The Texas Constitution provides:
“A general diffusion of knowledge being essential to the preservation of liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.” Tex. Const. art. VII, sec. 1 (emphasis added).
On August 28, 2014, a state district court judge determined that Texas’s public school finance system failed to comply with the mandates of the Texas Constitution. This ruling was a direct result of the Legislature’s decision in 2011 to cut $5.3 billion in funding for public school districts, which had already been dealing with previous budget shortfalls, while simultaneously raising academic standards designed to prepare students to compete in the 21st Century. Although the Legislature restored some of those cuts in 2013 and 2015, school districts are still unable to sustain a consistent stream of revenue sufficient to adequately educate and prepare our rapidly growing and diverse student body. While the state’s appeal of the district court ruling was pending in the Texas Supreme Court, the Legislature in 2015 did absolutely nothing to address the problems carefully and thoroughly delineated in the district court’s judgment.
Although the Texas Supreme Court eventually upheld the constitutionality of Texas’s public school finance system in 2016, the Court was critical of the Legislature’s ongoing neglect of its responsibility to provide our children with a system that works well, instead of one that simply limps along. The Court wrote: “Our Constitution endows the people’s elected representatives with vast discretion in fulfilling their constitutional duty to fashion a school system fit for our dynamic and fast-growing State’s unique characteristics. We hope lawmakers will seize this urgent challenge and upend an ossified regime ill-suited for 21st century Texas.”
Our public school finance system is made up of three funding tiers: formula funding, enrichment funding, and facilities funding. The first two tiers, formula and enrichment, are subject to recapture. Established in 1993, recapture, also known as “Robin Hood,” involves the State taking tax revenue collected by a local school district and redistributing it to other school districts throughout the state. In order to determine which school districts will be subject to recapture and how much tax revenue is taken from them, the Legislature relies on an arbitrary “per-student-basic allotment” (“PSBA” ) increased by a Cost of Education Index (CEI) that takes into account the differences in labor costs, such as teacher’s salaries, throughout the state. Currently, the adjusted PSBA is set at $5140, which is one of the lowest in the country. The PSBA is an important number because it represents the amount of money that the Legislature has determined districts need, at a minimum, to spend on each student to meet minimum educational needs.
Under the first tier of our public school finance system, a formula determines how much financial aid a school district will receive from the State. That formula provides as follows: (*basic allotment x student population) – (total tax revenue generated by tax of $1/$100 property valuation)= state aid. School districts that are considered “property wealthy” always raise much more revenue with a $1.00 tax rate than the basic allotment requires. Because AISD, for example, is a “property wealthy” school district, it must turn over to the State about 60% of what it collects in tax revenue. But, AISD has argued that the 40% it is allowed to keep is insufficient to meet the basic needs of educating its student body, particularly because their student body consists of a large number living in poverty, have special needs, and English is their second language. These factors have been shown to increase the cost of education.
It has been argued in court that the Legislature’s failure to update the CEI and other formula funding factors are direct causes of the inequities in the system. Others have argued that the neglect is a deliberate political maneuver to shift blame for high taxes from the state legislature to local taxing entities. Indeed, when 60% of tax revenue from property wealthy districts is redistributed, the State actually receives a windfall because it does not have to provide as much aid to the property poor school districts. It also means, however, that the tax payers living within property wealthy districts are bearing a disproportional share of public education costs, while, at the same time, they are having difficulty providing a quality education to their own student populations.
Which brings us to the second tier of our public school funding system, enrichment funding. Tax revenue generated by a tax rate above $1.06 is subject to recapture, but tax revenue generated by a tax rate between $1.01-$1.06 is not subject to recapture. So school districts, who cannot sufficiently pay for the costs of educating their student body within the first tier, but don’t want any more of their dollars recaptured, must stay within the $1.01- $1.06 range. However, school districts only have independent authority to raise tax rates up to $1.04. In order to raise tax rates above $1.04, school districts have to obtain voter approval. Currently AISD’s combined tax rate is 1.192, which raised over $1.1 billion last year. Nevertheless, due to the problems with our current system, some “property wealthy” school districts, like AISD, are having a hard time maintaining quality education standards even though their rates are high and they raise an obscene amount of money, while some “property poor” school districts are receiving more money than they know what to do with.
Without raising taxes, we can improve outcomes for all students, including special needs students by simply adjusting the PSBA and updating the cost education index (CEI). Moreover, property tax rates would likely come down if school districts are receiving adequate funding at the Tier 1 level.
