjunction with a potential cut in property taxes, but that’s an argument for the Republicans to make, and given the baked in doubt about anything actually reducing property taxes (for good reason!), I’d take that bet. HB2 is up for debate today, so we’ll see how this goes. The Chron and Texas Monthly have more.

House approves budget, and other news

Always a major milestone.

In Dennis Bonnen’s first major test as speaker of the Texas House, the chamber he oversees resoundingly passed a $251 billion budget Wednesday after a long but largely civil debate — a departure from the dramatics that have typically defined such an affair.

Though lawmakers proposed more than 300 amendments to the spending plan, Bonnen, an Angleton Republican, and his chief budget writer, state Rep. John Zerwas, R-Richmond, finished the night with their budget plan largely intact. After 11 hours of relatively cordial discussion, lawmakers agreed to withdraw the vast majority of their amendments or move them to a wish list portion of the budget, where they are highly unlikely to become law.

The budget passed unanimously on the final vote. The legislation, House Bill 1, now heads to the Senate, whose Finance Committee was set to discuss its budget plan Thursday.

“I’m proud of where we are in the bill that we are sending to the Senate,” Zerwas said at the end of the marathon debate. “Each and every one of you should be incredibly proud of the work that you’ve put in here.”

The two-year spending plan’s highlight — a $9 billion boost in state funding for the public education portion of the budget — remained unchanged. Of that, $6 billion would go to school districts, and the remaining $3 billion would pay for property tax relief, contingent on lawmakers passing a school finance reform package.

The budget plan would spend $2 billion from the state’s savings account, commonly known as the rainy day fund, which holds more than $11 billion.

“I’m not here to compare it to previous sessions,” Bonnen told reporters after the House budget vote. “But I’m here to tell you we had a great tone and tenor tonight, and I’m very proud of the business that we did.”

[…]

So while Bonnen’s first budget night as speaker was hardly free of controversy — an argument over the effectiveness of the state’s “Alternatives to Abortion” program, for example, derailed movement on amendments for nearly an hour — the occasional spats paled in comparison with those of years past. There were no discussions at the back microphone of lawmakers’ sexual histories, as happened in 2015, and no one had to physically restrain House members to prevent a fistfight over the fate of a feral hog abatement program, as happened in 2017.

Still, state Rep. Jonathan Stickland, R-Bedford, continued his long-running campaign against the feral hog program. And though the exchange ranked among the evening’s rowdiest, it was more than tame by last session’s standards.

State Rep. Drew Springer, R-Muenster, again opposed Stickland’s amendment to defund the program, which reimburses local initiatives to eradicate wild hogs. Stickland responded, “Members, although I respect the thoughtful words of Rep. Springer … let’s end this program right here, right now.”

Stickland’s amendment failed, with just four votes in favor.

See here for more on last session’s House budget debate. One should never miss an opportunity to illustrate Jonathan Stickland’s failures. The House also approved a supplementary budget for the previous biennium, to cover expenditures that were not previously appropriated, such as the traditional underestimating of Medicaid’s costs and all of the Harvey recovery funding.

Speaking of revenues:

House Republicans muscled a heavily altered version of their property tax reform bill through a committee early Thursday, notching a single Democratic vote and swiftly shooting down attempts to further modify the draft.

A top priority for state leaders, House Bill 2 would require cities, counties and other taxing units to receive voter approval before levying 2.5 percent more property tax revenue than the previous year. A vote was expected to come Wednesday morning on a new draft of the legislation, which contains changes likely to appease small and special taxing units but leave big municipal leaders staunchly opposed.

But the hearing on the new version was postponed until past midnight. The 16-hour delay gave an unusual cluster of critics time to trumpet their concerns with the measure — and then for top House leaders to respond in an informal late-night news conference.

“Sometimes when everyone’s a little bit upset with you, maybe you have a good balance — that’s probably a good sign,” said House Ways and Means Committee Chair Dustin Burrows, the author of the legislation and a Lubbock Republican. “We worked really hard; we talked to a lot of different constituencies” and a lot of members. “I think you’ll see in the committee substitute, the work product and a lot of collaboration.”

As amended, HB 2 now exempts community colleges, emergency service districts and hospital districts from abiding by the 2.5 percent election trigger. Another provision lets certain districts, including cities and counties, bank unused revenue growth, so long as they average below 2.5 percent over five years. And new “revenue enrichment” language could cushion some taxing units by letting them raise $250,000 in new property taxes a year, even if it exceeded the growth rate. The threshold, set at $250,000 for 2020, would be adjusted by the state comptroller annually, based on inflation.

[…]

Currently, voters can petition for an election if property tax revenue growth exceeds 8 percent, a rate set during a period of high inflation in the 1980s. State leaders have touted the lower chamber’s proposal and a Senate companion as an overdue correction and as a needed check on spiraling property tax bills. But critics say the reform efforts would not reduce tax bills, just slow the rate at which they grow — and, in the process, hamper local officials’ ability to provide public services for growing populations.

As you know, I oppose revenue caps, no matter how well intentioned. The reason the Lege ties itself into knots every two years in a vain attempt to limit property tax growth is that a taxing system that so heavily relies on property taxes fundamentally relies on a system that is divorced from people’s ability to afford their taxes. As I muse every two years, if only there were some system of taxation that was proportional to how much money people made in a given year, that would solve so many of these problems. Too bad no such system exists anywhere in the world.

Of course, another way to limit property tax growth for homeowners would be to ensure that everyone is paying their fair share of property taxes.

As state leaders promote their property tax reform package as needed relief for everyday Texans, some Democrats and county appraisers suggest a provision in the tax code has stacked the system in favor of corporations that can appeal their valuations with a combativeness most homeowners can’t muster.

At issue: a 1997 amendment, drafted by a prominent tax attorney, that critics say has allowed business and industry to lower their property tax burden at the expense of other taxpayers. The provision offers all Texans a way to fight their appraisals by arguing they were treated unfairly compared to other properties. But critics say large property owners have capitalized on it to drive down their costs, while residences and small businesses can’t afford to do the same.

“If you have a whole category of property that is nonresidential systematically paying less, well who do you think is paying more?” said Bexar County chief appraiser Michael Amezquita.

Amezquita is one of several officials who say their districts have been inundated by appeals and lawsuits from commercial owners trying to lower their appraisals, which determine what taxes are owed on a property. Supporters of the “equity” provision say it’s a critical tool for all property owners, and that commercial properties aren’t afforded the tax exemptions many home and agricultural land owners receive. Critics counter only well-funded property owners can afford to sue — and when they do, there’s often little an appraisal district can do to fight back.

“The deck is stacked against us,” said Amezquita, who has been sued by a J.W. Marriott resort seeking to have its taxable value reduced. A spokeswoman for the hotel declined comment.

I’ve written about this before. This issue of equity appeals was a cornerstone of Mike Collier’s campaign for Lt. Governor. We’d be having a much broader conversation about fairness and equity in taxation if he had won that race, but he didn’t and so we aren’t. Better luck next time, I guess.

Anyway. The Senate still has to approve its budget, and school finance reform remains a work in progress. There’s a decent amount of harmony now, but plenty of opportunities for tension, drama, and good old fashioned nastiness remain. Which is as it should be.

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.

House moves its school finance bill

Step two of the process.

Rep. Dan Huberty

The Texas House Public Education Committee unanimously signed off on a comprehensive $9 billion school finance and property tax reform bill Tuesday — but only after removing a controversial educator merit pay provision that had angered teachers unions.

House Bill 3, filed by committee chair Rep. Dan Huberty, R-Houston, would put $6.3 billion into public schools and $2.7 billion into property tax reform. The bill will likely head to the full House soon, where more than 100 have already signed on as co-sponsors.

“Everybody’s opinion is welcome,” said Rep. Ken King, R-Canadian, before voting to approve the bill. “I would just hate to see the destruction of a valiant effort because somebody didn’t like one little piece on it.”

The initial version of HB 3 included money for districts that wanted to rate their teachers and provide the top-rated ones with more money, modeled on a Dallas ISD program that Republican Gov. Greg Abbott has touted.

“The language we ended up with to some degree could have been construed as tied to [the state’s standardized test] and created a little bit too much authority as we went forward,” Huberty said, explaining the change in the bill.

[…]

HB 3 does not include an across-the-board teacher pay raise, with Huberty and Republican House Speaker Dennis Bonnen arguing school districts should instead have local control to decide how to use additional funding. The Senate already unanimously passed Senate Bill 3, which would put $4 billion toward $5,000 raises for full-time classroom teachers and librarians.

Educators and advocates have appeared divided in their support for the two bills, which will need to be reconciled in some form later this session.

See here, here, and here for some background. Now is when the real sausage-making begins, as everyone agrees that Something Must Be Done, but views differ from there. The most likely scenario is that something gets hammered out in a conference committee in the very last days of the session. It’s hard to say at this point which chamber’s bill, or which provisions of each bill, have the advantage. Sometimes it just comes down to who gets on the committee. Expect there to be a bunch of amendments to both bills as they come to their respective floors, which may bring them closer together and may heighten their differences, with the extra joy of shenanigans and other partisan games always in the offing. It’s stuff like this that makes political junkies what they are.

Inevitably, we come back to a sales tax/property tax swap

It’s an idea we just can’t seem to quit.

Texas lawmakers are considering an infusion of $9 billion to improve public schools and lower property taxes over the next two years. The additional $6.3 billion in the classroom is being billed as a transformational effort to better educate the state’s 5.4 million students, while another $2.7 billion would stem the tide of escalating property taxes for homeowners.

“If we’re going to make some strides on these really big items, it really has to happen this session,” said Rep. John Zerwas, R-Richmond, chairman of the influential Appropriations Committee.

While lawmakers are confident the state’s booming economy will provide big bucks to spend on public schools, they are also pitching a number of plans to increase the state sales tax in the future. The proposals include hiking taxes on items such as sweet snacks, gasoline, e-cigarette fluid and heavy machinery rentals. But the proposal with the most apparent momentum is a tax swap that would allow local governments to charge a higher sales tax in exchange for reducing property tax levies.

Even raising the sales tax by one percent “contributes a lot of money” that school districts, cities and counties could use to offset reductions in property tax revenue, Zerwas said. Some estimates predict such an increase would raise more than $5 billion a year. The statewide sales tax rate is now 6.25 percent a year. Local governments can add up to two percent.

Although Republicans are leading the charge with major tax swap proposals, it’s unclear how they will fare in the GOP-led House and Senate, particularly among lawmakers who narrowly won their reelections as Texas Democrats gain ground.

Financial implications of the bills are shaky. Several tax bills were filed a week ago, just under a deadline, and have yet to be analyzed by the Legislative Budget Board which predicts financial effects.

Increasing reliance on the sales tax troubles Eva DeLuna Castro, a budget and policy expert with the left-leaning Center for Public Policy Priorities. Not only is a sales tax considered regressive for taking more money from low-income people than the rich, but its collections are more susceptible to the ups and downs of the economy, she said.

“You need to find a revenue source that doesn’t all the sudden tank on you. Or if you know that it is going to do that, you need to put most of it away for a rainy day and use it when that rainy day comes,” she said.

[…]

Rep. Drew Springer, R-Muenster, is proposing Texas increase taxes on gasoline and close tax exemptions on items like ice cream, certain baked goods, e-cigarette vapor fluid and over-the-counter medicine.

“I don’t think people realize their ibuprofen is tax-free,” said Springer. In exchange, House Bill 2915 would allow the state to lower the maintenance and operations property tax that funds schools. His bill would also increase the homestead exemption to 50 percent of a home’s value. Texans in a home valued at $274,000 would average $1,400 a year in property tax relief, he said, amounting to $6.2 billion less in property tax collections statewide.

Another bill, House Joint Resolution 3, proposes inching up the sales tax and using money from that increase exclusively for public schools. The resolution is proposed by Rep. Dan Huberty, R-Houston, the architect of the House’s $9 billion school finance plan. The measure would require a vote in November to change the state Constitution and increase the statewide sales tax, which is now 6.25 percent. Huberty emphasized that raising the sales tax is just one measure under consideration, and that it’s still too early to pencil in numbers.

“We have to put more money into the system. It’s our responsibility,” Huberty said Thursday at an event hosted by the Texas Tribune.

Rep. Chris Turner, D-Grand Prairie is proposing the state systematically examine each tax exemption every six years to decide whether it is needed. House Bill 3968 will raise revenue by expiring out-of-date tax “loopholes” over time, he said, and is a good alternative to raising sales taxes.

“It is important to note that Texas already has a high sales tax — 8.25 percent in most areas,” said Turner, who chairs the House Democratic Caucus. “The lower someone’s income, the more it hurts, so an increase in the sales tax will hurt a lot of Texas families.”

This comes up every few years – in 2005, in 2007, in the 2012 and 2014 elections – and each time we confront the fact that swapping property taxes for sales taxes greatly benefits property owners while burdening lower income folks the most. That’s a feature and not a bug, as far as its Republican advocates are concerned. I appreciate that at least this time it’s being proposed in the context of putting more money into schools, which would then have the effect of easing the pressure on local property taxes, but the same problem remains. Rep. Turner’s proposal to evaluate tax breaks also comes up whenever sales-tax-increase bills are filed, and it usually gets quietly ignored as the higher-profile swap bills eventually die. It’s still a good idea, it just never gets any momentum behind it. Rep. Springer’s idea to expand the sales tax to more things also comes up in conjunction with swap bills, and there is merit to this approach as well, though the real money is in taxing services, which is pretty much as big a taboo as an income tax is.

To review: I support requiring a process to scrutinize and sunset every tax break we have on the books, and I support at least exploring the imposition of a sales tax on selected goods and services where it is not currently imposed. If the goal of that is to put more state money into public education, and one result is that it allows local governments to ease up on property tax collections because they are no longer trying to make up for the state’s inadequacies, I would consider that a good outcome. The Trib has more.

House passes its budget out of committee

On to the full House, then the real fight occurs.

A panel of House budget writers gave initial approval Monday to a budget that would spend $115 billion in state funds, including a $9 billion infusion of new funds for Texas public schools and property tax relief.

Now that the House Appropriations Committee has approved the 2020-21 spending plan, House Bill 1, the legislation moves to the floor of the 150-member House.

[…]

Among the highlights of the House’s spending plan are:

$9 billion in new state funding for K-12 education and property tax relief, contingent on lawmakers passing reforms to the way the state funds public schools. The budget does not dictate the breakdown of those funds, but a bill backed by Speaker Dennis Bonnen would give about $6 billion to school districts and use the remaining $3 billion to pay for a reduction in local school district property taxes.

A $2.8 billion increase in state and federal funds for health and human services above what the House proposed in January. That includes a $25 million increase for early childhood intervention services, $6.7 million to reduce caseloads for Adult Protective Services workers, $31 million to expand capacity at local mental health clinics for low-income Texans and $87 million to raise the pay of personal attendants, who care for the elderly and disabled, by about 10 cents an hour.

A $168 million expenditure to give some Texas prison guards and parole officers a pay raise.

Rep. Matt Schaefer was the lone No vote in committee, so presume that this will get some pushback from the wingnuts. The story notes that the House budget draws $2 billion from the Rainy Day Fund, but it doesn’t specify what it’s used for. There’s more here on the House school finance proposal. The budget is the one thing the Lege absolutely has to do. With some cracks beneath the surface on other “priority” items, it’s nice to see this get a head start.

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.

Senate files its school finance bill

Here it is.

Sen. Larry Taylor

On the night of the deadline to file bills this legislative session, Texas Senate leaders turned in their first crack at legislation designed to reform school finance — rounding out a series of proposals in the upper chamber aiming to address rising property taxes and fix the way the state pays for its schools.

The bill was clearly incomplete and included some placeholder language. But its Republican author, Senate Education Chairman Larry Taylor, said it includes proposals that would fund full-day pre-K, incentivize school districts to improve their third-grade reading performance, offer money for teacher merit pay and increase funding for low-income students. The bill does not appear to require school districts to use standardized tests to determine funding.

Taylor didn’t give an indication of how much the bill would cost, or how it would affect local school district property taxes.

“Our focus should be on improving the academic outcomes of our low-income students, who make up the largest and fastest growing demographic in our public school system,” he said in a statement.

Some of the proposals in the bill appear similar to recommendations from a state school finance commission, which Taylor helped create.

See here, here, and here for some background. We don’t know enough about this bill yet – if there’s ever an application for the old saying about the devil being in the details, it’s with school finance bills – but so far I don’t see anything that makes me want to put my shields up. We’re starting out in a better place now than we’ve done in previous sessions. We still need to finish there.

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.

Here comes the House school finance plan

Not surprisingly, they go bigger than the Senate.

Rep. Dan Huberty

With Texas House lawmakers unveiling their long-awaited school finance proposal Tuesday and the Senate’s version likely close behind, teacher pay appears to be emerging as one of the biggest sticking points between the two chambers.

House Public Education Committee Chairman Dan Huberty, R-Houston, and House Speaker Dennis Bonnen, R-Angleton, laid out their reform proposal at a press conference Tuesday, calling for raising minimum salaries for a broad group of educators, increasing health and pension benefits, and offering opportunities for merit pay programs. That approach differs substantially from the $4 billion proposal that sailed through the Senate on Monday that would provide mandatory across-the-board $5,000 raises for classroom teachers and librarians.

When asked about the Senate’s proposal, which Lt. Gov. Dan Patrick has championed, Bonnen said, “I don’t know how you call a $5,000 across-the-board teacher pay raise … with no discussion of reducing recapture, no discussion of reducing property taxes, no discussion of early childhood education, no discussion of incentivizing the teachers going to a tougher school to teach” a school finance plan.

“What we have is a plan,” he added. “I think teachers are some of the smartest people in Texas, and they are going to figure out that the Texas House has a winning plan for the teachers and students in Texas.”

[…]

The House proposal, House Bill 3, would increase the base funding per student while requiring school districts to meet a higher minimum base pay for classroom teachers, full-time counselors, full-time librarians and full-time registered nurses. Many districts already exceed the current minimum salaries for educators at different experience levels.

It would work hand-in-hand with House Bill 9, filed Monday by the speaker’s brother, Rep. Greg Bonnen, R-Friendswood, which would increase the state’s contribution to Teacher Retirement System pensions over time while keeping active member and district contributions the same.

HB 3 would also provide funding for districts that offer a merit pay program, rating their teachers and providing the top-rated ones with more money — modeled on a Dallas ISD program touted among lawmakers. The Senate is expected to include a similar proposal in its school finance bill later this week.

The politics surrounding the Senate’s teacher pay raise bill this session are unusual, with Patrick, who has previously clashed with educators, advocating for a proposal many teachers like. Meanwhile, conservative group Empower Texans, a key contributor to Patrick’s campaign, has come out against the bill, with one employeecriticizing conservatives like Patrick for “kowtowing” to liberals.

That bill has divided the education community, with superintendents and school boards arguing they need more flexibility with additional funds and many teachers supporting the directed raises.

Huberty said Tuesday that the House would “certainly have a hearing on that [Senate] bill” but that the school finance panel that worked to develop recommendations for lawmakers did not include across-the-board raises.

He said HB 3 provides more opportunity for local school boards and superintendents to decide how to use increased funding. More than 85 House members have signed on as co-authors of HB 3, and in a public show of support, many of them were present at Tuesday’s press conference.

See here and here for some background. A preview story about the House bill is here, and a story about that Senate bill is here. The Senate bill covers raises for teachers and librarians, but not other support personnel like nurses or bus drivers, which is one reason why the more-flexible approach is favored by school districts; that said, the president of the Texas State Teachers Association released a statement emphasizing the need for a Senate-style guaranteed teacher pay raise. The House is also taking a different approach on property taxes, as noted in that preview story:

According to the summary, the bill would increase the base funding per student by $890 to $6,030 — the first time that allotment has been raised in four years. It would also lower school district property tax rates statewide by 4 cents per $100 of taxable property value, helping to reduce so-called Robin Hood payments that redistribute money from wealthier districts to poorer ones. The compression could save the owner of a home with $250,000 in taxable value about $100 annually in school district taxes.

That method of property tax relief is different than one proposed by Gov. Greg Abbott last year, which would cap annual increases in school districts’ tax revenues at 2.5 percent.

There’s also the Democratic proposal, some of which is in HB3. All of this is a starting point, so I don’t want to get too far into the weeds. None of these bills will be adopted as is, and some of them may not get adopted at all. This and the budget will be the last pieces of business the Lege deals with, and the main reason why there could be a special session. We’ll keep an eye on it all. The Chron has more.

The state of the state 2019

Sometimes it’s what you don’t say that gets noticed.

Gov. Greg Abbott, in his biennial State of the State address Tuesday, stayed on message about schools and taxes, continuing state leaders’ so far unified focus on bread-and-butter policy reforms in a forum where he has in the past served up red meat.

Speaking in the Texas House to both chambers of the Legislature, Abbott named as emergency items the consensus priorities of school finance reform, teacher pay raises and property tax relief, the issues he and the state’s other top two Republican leaders have trumpeted almost single-mindedly in the months since the midterm elections. In doing so, he carefully avoided controversial social issues like the ones that headlined last session’s speech.

Also topping the governor’s priority list: school safety, disaster response and mental health programs. Abbott’s designation of those priorities allows lawmakers to take up such measures sooner, lifting the usual constitutional limitation that prevents the Legislature from passing bills within the first 60 days of the session.

“Our mission begins with our students,” Abbott said as he began to lay out his legislative priorities. To improve lackluster student outcomes — only 40 percent of third-graders are reading at grade level by the end of their third-grade year, he said, and less than 40 percent of students who take the ACT or SAT are prepared for college — “we must target education funding.”

[…]

Unlike in his first two State of the State addresses, Abbott did not deem ethics reform an emergency item. He tagged that issue with top priority status in 2015 and 2017, but didn’t mention it this year. Nor did he raise any proposals related to abortion. And there was hardly any other mention of health care, an expense that takes up nearly as large a share of the state’s budget as does education.

House and Senate Democrats called it “disappointing” that the governor didn’t propose expanding access to pre-K or lowering the costs of teachers’ health care.

And state Rep. Toni Rose, D-Dallas, who serves as the caucus’ second vice-chair, said that Abbott, for all his bragging on the state of Texas during his speech, failed to mention the state’s high uninsured rate for health care.

“Texas needs to expand Medicaid,” Rose said during the conference, “and we need to expand it today.”

Still, Democrats were optimistic about some of the notable absences. Two years ago, Abbott’s address was headlined by his call for an anti-“sanctuary cities” bill that Democrats would staunchly oppose. This year, the governor mostly stayed away from hot-button social issues.

“It certainly was a different speech than we heard two years ago,” state Rep. Chris Turner, the Democrat who heads his party’s caucus in the House, said after the speech. “It seems as though election results have consequences.”

Another conspicuous absence from the speech was the voter rolls debacle that has dogged state leaders in recent weeks. Last month, Texas Secretary of State David Whitley flagged for citizenship review nearly 100,000 Texas voters; in the weeks since, the list has been revealed to be deeply flawed, and civil rights groups have sued the state three times.

There’s still plenty of reason to be wary of the property tax proposals Abbott has made, and one reason why there are fewer red meat items on his agenda is that a lot of them – voter ID, “sanctuary cities”, campus carry – have already been passed. I will agree that this was much more temperate than the address from two years ago – there’s no way Abbott would admit this, but I think Rep. Turner is right in his assessment – and there are issues on Abbott’s list that will get broad bipartisan support. Let’s be glad for the small victories, and work to make them bigger. Ross Ramsey, Texas Monthly, and the Observer have more.

Always beware revenue caps

They’re always a bad idea.

Flanked by the state’s top legislative leaders, Gov. Greg Abbott announced Thursday that both chambers of the Texas Legislature will push to curb property tax growth by limiting how much money local governments collect without voter approval.

Fellow Republicans Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, as well as the heads of both chambers’ tax-writing committees, joined Abbott in making the announcement. Their news conference followed the filing of identical bills in both chambers, Senate Bill 2 and House Bill 2.

Abbott said it was “completely unprecedented” for lawmakers to be so closely aligned on such an important issue this early in the session.

“Most importantly, it’s a testament to the voters in this state,” he said. “The voters demanded this, and this demonstrates that the Texas Legislature is responsive to the needs of our voters.”

But two Democrats who sit on the House Ways and Means Committee said the proposed legislation is far from being a done deal. And an advocate for city governments said there are plenty of unintended consequences that need to be worked out. Chief among them is ensuring that cities aren’t suddenly unable to afford police officers and firefighters.

Thursday’s bills seek to require voters to approve tax rates that allow government entities like cities, counties and school districts to collect an additional 2.5 percent in revenues from existing property compared with a previous year. The threshold would not apply to small taxing units — those with potential property and sales tax collections of $15 million or less.

Currently, cities and counties can collect an additional 8 percent in revenues without involving voters. But even then, residents must collect enough signatures to force an election. The new pair of bills would automatically trigger what’s called a rollback election. If voters shoot down the measure, the government entity would have to set a tax rate that allows it only to collect revenues from existing properties that are less than 2.5 percent more than the previous year.

The rollback rate is also based on the appraised value of properties within a taxing unit’s borders. That means a city or county could hit the rollback election threshold without changing its tax rate — or even if it lowers the tax rate — if there is a significant increase in local property values.

The legislation does not apply a cap to individual property tax bills. Because it would limit only how much government entities can collect in property tax revenues before getting voter approval, an agency could stay below the rollback election rate, and that portion of a property owner’s tax bill could still increase.

Local officials are almost certain to to push back. Bennett Sandlin is the executive director of the Texas Municipal League, which advocates for city governments. His organization estimates that about 150 of the state’s largest cities would be affected if the legislation passes. He said that the rollback threshold is lower than inflation and could prevent cities from paying for first responders’ raises, filling potholes, and keeping recreation centers or libraries open.

As the story notes, this is more ambitious than what Abbott and Patrick pushed for in 2017, and they’re doing it with smaller majorities. On the other hand, these are the highest-priority bills they have (hence the HB2 and SB2 designations), and they’re no doubt going to go all out. It’s very possible they could succeed.

But here’s the thing. This is what they rolled out after making big promises about reforming school finance and giving more money to schools. Did you notice what was missing in this rollowt?

They were so tuned in to their harmonic convergence, they didn’t talk much about what their legislation would actually do, leaving the details to the bill sponsors to explain later.

They did say they were going for a 2.5-percent growth limit on property taxes in local school districts, cities, counties and other government bodies. It’s aimed at overall taxes, a leash on the overall mix of property values and tax rates that determine what happens to the average taxpayer’s bill. Anything that increases a local government’s property tax revenues by more than that would trigger an automatic November election asking voters for permission.

You might wonder how public education is going to get more financial help, as proposed by this same group of elected officials, if the state is going to limit school districts’ ability to levy taxes.

The short answer is that the state’s going to pay for it. The House’s proposed budget for the next two years adds billions to what the state is spending on schools. The Senate’s plan doesn’t spend as much, but the increases are significant (and in one case, more specific: Patrick has proposed $3.7 billion in teacher pay raises). Abbott floated the idea of holding down local taxes and tax increases — an answer to loud and persistent complaints about property taxes — and increasing state spending to fill the gap. And Comptroller Glenn Hegar, the fourth official at those weekly breakfasts, has proposed requiring the state to pay at least 40 percent of the cost of public education, along with any increases due to inflation.

But they haven’t said where the state money will come from. Nobody in the state government’s high places has proposed raising a tax, cutting other state spending to produce money for education, or weeding through the state’s tax exemptions and loopholes to shore up the state’s share of the public education load.

In other words, right now it’s all underpants gnomes. I don’t know about you, but I’m not expecting much more in the way of details about how this is supposed to do all the things they say it will do.

State House mulls big increase in school funding

That’s a good start.

As Texas’ Republican leadership calls for property tax cuts and a school finance overhaul, the Texas House on Monday pitched a bold proposal: Pump roughly $7 billion more state funds into public schools — but only if lawmakers can satisfactorily overhaul the school finance system to slow the growth of property taxes.

Budget documents published Monday evening show the House has offered up a whopping 17 percent increase in K-12 public education funding so long as lawmakers achieve a few lofty goals in reforming how the state pays for public schools: Reduce the state’s reliance on property taxes, decrease the need for the unpopular Robin Hood system that requires property-wealthy school districts to subsidize poorer ones, and maintain an equitable system of school finance, as required by the state Constitution.

Counting all sources of funding — including local property taxes, state revenue and federal dollars — the state’s public education budget would grow to about $70.6 billion in the two-year cycle from 2020 to 2021, according to a Legislative Budget Board summary of the proposed House budget. That’s an increase of 16.7 percent from the previous two-year budget cycle, when the state spent about $60.5 billion on public schools.

[…]

The state is forecasted to have about 8.1 percent more funding available to spend over the next, two-year budget cycle. The House’s proposed budget would also withdraw $633 million out of the state savings account, called the Economic Stabilization Fund, to pay for retired teachers’ pensions, school safety improvements and disaster-relief programs.

That account, also known as the rainy day fund, has grown to a record level thanks to booming oil and gas production. Even after the House’s proposed $633 million withdrawal, the fund’s balance is projected to reach $14.7 billion in 2021.

The budget recommends spending $109 million on school safety, which lawmakers have discussed as a priority item since the 2018 Santa Fe High School shooting near Houston left 10 dead. Included in school safety funding would be about $12 million for children’s mental health programs.

Notably, the House budget decreases state funding for health care and human services by about 3.2 percent. Education and health care make up the vast majority of state spending.

Medicaid, the federal-state insurance program for the poor and disabled, would see a decrease of $1.4 billion in state funds, for example.

There are a lot of details to be filled in here. Making this contingent on property tax reform can be dicey, as the last time the Lege “fixed” school finance by way of tax reform they screwed over the revenue stream for years to come. Cutting Medicaid payments is a serious no-go. All of this has to actually be written into the budget and then approved by both chambers and not line-item-vetoed by Abbott. Lots of things can go wrong or turn out bad. But all that said, this is a great starting point, and hugely refreshing after too many sessions of cuts.

Meanwhile, in the Senate:

Leaders of the Texas Senate are proposing giving schools $3.7 billion to provide $5,000 pay raises to all full-time classroom teachers — on the heels of a House budget proposal that includes $7 billion more for public education.

Sen. Jane Nelson, R-Flower Mound, filed Senate Bill 3 Tuesday morning, which would mandate that schools use the billions in additional funding specifically for teacher pay raises. Speaking at his inauguration Tuesday morning, Lt. Gov. Dan Patrick, who presides over the Senate, lauded the proposal as one of his main priorities this legislative session and said the funding would be permanent.

[…]

Nelson’s proposal appears to build a new formula into the school finance system that would distribute state funding to schools based on the number of full-time classroom teachers they employ, and require they use that money for raises over the previous year.

Here’s SB3. We now know that while the Senate is also proposing more money overall for school finance, it’s not as much as what the House is proposing. This is what I mean when I say there’s a long way to go to get to a finished product. Be that as it may, this too is a good start.

Here comes the latest school finance report

I figure the smart money is always on efforts like this to fail, but you never know.

After hours of discussion Wednesday, a state panel studying school finance stripped its final report of language that blamed the state for inadequate education spending — and that added urgency to a need for more money to improve student performance.

The original version of the report, unveiled last Tuesday, included stronger language that held the state accountable for the lack of education funding and urged lawmakers to immediately inject more than a billion dollars of new funding into public schools. Scott Brister, the panel’s chairman and a former Texas Supreme Court justice, led the charge to make those changes, which he said would be more palatable to lawmakers and keep Texas from being sued in the future.

“I do have a problem several places where it says our school system has failed. I do think that’s asking for trouble,” he said.

Some lawmakers and educators on the panel pushed back before agreeing to compromise.

“I think we have failed our schools and we haven’t funded them, in my view, adequately or equitably,” responded state Rep. Dan Huberty, R-Houston, who chairs the House Public Education Committee.

Despite the conflict, the 13-member commission unanimously approved more than 30 recommendations on Wednesday aimed at boosting public education funding, improving student performance, cleaning up a messy funding distribution system — and providing property tax relief for Texans.

A final report will be sent to lawmakers, who are convening next month amid calls from state leadership to overhaul a long-embattled school finance system. Gov. Greg Abbott supported the panel’s vote in a statement Wednesday afternoon: “Today’s school finance commission report made clear that the state must reform the broken Robin Hood system and allocate more state funding to education. This session, we will do just that.”

[…]

Among the recommendations the commission plans to send to lawmakers are:

  • $100 million a year to school districts that want to develop their own teacher evaluation metrics and tie pay to performance. The total amount available should increase $100 million each year until it reaches $1 billion.
  • Up to $150 million to incentivize school districts to offer dual language programs, which instruct students in both English and Spanish, and to improve their dyslexia programs.
  • $800 million to incentivize school districts to improve students’ reading level in early grades and to succeed in college or a career after graduating high school.
  • $1.1 billion to improve education for low-income students, with school districts that have a higher share of needy students getting more money.
  • Create a new goal of having 60 percent of third-grade students reading on or above grade level and 60 percent of high school seniors graduating with a technical certificate, military inscription, or college enrollment without the need for remedial classes.
  • Cap local school district tax rates in order to offer property tax relief and a small amount of funding for schools — a proposal from Abbott.
  • No extra funding for special education programs until the state has completed overhauling those programs in line with a federal mandate.

The report hasn’t been published yet, so this is all we know. I don’t see any reason to trust Greg Abbott, who is more interested in cutting property taxes than in providing schools with the resources they need, and of course Dan Patrick will be heavily involved in whatever happens. I think the commission has generally good motives and for the most part the ideas are fine, but we could do a lot more, and that’s before we address the huge need for special ed funding. It’s all a matter of our priorities, and of our view of what “fixing” school finance looks like. The Chron has more.

It’s bill-filing season

Here are some highlights from Day One:

  • House Bill 49, by Rep. Lyle Larson, R-San Antonio, would get rid of daylight saving time in Texas. Some lawmakers have tried to do this in past sessions.
  • House Bill 63, by Rep. Joe Moody, D-El Paso, would make it a civil offense — not a crime — to be caught with less than one ounce of marijuana. Moody’s bill was one of several filed Monday aiming to loosen marijuana laws in Texas.
  • House Bill 84, also by Moody, would repeal the section of the Texas penal code that lists “homosexual conduct” as a crime. The U.S. Supreme Court has already ruled that the section is unenforceable, but it remains on the books.
  • House Bill 222, by Rep. Matt Krause, R-Fort Worth, would prohibit Texas cities from adopting or enforcing ordinances that would require employers to offer their employees paid sick leave. San Antonio and Austin have passed paid sick leave ordinances this year. Soon after Austin passed its ordinance, state Rep. Paul Workman, R-Austin, announced that he would file legislation banning the ordinances, but Workman was defeated in Tuesday’s election.
  • House Joint Resolution 24, by Rep. Charlie Geren, R-Fort Worth, would propose a constitutional amendment requiring the state to fund at least half of the cost of funding public schools. If the amendment were approved by voters, local property tax collections would not apply to the state’s share.
  • Senate Bill 66, by Sen. Jane Nelson, R-Flower Mound, would reduce and eventually eliminate the state’s franchise tax.

My reaction, in order: Oppose, favor, favor, oppose, favor, neutral. It makes me happy that the pro-sick employees faction had to find a new lackey after their original sponsor got tossed. I’ll be following this stuff as usual as we morph into the legislative season.

Will teachers turn out for Mike Collier?

He sure hopes so.

Mike Collier

On his long-shot campaign to unseat incumbent Lt. Gov. Dan Patrick, Collier is hoping he’s popular in a lot of rooms that look like this one — where after hearing from him, education-focused voters in a reliably red county said in interviews that they planned to vote for Republican Gov. Greg Abbott, then cross over to back Collier.

Collier, a Houston accountant and a failed 2014 candidate for Texas comptroller, is at a deep, perhaps insurmountable disadvantage in deep-red Texas, where Patrick has served in state government for more than a decade and accumulated about 35 times as much cash on hand.

Still, Collier says he can see a path to victory — and it starts here, in a crowd of retired teachers, scribbling on the bingo card-like sheets they’ve prepared for the occasion, sipping coffee out of teeny foam cups, some nodding along and a few nodding off.

But are there enough rooms like this to carry him to victory?

[…]

If Collier is positioning himself to draw center-right Republicans back over the line, public education may be his best issue. Patrick is not an uncontroversial figure among teachers, retired teachers and public school parents.

As a former chair of the Texas Senate’s public education committee and as the leader of the upper chamber, Patrick has championed what he calls “school choice” and critics, many of them public school educators, call “vouchers” — programs that would give Texas families subsidies to fund private school tuition for their kids. During last summer’s special session, as the Legislature debated an influx of cash for public schools, the Texas House offered up $1.8 billion — $1.5 billion more than Patrick’s Texas Senate proposed.

“When you have 700,000 school employees, they’re not all going to be on the same page. That said, I do feel like if there’s any one person out there that they’re most unified about it’s probably the lieutenant governor,” said Monty Exter, a lobbyist at the Association of Texas Professional Educators.

As a senator, Exter said, Patrick “was pushing reforms that lots of educators are not necessarily in favor of. He doesn’t seem to favor class-size restrictions and they really, really do. He really does favor vouchers and they really, really don’t. And the funding issues have died in his hands or at his hands.”

If public education is your issue, then I don’t know how you can even think of voting for Dan Patrick. It’s just that generally speaking, public education hasn’t been a big motivating issue for a lot of people, even those who have a direct stake in it. Maybe this is the year, I don’t know. The story talks about how pro-education candidates lost in this year’s Republican primaries, but that misses the point. Collier doesn’t need a majority of Republican voters to defect for him to win. If base Democratic turnout is sufficiently high – still a big if, even with the encouraging early voting numbers so far – he probably needs between ten and twenty percent of them. That’s doable, and it’s within the range of past performances. That’s an if on top of an if, but at least it’s a chance. If the teachers want to send a message, it’s in their capacity to do so.

Falling short on college readiness

Not good.

A majority of students at the top-rated high schools in Texas are likely to need remedial course work when they get to college because they don’t score well enough on entrance exams, a Hearst Newspapers analysis of newly released school accountability data shows.

More than 900 high schools in the state received the equivalent of an A or B rating from the state last month. But the analysis shows that at two-thirds of those schools, the majority of students are failing to score high enough on the SAT or ACT to be considered “college ready,” increasing the chances that they’ll need remedial course work in college and jeopardizing their chances of getting a college diploma.

The low number of Texas students who are adequately prepared for college has emerged again as an issue as state lawmakers study education funding this fall, in preparation for the Legislative Session, which starts in January. At a meeting Tuesday, education committee chairman Sen. Larry Taylor, R-Friendswood, and Rep. Dan Huberty, R-Houston, recommended giving more money to schools for each student who scores college-ready on the entrance exams.

Another group of lawmakers studying the performance of Texas schools, including Rep. Diego Bernal, D-San Antonio, recommended that Texas do away with the STAAR test, the state standardized exam, and instead use the SAT or ACT to hold high schools accountable.

The state’s top education official says Texas is steadily raising the bar for what students are expected to learn, and schools are improving.

But education experts say the combination of high ratings and low college readiness scores exposes a major flaw in the state’s accountability system. They say the gap is proof that lawmakers are placing too much emphasis on improving scores on the STAAR and high school graduation rates, rather than on preparing students for what happens after they finish high school.

“To get an A means this school is doing a good job of getting an increasing number, and a majority number, of its students ready for the next stage in life,” said Sandy Kress, a former senior adviser for George W. Bush and one of the architects of No Child Left Behind, the law that brought accountability ratings to schools across the country. “You have no business getting an A if you can’t tell me that.”

I don’t know what the answer is for this, though I have a pretty good guess that it would involve spending more money up front and across the board. I do know that our state will suffer from the lack of truly college-ready students, and the students themselves are being poorly served by schools that aren’t doing what they could and should be doing. Meanwhile, Greg Abbott is busy running ads claiming credit for everything under the sun. Maybe someone should ask him about this.

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.

Many more school districts are feeling the pinch

Not just HISD. Not by a long shot.

For eight-straight years, Cypress-Fairbanks and Conroe ISDs earned the Texas Smart Schools Award, bestowed on school districts with prudent financial practices and high academic achievement.

Now, Cypress-Fairbanks faces a $50 million deficit next school year, and Conroe is projected to face its first deficit in nearly a decade in the next two to four years.

They are not alone.

As the Texas Legislature studies potential changes to the state’s school funding mechanisms, the majority of large Houston-area school districts are facing budget shortfalls they say stem from a lack of state aid. Of the 10 largest Houston-area school districts, all but three approved budgets last summer that included deficits of more than $1 million, according to a Chronicle review. At least nine say they may have to dip into reserve funds within the next three to five years if revenues do not increase.

For some, it is more dire. If nothing changes at the state or local level, district officials say Spring Branch ISD in west Houston will be financially insolvent in three years. Cypress-Fairbanks ISD will use up all its reserve funds in four or five years. Pasadena ISD only avoided a $20 million shortfall for the next school year by passing a tax hike referendum, and multiple districts are considering similar measures to keep their schools afloat.

That pain is felt in large and small districts across the state. North East ISD in San Antonio expects to cut $12 million from its budget next year, likely leading to teacher layoffs, according to the San Antonio Express-News. By 2020, budget documents in Ysleta ISD near El Paso show the district likely will draw down its reserve funds by $12 million. Friendswood ISD, which educates roughly 6,000 students in a sliver of southeast Greater Houston, is facing a $1.9 million budget shortfall next year.

“If we’ve been one of the most efficient districts in the state, and we’re facing this crisis, imagine what other districts are dealing with,” Cy-Fair ISD Chief Financial Officer Stuart Snow said.

[…]

Sen. Paul Bettencourt, R-Houston, who sits on the Commission of Public Education Funding, said districts should expand their revenue streams to include sources other than local property taxes and the state. He pointed to Dallas ISD, which pulls in about $10 million annually from philanthropy. United Airlines also staffed one of DISD’s schools with 25 full-time employees, a partnership Bettencourt said should inspire districts elsewhere.

“It’s not going to be one-size fits all — there are many, many ways to do it right,” Bettencourt said. “At end of the day, we want the education system to get students the best educations they can get for best deals taxpayers can support. But we need to look for all the ways we can do it right.”

First of all, to Paul Bettencourt: You cannot be serious. Philanthropy? Are you kidding me? Dallas ISD’s 2017-2018 general revenue expenditures were over $1.4 billion. That $10 million represents 0.7% of the total. You gonna suggest everyone search their couch cushions, too? Oh, and I don’t know about you, but I’m old enough to remember when two of the biggest philanthropic entities in Houston were Enron and Continental Airlines. Good thing HISD didn’t make itself dependent on them, you know?

This is entirely the Legislature’s responsibility. We are here because they refuse to adequately fund schools, and because they use the increases in property valuations to fund the rest of the budget, while blaming local officials for their shortfalls and tax hikes. As with everything else in this state, nothing will change until the people we elect change. If you live in one of these districts, don’t take your frustrations out on your school board trustees. Take it out on the State Reps and State Senators who skimp on school finance, and the Governor and Lt. Governor who push them to keep doing it.

HISD faces major changes

This is a very big story, but a key component to it is not discussed here.

Houston ISD officials said Saturday the district will need to cut about $200 million from its 2018-19 budget to bring spending in line with an increasingly gloomy financial outlook.

In an equally momentous move, Houston ISD officials also proposed far-reaching changes to how the district operates its magnet and school choice systems, some of the boldest moves to date by second-year Superintendent Richard Carranza.

Still reeling from Hurricane Harvey, Houston Independent School District officials revealed at a board meeting Saturday that the district is facing a double whammy: A multimillion-dollar, state-mandated “recapture” payment requiring districts with high property values to “share the wealth,” and an expected drop in enrollment and tax revenue because of the devastating storm, which severely damaged schools and delayed the start of classes by two weeks.

The proposed cuts come at an inopportune time, with the district battling to stave off a potential state takeover because of 10 chronically under-performing schools.

Although the measures outlined Saturday are preliminary and could change significantly before HISD’s board votes on them, officials acknowledged that the district is entering an uncertain time.

“It’s a sea change for HISD,” said Rene Barajas, the district’s chief financial officer. “But at the end of the day, from a budgetary perspective, we’re still going to get the job done. It’s just going to be harder.”

There’s a lot more and there’s too much to adequately summarize, so go read the rest. We know about the recapture payments, which even though they have been reduced due to Harvey are still significant. We know HISD has been talking about revamping its magnet programs for some time, and there’s a cost-savings component to that as well. We know that property values and enrollment have been affected by Harvey, and we know how daily attendance determines the amount of money the district gets from the state. So none of this is a surprise, though having to deal with all of it at once is a big shock.

What’s missing from this article is any mention of what the state could and should do to help ameliorate this blow. I think everyone agrees that if a school building is destroyed by a catastrophic weather event, it should be rebuilt via a combination of funding sources, mostly private insurance and emergency allocations from the state. Why shouldn’t that also apply to the secondary effects of that same catastrophe? It’s not HISD’s fault that its revenues, both from taxes and from state appropriations, will be down. There needs to be a mechanism to at least soften, if not remove, this burden. Bear in mind that one reason why the drop in property values is such a hit is because the state has shoved more and more of the responsibility for school finance on local districts. If Harvey had happened even a decade ago, the appraisal loss would still be felt, but not by as much. That’s not HISD’s doing, it’s the Legislature’s and the Governor’s and the Lieutenant Governor’s, all with the approval of the Supreme Court.

But what can be done can be undone. With little to no pain on its part, the Lege could tap into the Rainy Day Fund to get HISD past the worst of this, or it could recognize that the nearly one billion it appropriated last session for “border security” is little more than macho posturing, an endless boondoggle for a handful of sheriffs, and an sharp increase in traffic citations, and redirect some of that money to HISD and any other district in similar straits. There are other things the Lege could do, but all of it starts with the basic principle that the Lege should do something to help out here. When are we going to talk about that?

Has Harvey changed anything politically?

You’d think it would, but it remains to be seen as far as I’m concerned.

A month to the day after Hurricane Harvey made landfall in Texas, the reality of the storm was beginning to sink in on the minds of politicians, policy makers and advocates bracing for a long recovery.

In short, any political plans people had pre-Harvey are now moot.

“Whatever any of us thought or hoped that the agenda for the next session would be, it is going to be overtaken by mother nature,” House Speaker Joe Straus told a full auditorium at the University of Texas Saturday. “It’s going to the biggest challenge that we face.”

[…]

Politicians said it’s still too soon to know exactly what the state needs to do to help the areas slammed by the storm cover, such as how much money it will cost to fix schools and roads and invest in such infrastructure to guard against future storms.

What policy experts and politicians across the board do know is it could take years for the state to recover.

The storm may provide an opportunity for a special legislative session for lawmakers to rethink the state’s school funding formula given property taxes, which schools depend on for funding, are expected to tank in storm-ravaged areas, said state Rep. Dan Huberty, R-Humble.

“I don’t believe 1 million children are going anywhere, but their homes have been destroyed,” he said, noting his home sustained $50,000 in damage from Harvey. “I just don’t see any path to victory for the schools if we don’t take this very seriously going forward.”

Huberty wants lawmakers to return to Austin for a special legislative session focused on storm relief. In that conversation, they could rehab the state’s school funding formula to level out funding for districts that stand to lose property tax revenue from the storm.

[…]

Education Commissioner Mike Morath said he’s still undecided about whether to cancel, delay or ease how the state grades schools based on the tests. However, his tone changed from last week when he told the State Board of Education it was unlikely Texas would tinker with the STAAR.

That will be worth keeping an eye on. I’ve been thinking about what would have to happen for me to accept that “things have changed” in a substantive fashion. Two possibilities come to mind:

1. A special session to address school finance. This can’t be just to make payments to districts to cover Harvey costs that insurance and the feds won’t pay, though that absolutely needs to happen, and it can’t be something that waits till 2019 and is the initiative of the House Education Committee and Speaker Straus, because we already know they’re on board for this. It also can’t be used as a vehicle for pushing through the usual hobbyhorses like vouchers or the new obsessions like bathroom bills. The call would have to include both addressing disaster funding and more importantly the overall inequities of the system. The reason why this would be a change would be that it would demonstrate for the first time that Greg Abbott wants to fix this problem, and it would provide him with the chance to separate himself from Dan Patrick. For a variety of what should be obvious reasons, I don’t expect this to happen, but if it does it will be a real change.

2. Someone loses an election as a result of being unwilling to take positive action to abet recovery. I don’t think this will happen because right now the main obstacle to getting things done is Paul Bettencourt, and he’s not in any position to lose a race. The members of Congress who voted against Harvey aid, whatever their reasons for doing so, are all well outside the affected area. If a special session does happen, then that would create opportunities for people to say and do potentially costly things, but in the absence of such, I any current officeholder has much to worry about at this time.

I’m sure there are other possibilities, but these are what come to my mind. Everything else feels like normal business to me. Maybe if the state winds up doing nothing to help cities and school districts cover costs, despite the $10 billion-plus in the Rainy Day Fund, that would count as something having changed, though that’s clearly not what the story is about. I’m open to the idea that “things” will “change” after Harvey, but I’m going to wait until I see it happen before I believe it.

House to study Harvey-related issues

Good to see.

Rep. Joe Straus

House Speaker Joe Straus is asking three House committees to wade into issues related to Hurricane Harvey, including how the state can maximize federal funds and whether to rethink how to grade schools affected by the storm this year.

Straus issued five interim charges Thursday, focused largely on education issues, like the scope of damage to schools and figuring out how to help districts absorbing students displaced by Harvey. He also wants lawmakers to look at student testing and accountability to “prevent unintended punitive consequences to both students and districts.”

[…]

Straus’ other charges include taking a close look at the state’s infrastructure and use of state and federal funds during storm recovery and review the role of regional entities to developing flood control projects.

“Hurricane Harvey has devastated our state and upended the lives of millions of Texans,” said Straus said in a letter to House members asking for further suggestions of issues lawmakers should study leading up to the next legislative session that begins in January of 2019. “The importance of getting these issues right when we meet again demands that we start working on them now.”

As we know, the TEA isn’t inclined to cut school districts any slack at this time, so it’s nice for the Lege to look at that. I’ll be very interested to see what they come up with regarding infrastructure. As noted before, we authorized a fund for building reservoirs and the like. What are we doing with that, and can we use it for flood mitigation instead of drought mitigation? This seems like as good a time as any to find out. The Trib has more.

House passes school finance bills

I doubt they’ll meet a different fate than they did in the regular session, but kudos anyway.

Rep. Dan Huberty

The Texas House on Friday passed a package of bills that would put $1.8 billion into public schools and help out struggling small, rural school districts.

House members voted 130-12 to approve the lower chamber’s main piece of school finance legislation, House Bill 21, just as they did during the regular session. The House also voted 131-11 to pass House Bill 30, which would fund the school finance bill by putting $1.8 billion into public schools. Once the House gives the measures final approval, they will head to the Senate.

The funds cited in the legislation would come from deferring a payment to public schools from fiscal year 2019 to 2020, and would allow an increase in the base funding per student from $5,140 to $5,350 statewide.

[…]

The House Public Education Committee’s chairman, state Rep. Dan Huberty, R-Houston, the author of HB 21, has pushed his bill as a preliminary step to fixing a beleaguered system for allocating money to public schools.

“You cannot have property tax reform unless you have school finance reform. That is just a fact,” he said Friday. “We have the time to get this done. We just have to have the will to get this done.”

HB 21 would increase the base per-student funding the state gives to school districts, in part by increasing funding for students who are dyslexic and bilingual. It would also gradually remove an existing financial penalty for school districts smaller than 300 square miles, which was originally intended to encourage them to consolidate.

[…]

The House voted 67-61 Friday against approving House Bill 22, a separate measure that would have continued ASATR for two years before letting it expire in September 2019. Some school districts have warned they might have to close without the program, which totaled about $400 million this year.

See here for the first go-round on HB21, and here for the ASATR story. I don’t expect anything to happen with any of this, but I suppose a surprise is possible. The House and the Senate are on such different pages that it seems unlikely in the extreme, though.

This special session is going to be so much fun

So much repressed hostility

Starring Dan Patrick as Thelma, Greg Abbott as Eunice, and Joe Straus as Vint

Five days before the Texas Legislature is scheduled to open a special session, it is clear the relationship between the leaders of the House and Senate remains as strained as it was at the end of the regular session.

On Thursday, Lt. Gov. Dan Patrick used a press conference to blast fellow Republican and House Speaker Joe Straus, comparing his education funding proposals to a “Ponzi scheme,” accusing him of laying the groundwork for a state income tax, and complaining that Straus won’t even meet with him one-on-one to bridge their differences.

Those comments come almost exactly one month after Straus used a speech in San Antonio to demand the state’s school finance system be added to the special session call and took issue with the Senate’s focus on transgender bathroom issues. And earlier this year Straus had compared the Senate’s budget writing to Enron accounting methods.

Patrick said his news conference on Thursday was to roll out new education proposals, including a bonus system for teachers. But much of the focus of the first 10 minutes was on his counterpart in the House and his continued call to have public school finance added to the special session call.

Patrick said Straus’ was using education funding as “dangerous political stunt” and accused him of having no plan to pay for the billions of additional funding Straus has said the state should be committing to schools.

“Where does that money come from? The only way to do it is a state income tax,” Patrick told reporters.

Later Patrick was even more direct.

“I will not join the Speaker and lay the groundwork for a state income tax,” Patrick said.

[…]

“It’s encouraging to see the Lieutenant Governor’s newfound focus on school finance reform,” Straus responded in a prepared statement.

“Nothing could be more important in this special session than beginning to fix our school finance system so that we improve education, keep more local dollars in local schools, and provide real property tax relief, just as the House overwhelmingly approved in the regular session,” Straus said.

so little time.

“My position is very well known. And let me say this very clearly: I know how to govern without being an extremist,” Straus said. “I know how to govern, trying to bring people together to focus on issues that really matter to all Texans, and I think that’s where our focus ought to be in the special session. It’s where our focus should be in any regular session as well.”

The bathroom proposal would keep transgender people from using multi-occupancy restrooms of the gender with which they identify in government buildings, or at least in public schools.

Straus, along with advocates for transgender people and business groups, has voiced concern about the possible economic effect of boycotts because the bill is viewed as discriminatory. He also has expressed a worry that it could hurt transgender people.

“I see no good reason to promote a divisive bathroom bill when it does nothing but harm to the economy, and some very vulnerable people could be harmed,” Straus said.

[…]

Straus, who has been a thorn in the side of Abbott and Patrick on red-meat issues, said he considered it “actually encouraging” that Patrick was talking about school finance. Straus has said that issue is more worthy of attention than most of those on the special-session agenda.

On Friday, when Abbott was showcasing his record as he announced for re-election in San Antonio, Straus made his point about the need to focus on core issues by citing CNBC’s annual ranking of America’s Top States for Business. In it, Texas fell from No. 1 to No. 4. The No. 1 state was Washington. Its governor and both senators are Democrats.

“While No. 4 is not a terrible place to be, I don’t like the direction. And I think that our Texas political leadership ought to be focused on making Texas No. 1 and reverse that slide,” Straus said.

They’re putting the “special” in “special session”, that’s for sure. The Observer has more.

Special session officially set

Brace yourselves, it starts next week.

Gov. Greg Abbott issued a declaration for a special session of the Texas Legislature Monday, formally inviting lawmakers back to Austin to pass “sunset legislation” that will keep several key state agencies open.

The long-awaited procedural move allows lawmakers to begin filing bills for the special session set to begin on July 18.

In addition to the formal declaration, Abbott also released a draft version of 19 additional items he plans to add to the special session agenda later on. Last month, Abbott announced that lawmakers would consider 20 total legislative items during the special session.

[…]

Secretary of the Senate Patsy Spaw said her office received a copy of the proclamation around 11:00 a.m., which she forwarded to senators to alert them that they could begin filing bills. A physical copy of the proclamation was also delivered to senators’ offices in the Capitol building. Senators began filing bills Monday afternoon.

Meanwhile the House, which has had an e-filing system in place for years, received over two dozen bills before 1 p.m.

Robert Haney, the House chief clerk, said the first bill filed Monday, House Bill 41 from state Rep. Mike Schofield, R-Katy, was received at 11:42 a.m. The bill aims to change how the state calculates the constitutional spending limit, which restricts how much the budget can grow from one biennium to the next.

Within an hour, dozens of other bills were filed including two pieces of bathroom-related legislation from state Rep. Ron Simmons, R-Carrollton. HB 46 would forbid “political subdivisions, including a public school district” from adopting or enforcing measures to “protect a class of persons from discrimination” in regulating “access to multi-occupancy restrooms, showers or changing facilities.” HB 50 is identical except applying only to a school district board.

See here and here for the background. Special sessions are limited to the agenda the governor sets. That has never stopped anyone from filing bills on whatever other subjects they wanted, some good, some bad, and some utterly pointless, because you never know when the governor may exercise his power to add to that agenda. The real question for this session is what happens when some number of Abbott’s bills don’t get passed – indeed, don’t even get a vote. “Sunset and sine die” may be the battle cry, but nothing would stop Abbott from calling everyone right back, as Rick Perry did in the past. How much is enough for Abbott? We’re about to find out.

What West Texas can do to improve their schools

Here’s an op-ed from the Statesman about one educator in West Texas who has had enough.

My hero this week is Graydon Hicks, Fort Davis superintendent of schools.

A West Texas publication published his open letter to Gov. Greg Abbott and Lt. Gov. Dan Patrick raking them over the coals for “the lack of positive legislative action for public schools in Texas” at the most recent session, which adjourned at the end of May without passing a school finance bill.

Hicks is a West Point graduate and an experienced school administrator. He is no-nonsense guy who does not mince words. After detailing the effect of shrinking state financial support for public schools on Fort Davis schools over the past 10 years — combined with an increasing number of unfunded mandates and requirements — Hicks wrote, “How much more do you want to harm our children?

“If your intent is to dissolve public education (and your actions are more than a clear signal of such), then simply go on the record with that statement and remove the state’s authority to further overburden us without financial support. Quit pontificating about bathrooms. Quit hiding your intentions behind righteous statements about school vouchers and choice.”

Hicks accompanied his letter with a chart showing the annually declining amount of state funding available to the Fort Davis school district and the increasing burden on local taxpayers since 2008. That year, state funding amounted to $3.9 million, or 68 percent of the school district’s budget. Local property taxes provided $1.8 million, or 32 percent. In 2017, the state will contribute $378,000 — about one-tenth of its 2008 commitment, or 15 percent of the total budget. Local taxes this year will provide $2.2 million, or 85 percent.

“The Fort Davis ISD has 226 students,” Hicks wrote. “It has no cafeteria, has no bus routes, has dropped our band program, has eliminated (or not filled) 15 staff positions, has cut stipends for extra-curricular activities, has frozen (or reduced) staff pay for one year, has cut extra-curricular programs, has no debt, and has increased our local tax rate to the maximum allowed by the law.

“We have nothing left to cut.”

I agree that Superintendent Hicks sounds like a fine fellow who is speaking truth to power. That said, I feel compelled to point out how Jeff Davis County (*), which is where Fort Davis ISD, voted in the last gubernatorial election:


Governor
			
Greg Abbott             623  60.54%
Wendy R. Davis          366  35.57%
Kathie Glass             31   3.01%
Brandon Parmer            9   0.87%


Lieutenant Governor
			
Dan Patrick             560  56.62%
Leticia Van de Putte    375  37.92%
Robert D. Butler         48   4.85%
Chandrakantha Courtney    6   0.61%

Hold that thought. Now here’s a similar story about the school funding woes in West Texas:

Educators were excited to hear Gov. Greg Abbott announce he would call lawmakers back to Austin for a special legislative session to consider $1,000 teacher pay raises.

But Donna Hale, superintendent at 200-student Miami ISD in rural Roberts County, is wondering where the money is going to come from. An unfunded mandate, she said, could throw a wrench into their already difficult budgeting process.

“That’s the last thing we really need – the state saying you’ve got to do this when they’re not offering any support for us,” said Hale, who already doubles as the district’s librarian and said she was considering taking over as principal to cut payroll costs.

A wind farm and a sea of oil and natural gas wells in Roberts County has been good to Miami ISD, giving the district a flush tax base to pay for teachers and buildings. But its $1 billion dollar tax roll was cut in half this last year amid tumbling oil and gas prices. A state aid provision that it has relied on in recent years to guard against economic downturns expires in September and will take more than a third of the district’s budget with it.

Many rural schools like Miami ISD, the only school district in the county, are facing a similar dilemma and pleading with the State Legislature to act. Lawmakers return to the Capitol next month for a legislative overtime period, but school finance reform has taken a back seat to bills regulating bathroom use and creating a school choice program.

Again, I sympathize, and again, I wonder how did Roberts County vote in 2014?


Governor
			
Greg Abbott             324  93.91%
Wendy R. Davis           15   4.35%
Kathie Glass              5   1.45%
Brandon Parmer            1   0.29%


Lieutenant Governor			

Dan Patrick             320  93.29%
Leticia Van de Putte     12   3.50%
Robert D. Butler         10   2.92%
Chandrakantha Courtney    1   0.29%

I think you get where I’m going with this. Now, I will stipulate that in 2014, one might have been able to believe that Greg Abbott, who was touting an expansion of pre-K, and Dan Patrick, who had served as the Senate Education Committee chair and had passed some bipartisan bills during that time, could at least have been okay on education and school finance issues. Here in June of 2017, after a session that included the Senate refusing to consider HB21 and a special session that includes vouchers on the agenda, it’s really hard to believe that now. Further, both counties are represented in the Lege by pro-education members. Roberts County is served by Sen. Kel Seliger, who was the only Senate Republican to oppose the main voucher bill, and by Rep. Ken King, who was endorsed by Texas Parent PAC in the 2012 primary. Jeff Davis County has two Democrats, Sen. Jose Rodriguez and Rep. Cesar Blanco, in the Lege. Both were unopposed in 2016, and Blanco was unopposed in 2014, but in all three cases they drew a comparable number of votes to Republicans on the ballot. In addition, former Rep. Pete Gallego carried Jeff Davis County in 2010, even as Rick Perry and the rest of the Republicans were also winning it. The voters there do vote for pro-education candidates. Will they – and other counties like them – recognize in 2018 that “pro-education” does not describe Abbott or Patrick? I for one will have a lot more sympathy for their plight if they do.

(*) Yeah, I know.

School finance bill is dead

It started with this.

State Rep. Dan Huberty said Wednesday that he would not accept the Senate’s changes to his school finance bill, launching a last-ditch effort to hammer out a compromise with less than a week left in the session.

After a passionate speech railing on the Senate for gutting his bill, Huberty, a Houston Republican who is chairman of the House Public Education Committee, announced he has decided to request a conference committee with the Senate on House Bill 21.

The bill was originally intended to inject $1.5 billion into the state’s funding for the majority of public schools and to simplify some of the complex, outdated formulas for allocating money to school districts across the state. The Senate took that bill, reduced the funding to $530 million, and added what many public education advocates have called a “poison pill”: a “private school choice” program that would subsidize private school tuition and homeschooling for kids with disabilities.

“Members, some of your schools will be forced to close in the next year based on the committee substitute of House Bill 21,” as passed by the Senate, Huberty said, before moving to go to conference. “I refuse to give up. I’ll continue trying. Let’s at least attempt to rescue this bill.”

The House voted 134-15 to request a conference committee with the Senate on the bill.

See here and here for the background. The House’s request for a conference committee was denied by the Senate.

An effort to overhaul the state’s beleaguered school finance system has been declared dead after the Texas Senate Education Committee’s chairman said Wednesday that he would not appoint conferees to negotiate with the House.

“That deal is dead,” Larry Taylor, R-Friendswood, said.

Taylor’s remarks come after his counterpart in the House, Dan Huberty, R-Houston, gave a passionate speech in which he said he would not accept the Senate’s changes to House Bill 21 and would seek a conference committee with the Senate.

HB 21 was originally intended to inject $1.5 billion into the state’s funding for the majority of public schools and to simplify some of the complex, outdated formulas for allocating money to school districts across the state. The Senate took that bill, reduced the funding to $530 million, and added what many public education advocates have called a “poison pill”: a “private school choice” program that would subsidize private school tuition and homeschooling for kids with disabilities.

Lt. Gov. Dan Patrick pronounced the bill dead in a statement Wednesday afternoon.

“Although Texas House leaders have been obstinate and closed-minded on this issue throughout this session, I was hopeful when we put this package together last week that we had found an opening that would break the logjam. I simply did not believe they would vote against both disabled children and a substantial funding increase for public schools,” he said in the statement. “I was wrong. House Bill 21 is now dead.”

House Speaker Joe Straus said in a statement Wednesday that the Senate has not prioritized school finance reform this session.

“We appointed members of a conference committee today because the House was willing to continue to work on public school finance immediately. Unfortunately, the Senate walked away and left the problems facing our schools to keep getting worse,” he said.

HB 21 was the first time in years that the Legislature has taken up major school finance reform without a court mandate.

HB21 was also the vehicle for addressing the recapture issue that is costing HISD (among other districts) millions and which is being litigated on the grounds that the TEA didn’t make its changes to the formula properly. You can kiss that good-bye as well. It’s somehow fitting that the Lege could not come to an agreement on school finance, as this proves the lie of the Supreme Court ruling that insisted they could do this on their own without the Supremes forcing them to. Not as long as we have Dan Patrick presiding over this Senate they won’t. The Chron has more.

Senate wrecks school finance bill

It’s what they do.

The Texas Senate has scrapped much of a proposal to revise how the state funds education in place of a plan to create a school voucher program for children with disabilities.

The bill passed the Senate 21-10 at 12:50 a.m. Monday, marking the second time in two months the chamber has approved legislation that would allow parents to use public school dollars to subsidize their child’s tuition at a private school.

“It’s heartbreaking,” said Sen. Larry Taylor, a Friendswood Republican and Education Committee chairman sponsoring the bill. “This would empower some of those parents to have some leverage.”

The new language, added on the Senate floor late Sunday night, now includes money for charter school facilities, autism grant funding and programming for special education students transitioning out of school. The changes also reduce the amount of new money into education from about $1.9 billion to about $500 million during a tight budget cycle amid lower-than-expected state revenue.

The changes come to House bill 21, the lower chamber’s flagship proposal to begin a multi-year process of rehabbing the state’s school funding formula after the Texas Supreme Court called the system constitutional but in need of improvement. The House measure deleted outdated pieces of the formula, reduced recapture and added weights to allocate more money per student with dyslexia or learning English as a second language.

The Senate hijacked the bill shortly after it arrived in the upper chamber, adding to the bill a school voucher program, which the House has opposed, throwing the fate of the school finance fix into jeopardy.

Basically, HB21 as we once knew it is dead. The AFL-CIO changed its position on it from Support to Oppose a few days ago as these changes were first being made. At this point, the House should stick to its guns on vouchers and reject the amended bill. The Trib has more.

More on the HISD recapture re-referendum

Here’s the full Chron story about Saturday’s re-vote on recapture.

About 84 percent of constituents voted “for” HISD’s Proposition 1, giving the school district the green light to send $77.5 million to the Texas Education Agency rather than let the state forcibly remove some of most valuable commercial properties from the district’s tax rolls.

The reversal from the “come-and-take-it” mentality followed trustees’ meetings with state officials and lawmakers earlier this year. Board members feared vindictive action from Austin and also had second thoughts about going with the more costly “detachment” option.

Christopher Busby, an HISD teacher at the Sam Houston Math, Science, and Technology Center who voted for Proposition 1 on Saturday, said paying recapture was the lesser of two evils.

“Recapture is not on the ballot; recapture has already happened. This is about how we handle recapture,” Busby said. “The solution that does the least damage to the district is a ‘for’ vote.”

Mark Jones, a political science fellow at Rice University’s Baker Institute, said HISD gained nothing through the two referenda, which cost the district an estimated $1.7 million.

“In the end, what HISD has done is use a lot of its political capital and has gained absolutely nothing,” Jones said. “They used political capital in (the) fall to persuade people to vote no, and they used political capital this spring to get those same people to vote yes. But they could have just said yes and paid the state like everyone else.”

[…]

Most trustees agree that referendum produced some desirable outcomes – the Senate authorized a work-study committee to look into overhauling the state’s school finance system in January, and Rep. Dan Huberty, R-Houston, proposed a bill that would increase state education spending and lessen the amount districts would pay under recapture.

After the November vote, board President Wanda Adams and trustees Skillern-Jones, Anna Eastman and Mike Lunceford grew worried that refusing to pay the state recapture fee willingly would have dire consequences for the district and the board.

Trustees Jolanda Jones and Manuel Rodriguez Jr. insisted that the district hold fast in its decision to withhold the recapture money. Otherwise, they argued, HISD risked losing ground in getting the state to rethink recapture and its school funding formulas.

“The whole point was to get the Legislature to move on this. The only reason they’re paying attention was not because we have a great lobbying team, it’s because we voted no,” Jones said in February. “The second we relent and bend over, it’ll ruin this for rest of state and our momentum because everyone is looking at Houston.”

Jones with Rice’s Baker Institute said the state’s actions were more likely the result of a May 2016 Texas Supreme Court ruling that found while the state’s school finance formula was constitutional, it desperately needed to be overhauled.

Please note that the November election was required by state law once HISD was put into recapture. Only the May election was optional. As you know, I agree with the trustee’s interpretation of what the November “No” vote meant, and I disagree with Mark Jones. I’ll cite David Thompson as my evidence for that. What happens from here is unclear, but I believe that there is now a greater appreciation of how messed up our school finance system is – I mean, raise your hand if you knew six months ago that recapture funds helped offset state spending on education instead of going to other school districts – and I believe there is a greater consensus about what needs to be done to fix it. Not at the top, of course – we’re never going to get a real fix with the Governor and Lt. Governor we now have – but among legislators themselves. There’s still a lot of work to do – HISD in particular can and should keep pushing the TEA to give it and other recaptured school districts credit for transportation costs and pre-k programs – but progress has been made. I’m happy with the way things played out.

House approves bill to kill margins tax

Dumb.

The Texas House on Thursday approved a proposal that would phase out an unpopular business tax that provides funding for public schools.

The proposal by state Rep. Dennis Bonnen, R-Angleton, would not reduce the state’s franchise tax during the current penny-pinching legislative session, but it would do so in future years. Under Bonnen’s bill, economic growth would trigger reductions in the tax, which currently brings in about $8 billion every two-year budget cycle, until it ultimately disappears.

About $1.8 billion in franchise tax revenue in the current two-year budget cycle goes to the Property Tax Relief Fund, which pays for public schools. Democrats, arguing that the tax cut would cause lawmakers in later years to underfund crucial public programs, railed against the proposal for nearly two hours. They offered a series of amendments that would have lessened the extent of the tax cut or redirected funds for college tuition, pre-kindergarten and other priorities, but all were defeated.

The final vote took place late Thursday evening at the end of a long day on the House floor, which followed a marathon debate Wednesday over “sanctuary” jurisdictions that lasted until roughly 3 a.m. When Bonnen’s proposal finally hit the floor, few Republicans offered any remarks in response to Democrats’ outrage; most lawmakers in the chamber appeared to be paying little attention.

[…]

Businesses dislike the franchise tax, often called a “margin tax,” because they say it’s overly complicated and can punish them in less-prosperous years. Because it’s based on a business’s gross receipts, a business can still be required to pay the tax even in years it takes a loss. Many call the tax, which was passed as a way to reform the state’s school finance system, an unnecessary burden, and high-profile Republicans including Gov. Greg Abbott have sought its demise.

Lawmakers in 2015 cut the tax rate by 25 percent, which gave them $2.6 billion less revenue to help craft a budget this year. Proponents of the tax’s elimination argue it would stimulate the state’s economy and create jobs.

In the short term, it’s difficult to say just how much revenue is at stake in Bonnen’s proposal because the tax is highly dependent on economic conditions. A fiscal note written by the state’s Legislative Budget Board estimated it could cut public school funds by up to $3.5 billion in the 2020-2021 biennium.

I mean, look, I know the margins tax was a poorly conceived kludge that everyone hates (or at least claims to) and which has been a top GOP whipping boy for a couple of sessions, but please do keep two things in mind. One, this tax, which replaced the also-hated and seldom-paid franchise tax, was created in 2006 to help fill the revenue void left by the Supreme Court school finance decision in 2005 that led to a mandated across-the-board property tax cut. It was never going to fully fill that void, and indeed its poor design and regular underperformance has been a problem, but it at least made up for some of the funding for schools that disappeared when the previous system was declared to have been an unconstitutional statewide property tax. Something is going to need to replace the revenue lost to this tax being (eventually) eliminated, and all we have right now is wishful thinking about economic growth, a continued reliance on local property taxes, and a handful of magic beans. And two, it’s probably not a coincidence that the amount of revenue lost in this biennium to the previous one’s margins tax cut is almost precisely the amount the House and Senate are arguing about in order to make this session’s budget “balance”. Cause and effect, y’all. You should have one of your interns Google it.

House passes school finance reform bill

Well done.

Rep. Dan Huberty

State Rep. Dan Huberty succeeded at a difficult task Wednesday: getting the Texas House of Representatives to vote for legislation overhauling the funding system for public education, without a court mandate.

After a four-hour discussion of more than 30 proposed amendments, the House voted 134-16 to tentatively accept its top education leader’s plan to inject $1.6 billion into public schools, simplify the complex formulas for allocating that money, and target certain disadvantaged student groups for more funding. The bill must still be approved on a third and final reading in the House.

[…]

The tentative victory comes after senators approved a budget that cuts state funding for public schools by $1.8 billion in general revenue, and uses local property tax revenue to make up the difference.

Huberty’s bill would increase the base per-student funding the state gives to school districts, in part by increasing funding for students who are bilingual and dyslexic. The Legislative Budget Board estimates about 96 percent of districts and 98 percent of students would see more money under the bill.

“This is the first time in over 30 years that we have the opportunity to vote for school finance, to make a holistic change,” Huberty said before Wednesday’s vote.

Throughout the evening, Huberty successfully moved to table many of his colleagues’ proposed amendments to the bill, either because they would add to the bill’s price tag or because he deemed them irrelevant to his legislation.

“This is the school finance bill,” he reminded Rep. Jason Isaac, R-Dripping Springs, who unsuccessfully tried to attach a provision to HB 21 that addressed the testing and accountability system.

The House budget allowance for this bill would provide more funding to more school districts for busing, but many legislators expressed concern that the money would be stretched thin because districts that didn’t provide bus service would still receive transportation money. None of the amendments to address transportation funding passed.

Rural legislators banded together to add a provision that would help hundreds of small districts with fewer than 1,600 students. The provision, proposed by Rep. Drew Darby, R-San Angelo, would remove an existing financial penalty for school districts smaller than 300 square miles, which was originally intended to encourage them to consolidate.

Darby proposed putting all districts with fewer than 1,600 students at similar levels of funding, which he said would increase funding for more than 400 districts.

“Almost half the school districts in Texas will benefit from these amendments,” he said.

Legislators voted 86-59 to approve Darby’s amendment, despite Huberty’s opposition.

See here for the background. The Darby amendment was about Additional State Aid for Tax Reduction, for which you can get some background here. Getting something through the House is a big accomplishment; as the story notes, Rep. Jimmie Don Aycock declined to put a bill forward in 2015 on the grounds that it didn’t stand a chance. Priorities are shifting, and there seems to be a lot of support for finally addressing some of the serious shortcomings in the current system. Which, if it happens, would vindicate the Supreme Court’s decision to not force the issue but leave it up to the Legislature. Assuming that Dan Patrick and the Senate – and Greg Abbott – go along, of course, That’s far from a sure thing, as a brief perusal of the Senate’s budget proposal would show. But it’s a start, and it could happen. That’s more than what we’ve had in a long time. Kudos all around.

House releases school finance fix bill

A step in the right direction.

Rep. Dan Huberty

The top public education policymaker in the Texas House unveiled a $1.6 billion plan on Monday that he described as a first step to overhauling the state’s beleaguered school funding system.

At a Capitol press conference, state Rep. Dan Huberty said House Bill 21 would boost per-student funding for nearly every public and charter school in the state while reducing the amount of money wealthier school districts are required to give up to buoy poorer ones. The state’s so-called Robin Hood plan has become a hot-button political issue as large districts like Houston have recently had to begin making payments.

“House Bill 21 will not only improve our schools but it will also reduce the need for higher property taxes,” said Huberty, a Houston Republican who chairs of the House Public Education Committee.

[…]

He said HB 21 would increase the basic funding for almost all school districts from $5,140 to $5,350 per student per year. That would happen in part through an increase in transportation funding by $125 per student for all school districts, including property-wealthy districts that currently have limited access to that money.

It also would increase the amount of money the state gives to schools for students with dyslexia. And it would include additional funding for high schools and non-professional staff.

Huberty estimated it would lower payments that property-wealthy school districts pay to the state to subsidize property-poor school districts by $163 million in 2018 and $192 million in 2019. As the state’s share of school funding has decreased, more school districts with swelling enrollment are on the hook for such Robin Hood payments.

The bill is similar to an unsuccessful school finance initiative filed in 2015 that would’ve injected twice as much money into the system — $3 billion — and boosted per-student funding across the board. Still, $1.6 billion is a significant sum amid the current budget crunch.

This bill had a hearing yesterday as well, and despite being overshadowed by the sound and fury of the bathroom bill hearing, there was a report about it.

The bill would inject about $1.6 billion into the public education system, boosting funding for almost every school district in the state although a few would be left out. It also wouldn’t renew a soon-expiring program that awards supplemental state funds to more than 150 districts to offset a decade-old property tax cut — a major concern for education officials who depend on the funding. A provision in the bill that would award some grant money to make up for the loss isn’t enough, they told the committee Tuesday.

“My districts are going to lose,” said Mike Motheral, executive director of the Texas Small Rural School Finance Coalition. He said he represents 14 West Texas school districts that could lose up as much as 53 percent of their state revenue with the end of the state aid program.

“One of my districts will lose $4.5 million and they have a $10.5 million budget,” he said.

When the Legislature reduced property taxes by a third in 2006, it guaranteed school districts like the ones Motheral represents at least the same amount of funding they received in 2005-06 through a state aid initiative. The extra aid expires Sept. 1, so many districts have been asking for an extension to avoid falling off a funding cliff. About 156 school districts currently receive such aid.

As written, the bill proposes letting the initiative providing extra state aid expire and instituting a $100 million two-year grant program, prioritizing districts that would lose money through the new funding formulas. That’s not enough to cushion the blow, school officials told the committee Tuesday.

[…]

Numbers released Monday along with the bill show that about 35 of the state’s 1,200 school districts and charters would lose funding in 2018 and 58 would lose funding in 2019. The rest would see basic funding increase from $5,140 to $5,350 per student annually thanks to an increase in transportation funding and more money for students with dyslexia.

Many school officials and advocates who testified on the bill Tuesday said it leaves too many behind.

“We want a bill that has no losers,” said Christy Rome, executive director of Texas School Coalition, which represents mostly wealthier school districts.

Here’s HB21. I agree with Christy Rome and Mike Motheral. There shouldn’t be any losers in this. As much as HISD and the other districts affected by recapture should be made right, it should not come at the effect of these other districts. The right answer is the put enough money in to fix the formulas. Easy to say, and Lord only knows what kind of reception this gets in the Senate. But this is what it comes down to, and what needs to happen. The Chron has more.

A re-vote on recapture?

This is very interesting.

After reconsideration of an 18-year-old law, state education officials are adjusting their school finance calculations in a way that could save several dozen school districts roughly $100 million — while costing the state the same amount in revenue.

One of the apparent beneficiaries is Houston ISD, where the change means taxpayers will be sending about $60 million less to the state for public education than they had expected.

At issue is a calculation for recapture — the state’s term for the money that districts with higher property wealth send to the state for use in districts with lower property wealth.

It’s more commonly known as the Robin Hood system of school finance.

Some of those rich districts — “rich” here refers to the value of the districts’ property and not the income of its residents — have adopted homestead exemptions that are bigger than the exemptions mandated in state law. All school districts in Texas have to let homeowners deduct $25,000 from their taxable property values, but districts are allowed to raise those exemptions up to 20 percent of a home’s value.

Not all districts do that, and not all of those that do that are property rich. But some — including Houston ISD, the biggest one in the state — offer the higher homestead exemptions and are also subject to recapture, and they’re the ones subject to the new calculations from the Texas Education Agency.

In a letter sent Feb. 1 to school administrators, the agency’s associate commissioner for school finance said that starting in the current school year, TEA will include half of the money the districts have forfeited in optional homestead exemptions when calculating how much recapture money those districts should pay. That’s the agency’s new reading of a law that’s been on the books since 1999.

“The commissioner thinks he has the latitude to give them half credit for this,” said state Sen. Paul Bettencourt, R-Houston.

The recalculations would trim those districts’ bills considerably — by $100 million in rough numbers. In addition to Houston ISD, the unofficial list of beneficiaries of the new calculation include Spring Branch ISD, Highland Park ISD, Lake Travis ISD and Comal ISD. Officials with TEA said they have not yet calculated exact amounts for each district but said the $100 million is a reasonable estimate of the total cost this year.

[…]

Houston ISD said Friday evening that the board will consider a do-over and will vote next Thursday on whether to hold another election on May 6 to give voters an opportunity to reverse that November vote.

The effect of this new interpretation of the law would be to reduce HISD’s bill for recapture by about $60 million. HISD would still need to pay a bit more than $100 million to the state, so this is hardly a cure-all, but it’s a significant savings.

To me, this is a win for the No vote on recapture last November. As the story says, the TEA could have interpreted the law in this fashion, to allow districts that grant the higher homestead exemption more credit in the byzantize school finance system, years ago. I believe one reason – maybe not the only reason, but surely a big reason – why it didn’t happen before now is because there wasn’t a loud enough voice demanding the change. HISD’s No vote on recapture was a big deal that got people’s attention and focused some energy on just how screwy the system had become. Another boost to their argument was that HISD was being penalized for having a lower tax rate than it could have had. This particular kink in the way the finances were calculated was one of the things that “No on recapture” advocates like David Thompson pointed out, as it was a simple fix that could be easily implemented and would not only be fair but also have a big effect. Maybe this happens anyway if HISD meekly paid its recapture bill, but if anything should be clear at this point in time, it’s that kicking up a fuss tends to be a better way to get what you want.

Bettencourt’s office put out a press release lauding HISD for scheduling another vote. I haven’t seen any other reporting on this – as of Saturday there was nothing on HISD’s website or Facebook page about this – so he’s either being a bit premature or he’s gotten some verbal assurance that the Board will indeed approve a May election at its Thursday meeting. The Board can claim a victory here, and it should be able to sell the idea of writing a smaller check to the state to its constituents and allies from the last election. I’d be inclined to vote Yes this time around – the problem isn’t fully solved, and even without a big school finance overhaul there are other things that could be done for recapture districts like giving credit for pre-K students, but it’s a step in the right direction. It will be interesting to see how the Board reacts, and to see if groups like CVPE and the teachers’ union go along. Whatever else happens, this was a good thing.

Senate to begin studying school finance changes

We’ll see what this looks like.

Leaders in the Texas Senate are vowing to find ways to overhaul the state’s school finance system, saying a recent Texas Supreme Court decision granted them a prime opportunity to shake up the heavily criticized status quo.

On Monday, they announced the creation of a Senate budget working group — led by Friendswood Republican Larry Taylor — to tackle the issue. That group will work with the Senate Education Committee, which Taylor chairs, to propose replacements for the current school finance system.

“The opportunity is huge for us to get it right,” said Jane Nelson, chairwoman of the Senate’s powerful Finance Committee. “We need a whole new method of school finance.”

They’ll face an uphill climb in a session where legislators face several obstacles to major reform, not the least of which is money. The announcement comes a week after the Senate unveiled its preliminary budget, which did not include additional funding for public education.

During the Finance Committee’s first hearing of the 2017 legislative session on Monday, Nelson, R-Flower Mound, advised the newly formed working group to “start with a clean slate” in recommending a new school finance scheme. “It should be less complicated, innovative and should meet the needs of our students,” she added.

[…]

“We’re left with a question mark as to what this effort will mean by the Senate,” said Lynn Moak, a school finance expert at the Austin-based consulting firm Moak, Casey & Associates. The main question is “whether they’re trying to reform school finance within existing dollars or looking for possible additional dollars to fund the system.”

Nelson last week unveiled the Senate’s $213.4 billion two-year budget proposal, calling it a bare-bones starting point for financial discussions in what promises to be a particularly tight-fisted year. That proposal did not touch funding formulas for public education.

The House’s base budget — also released last week — included an additional $1.5 billion that could be spent on public education only if the Legislature reforms the school finance system.

Here’s the Chron story, which has the local angle.

In Houston, where voters last November overwhelmingly rejected having local taxpayers pay the state for $162 million in so-called “recapture” of school funds, HISD Trustee Jolanda Jones said the creation of the Senate group signaled that the message from the ballot initiative had been heard in Austin.

“They’ve done more with HISD pushing back than they have in 24 years of hearing school districts complain about it,” Jones, a vocal opponent of “recapture,” said Monday. “Recapture is based on the premise of Robin Hood, taking from the rich and giving to the poor, but that’s never what it did. It took from the poor and reallocated to the poor. Help me understand why 75 percent of our kids are poor, really poor, receiving free and reduced-priced meals, and you’re taking money from us? It makes no sense; we need more money, not less.”

Because the district will refuse to pay the recapture fee, the Texas Education Agency has threatened to remove commercial buildings from HISD’s taxing district this July so it can give the money to other “property poor” districts.

HISD Trustee Anna Eastman said she hopes lawmakers will act before the TEA takes the property tax revenue from local commercial properties, though she is not sure overhauling the school finance system can be done in one session. But she was heartened to see the Senate look at the funding system.

“School finance can’t be based on some kind of cryptic formula that makes it so kids in a certain pocket are getting lots of money and others are getting little,” Eastman said. “Areas such as ours shouldn’t be picking up all the slack for areas that can’t generate revenue off property growth. It shouldn’t be that big of a gap.”

In Pearland, where local schools receive $9,358 per student, the lowest share in the Houston area, Superintendent John Kelly said that if the state does not increase its share, his district may have to dip into reserve funds to provide any kind of an increase to employees or to meet rising costs. He said lawmakers have been disingenuous in saying they want to lower taxes while requiring districts to raise more local taxes.

“They talk out of one side of their mouth ‘tax cuts’ for people, but on the other side they’re confiscating the increase in tax values across the state,” Kelly said of the Legislature.

That would need to be a part of any overhaul for it to be worth the name. I’m more wary than optimistic. I fear what we will get will be another shuffling of existing funds that will mostly change who’s getting screwed less. I don’t have any faith that Dan Patrick’s Senate will put more money into the system, or that they will alter it in a way that allows for, let alone mandates, covering the costs of growth in a sensible fashion. Let’s not forget that at the same time this is going on, there will be a renewed push for private school vouchers, which will only drain more money from public education. They could surprise me in a good way, and I will reserve judgment until I see what they come up with, but I do not start out feeling very hopeful about this. The track record of the players involved argues otherwise. RG Ratcliffe, who also sees vouchers in this, has more.