Two school finance stories

Posted on December 21, 2015 by Charles Kuffner

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

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

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

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

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

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

[…]

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

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

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

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

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

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

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

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

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

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

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

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