How does school finance work, anyway?

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

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

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

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

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

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

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

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

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

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

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

The future turned out to be pretty near.

Again, read the whole thing.

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