The Bigger Picture: Understanding the Texas Revenue System
For more than twenty years, the Center for Public Policy Priorities (CPPP) has been a nonpartisan, nonprofit research organization committed to improving public policies and private practices to better Texas economic and social conditions. In 2008, CPPP analysts Dick Lavine and Eva Castro published, an easy-to-digest booklet on Texas taxes and public spending to help you think about the challenges facing us as Texans. Our public systems and structures, such as our public education systems, help make this a great state, securing the common good for us all. This primer discusses what we need to do to ensure our continued prosperity. Given that school finance constitues well over one quarter of the budget, it is important to understand school finance within the context of the state buget. Below is a link to the primer:
What are other people saying?
Following are links to websites that provide additional sources of information of public school finance.
Equity Center : Founded in 1982, the Equity Center is the only Texas association that exclusively represents the interests of low and mid-wealth school districts, whose access to funds is significantly less than that enjoyed by other districts.
Texas Education Crisis Coalition: Founded in 2005, the Coalition to Invenst in Texas Schools' mission is to ensure education excellence for all Texas public school students through increased funding. The Coaltion includes a vareity of organizations such as the Texas Assosciation of School Boards, the Equity Center, and the Texas School Coalition.
Coalition to Invest in Texas Schools: The Texas School Coalition is organized for the purpose of bringing together independent school districts that have an interest in improving the school funding laws for all school districts. The organization provides research, information, and consultation regarding school finance legislation. The Coalition represents 118 Texas school districts.
What is problematic about the current system?
To ensure that school districts did not lose revenue as a result of property tax relief granted in 2006, the Legislature enacted what is called a hold harmless feature. This feature substitutes state aid for lost school property taxes.There are many potential problems associated with the hold harmless feature. As noted by the Texas Association of School Boards, the feature “leaves some districts at a relative advantage while leaving others at a disadvantage”. This can be explained in light of the fact that there is a fixed amount promised to each school. This amount does not change to reflect changing circumstances, or the different needs of different school districts. For this reason, the hold harmless feature is a source of concern, and will hopefully be a source of debate during the next congressional session.
What are some recent changes to the system?
In recent years, there have been significant changes to the Texas school finance sytem. The most recent case, West Orange-Cove v. Neeley, began in 2001, when plaintiff school districts argued in district court that they were forced to tax at the maximum rate in order to educate students at the minimum level. Plaintiffs argued that local property taxes had effectively become a state property tax, because so many districts taxed at the limit just to provide essential services. In 2005, the Texas Supreme Court struck down the state school finance system because it relied on an unconstitutional state property tax. In response, the Texas Legislature was called into special session in 2006. The resulting legislation provided for a one-third reduction in rates so as to provide school district's meaningful discretion in setting tax rates. According to the Legislative Budget Board, the estimated cost of replacing local tax revenue with state funds will be about $2.1 billion in fiscal year 2007 and approximately $13.5 billion in fiscal 2008-09.
How did we get the system?
The current finance system is largely the result of Edgewood v. Kirby, a landmark case concerning public school finance, filed against the commissioner of education, citing discrimination against the economically disadvantaged. The plaintiffs in the Edgewood case contested the state's reliance on local property taxes was inherently unequal because property values varied greatly from district to district, thus creating an imbalance in funding. In its opinion (1989), the Texas Supreme Court noted that the Edgewood ISD, among the poorest districts in the state, had $38,854 in property wealth per student, while the Alamo Heights ISD, which is in the same county, had $570,109 per student. These differences produced disparities in the districts' abilities to hire good teachers, build appropriate facilities, offer a sound curriculum, and purchase such important equipment as computers.
Following the court's order, the legislature met in four consecutive and often contentious special sessions to resolve the financing issue. Their solution is now known as the Robin Hood Plan. The Robin Hood plan is a media nickname given to legislation enacted by the Texas in 1993 to provide court-mandated equitable school financing for all school districts in the state. Similar to the legend of Robin Hood, who "robbed from the rich and gave to the poor", the law "recaptures" property tax revenue from property-wealthy school districts and redistributes those funds to property-poor districts.
How does the Texas' public school finance system work now?
Public School Finance can be an intricate maze to follow, but the first step to understand funding is to understand where that money comes from. Sources of revenue are from: local, state, and federal levels. These sources are outlined as follows. Approximately 55% of funds comes from the local property taxes. The state government provides roughly 33.9% of necessary funds. Most state funding for education is pulled from a special account designated specifically for education; however, additional sources of revenue are also pulled from things like lottery proceeds or funds recaptured from wealthy school districts. Lastly, the federal government picks up the remaining 11.5%. Thus, the Texas public school funding system is therefore a shared arrangement between local, state, and federal sources. Funding calculations are based on factors such as student attendance, tax rates, and property value per student. Because property value varies across communities in Texas, the state provides funding to school districts in inverse relation to district wealth per student. If you are interested in reading a great overview of Texas school finance, please contact the the Texas Association of School Boards, who currently prints a fantastic primer entitled: "The Basics of Texas School Finance".
Public Education
PUBLIC SCHOOL FINANCE
Today, Texans face the challenge of providing an education to its youth. Given that millions of children’s futures are dependent upon proper education and billions of tax dollars are spent providing for those futures, school finance is of paramount importance. Texas Impact calls on Texas lawmakers to enact a public school finance system that is both EQUITABLE and ADEQUATE.
- 1. Texas' public school finance system must be EQUITABLE, both in how revenues are collected and in how funds are distributed.
- Individuals and groups with more resources should contribute at least as large shares as those with fewer resources.
- Funds should be distributed so that every Texas child has access to the same quality of education.
2. Texas' public school system must provide ADEQUATE funding to the existing school system. Examples of insufficient funding in the current system include overcrowded classrooms, diminished teacher benefits, and use of outdated textbooks.
