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Analysis: A $100 Million Reinterpretation of Texas School Finance Law

A reinterpretation of the state’s school finance law will leave $100 million in the accounts of some of the state’s property wealthy districts — and will leave a hole of that size in an already tight state budget.

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.

It’s a boon to those districts and a hit on the state’s tight budget. “This will reduce the recapture/detachment demands on Houston ISD by approximately $60 million, and on school districts other than Houston ISD by approximately $40 million this year — a total hit to an already challenged state budget of $100 million and likely to increase in years going forward,” wrote Sheryl Pace, an analyst for the Texas Taxpayers and Research Association.

In Houston, it eases the size of a pending property tax headache. Houston ISD is new to Robin Hood, and voters there — asked for the first time ever in November’s election — said they did not want to send money to the state for use in other districts. In Houston ISD’s case, that’s an estimated $165 million.

(Actually, they voted on this murky language dictated by state law: “Authorizing the board of trustees of Houston Independent School District to purchase attendance credits from the state with local tax revenues.”)

That triggered an unused and breathtaking provision in the school finance laws that requires the state education commissioner — currently Mike Morath of Dallas — to take away enough of Houston ISD’s commercial property tax base to raise $165 million for other districts.

Unless something changes — there have been calls for a quick election where the voters might reconsider — that means Morath will start with the most valuable commercial properties in Houston ISD and assign them to poorer districts until he’s taken away enough property to cover Houston ISD’s $165 million Robin Hood bill.

Last week’s letter doesn’t erase that bit of accounting violence, but it would trim the size of the amputation; instead of sending $17.4 billion in value from its commercial property tax rolls to the rolls of poorer districts, Houston ISD would send $11.1 billion, according to estimates from the taxpayers and research association. The owners of those severed properties could end up attached to districts with higher property tax rates; it’s fair to expect some noise if they do.

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. Bettencourt said he thinks the district ought to just pay what it owes in recapture money and leave the property tax rolls alone.

“I’m glad they’re coming to their senses,” he said.

That’s not the end of this. In its letter to districts, the TEA tried to protect itself from liability for recapture payments made to the state during the 18 years that the law was in effect before the agency discovered it had been calculating incorrectly. “This change is effective for the 2016-17 school year (and state FY2017) only and forward and will not be applied retroactively to prior fiscal years,” the letter said, in bold.

Lawyers for school districts that overpaid the state might want to have a peek at that. Legislators, too.

“I think there are going to be lots of questions on Monday morning,” Bettencourt said. “I’ll be asking some of them.”

More columns from Ross Ramsey:

  • Most states have dropped straight-ticket voting, but not Texas. There’s another attempt coming in the current legislative session, and it’s got some high-level supporters.
  • The Texas Legislature is primed to go, but this is going to be a session outside the limelight. The Texans are busy, but the spotlight is on the new administration in Washington, D.C.
  • The debate over education savings accounts and other voucher programs is only peripherally about educating kids. It’s really a debate about money. 

Author:  ROSS RAMSEY – The Texas Tribune

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School Choice Bill Pitches Savings Accounts, Tax Credit Scholarships

Sen. Larry Taylor on Monday filed Senate Bill 3, which pushes education savings accounts and tax credit scholarships to subsidize private school tuition and other education expenses.

One of the most anticipated debates of the 85th Legislative Session began taking shape Monday with the layout of a two-part Texas Senate bill that would allow for Texas taxpayer dollars to be used to help parents send their kids to private or religious schools.

Senate Bill 3, filed by Senate Education Chairman Larry Taylor, R-Friendswood, would establish the creation of two voucher-like programs that some parents could combine to subsidize the entire cost of private school tuition. 

The first half of the bill proposes education savings accounts, or ESAs, which give Texas parents public money to spend on private K-12 school tuition and education-related expenses, including tutoring, technology, textbooks and special education services. Five states have implemented the program so far, mostly for students who have special needs.

The second half of the bill brings back a proposal for tax credit scholarships, which was hotly debated during the 2015 legislative session. The tax credit scholarship program would allow businesses to count contributions to approved scholarship organizations as credit against their insurance premium tax.

“This is not money leaving the system. It is money following the student,” Taylor said Monday at a Capitol news conference announcing the legislation.

“If Texas wants to remain economically sound … we need to pass school choice legislation to give all of our students the opportunity to receive a great education that is tailored to their specific needs,” he added.

Lt. Gov. Dan Patrick, a former Senate Education Committee chairman, has championed private school choice legislation since his first session as a state senator in 2007. He said Tuesday that 13,000 to 15,000 students would be able to take advantage of this funding, if the bill passes.

At last week’s National School Choice Week Rally, he called on the House to take a vote on the upcoming bill. “It’s easy to kill a bill when no one gets to vote on it,” he said.

At the same rally, Gov. Greg Abbott said he looked forward to signing the bill once it reaches his desk. “I hope and I urge that that law reach my desk. And when it does, I will make the choice to sign it and authorize school choice in the state of Texas.”

Last session, the Senate approved a tax credit scholarship bill, but the House did not bring it up for a vote.

Students in families of all income levels would be eligible to access the education savings accounts. Low-income students would receive 75 percent of average state operational costs per student. Students above the poverty line would receive 60 percent, and students with disabilities would get 90 percent, according to the bill.

Taylor said students’ home districts and the state would share the portion of funds left over, leaving schools with more money to educate fewer students.

To use the education savings accounts, students must be currently attending public school, or looking to attend private school in kindergarten or first grade.

The tax credit scholarship program is more restrictive, allowing just the most vulnerable students up to 75 percent of average state operational costs per student. Students can use scholarships for private school tuition and other education expenses, if they are in foster care, need special education services, have family in active military duty, or are below the poverty line. They must be enrolled in public school, starting school for the first time, or be the sibling of a student who is eligible.

The scholarship program would also provide up to $500 for students who want to stay in the public school system and pay for extra academic support, including tutoring and transportation to other districts, Taylor said Tuesday. The total amount of tax credits allowed in the 2018 fiscal year would be $100 million, and the cap increases by 10 percent each year.

Low-income families could combine the two programs, Taylor said, to make up the difference for private school tuition and transportation costs. “Only a small percentage of families will take advantage of these programs, because most families want to stay in the public school system,” Taylor said. “Parents really need to want something else in order to leave.”

Critics argue that school choice measures like education savings accounts divert public money to private schools, with no accountability, and exacerbate school funding inequities. Proponents say the accounts could help ease excessive enrollment at “failing” public schools by subsidizing parents who want to take their students to schools outside of the public system.

Patrick has linked “school choice” policies to the state’s new A-F rating system for schools and districts. “No parent should be forced to send their child to a school that’s a D or an F or a C, or frankly any school that they don’t think serves their child,” he said earlier this month at a forum hosted by the Texas Public Policy Foundation.

At the same forum, U.S. Sen. Ted Cruz encouraged the Texas Legislature to “step up and lead and help lead the nation on school choice.”

All parents, no matter the income level, should be able to use the education savings accounts, said Vance Ginn, an economist the Center for Fiscal Policy at the Texas Public Policy Foundation.

“No matter your income, if you’re paying property and state taxes…why shouldn’t they have the opportunity to go to whatever school they choose,” he said. “Once you add in competition, it increases student outcomes across the board — and public school outcomes.”

Opponents immediately released statements against the bill Tuesday.

Charles Johnson, executive director of Pastors for Texas Children, said parents should not be allowed to take their tax money back, if they choose not to send their children to a public school. “We believe public education is a basic provision of the social contract,” he said. “Anything that releases us from that public trust to the benefit of a few should be opposed.”

“SB 3 is a school voucher on steroids. It marries a taxpayer-funded government subsidy for private schools and vendors to a corporate tax break with little public oversight and no accountability for results,” said Alison Badgett, executive director of education nonprofit Raise Your Hand Texas.

“This is an attack on public education that will harm the vast majority of Texas school children in order to benefit a few private and religious schools, and it may allow a few homeschoolers to purchase new family computers at taxpayer expense,” said Noel Candelaria, president of the Texas State Teachers Association.

Senate Bill 3 is one of a few voucher-like bills this session that would have taxpayer money follow students to private schools and homeschooling.

State. Rep. Ron Simmons, R-Carrollton, proposed House Bill 1335, which would create education savings accounts allowing parents of special-needs students to pay for private school, special education services, and other education expenses. Other states with education savings account programs started by limiting them to students with disabilities. 

The Texas Catholic Conference of Bishops and the Texas Private Schools Association are pushing tax credit scholarships in separate bills — Senate Bill 542 and House Bill 1184. Students with high academic and financial need could use those scholarships at any accredited private or parochial school, similar to Taylor’s bill. But those bills do not include education savings accounts.

“When it comes to an education savings account, we’re a little more cautious. We see potential there. We’re a little more cautious because we haven’t done it,” said Jennifer Allmon, executive director of the Texas Catholic Conference.

Read related Tribune coverage here:

  • At a “National School Choice Week” rally Tuesday, Lt. Gov. Dan Patrick and Gov. Greg Abbott urged the Legislature to take a vote on school choice legislation this session.
  • Longtime GOP political operative John Colyandro has been tapped to head a new organization that will aggressively push Texas lawmakers to approve education savings accounts.
  • In a bipartisan sparring match, members of the House Public Education Committee challenged proponents of using taxpayer dollars — or tax breaks — to help parents send their kids to private or parochial schools.
  • You can slow down or even kill a piece of legislation with a single word or phrase, if it’s poisonous enough.

Disclosure: The Texas Public Policy Foundation, Raise Your Hand Texas and the Texas State Teachers Association have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

Correction: An earlier version of this story misidentified Charles Johnson, executive director of Pastors for Texas Children.

Author:  ALIYYA SWABY – The Texas Tribune

School Finance Dividing Lines Emerge at Hearing

The fault lines that will define efforts to improve the state’s system of funding education came into sharp focus Wednesday as a Senate panel began studying how to improve the “efficiency” of public schools in Texas.

The 11-member Senate Education Committee and a hearing room full of education professionals, lobbyists and school and minority advocates generally agreed that the Legislature should scrap the way it divvies up the more than $40 billion of state money now spent on public schools.

“You’ve basically gotta blow it up,” said Ray Freeman, deputy executive director of the Equity Center, which represents property-poor school districts.

There was little such agreement, however, on what to do instead.

Conservative lawmakers, expressing exasperation with suggestions that the state isn’t spending enough on schools, have begun searching for a system of benchmarks that would tie state funds to how schools perform, not primarily how many students they enroll.

Educators and advocates from small schools and poor districts fear the stage is being set to sacrifice struggling schools on the altar of “efficiency” and argue lawmakers should close the wide gaps between districts before using money to reward or punish districts.

“Looking at the numbers, you know, 2015 was the most money that the state of Texas has ever spent in the history of the state on a per-student basis and we still have people coming and complaining we’re not spending enough, and it’s just so frustrating,” said state Sen. Van Taylor, a Plano Republican. “When’s enough enough?”

Lt. Gov. Dan Patrick instructed the panel to re-examine school finance before a May state Supreme Court decision that upheld the school finance system as constitutional but urged lawmakers to overhaul a process it described as flawed and byzantine.

In what could be the only hearing on the issue, Wednesday’s meeting gravitated toward the points of friction that have long bedeviled such explorations.

School officials, Latino groups and some Democrats on the panel questioned the GOP focus on efficiency, saying ranking schools by academic and financial performance is fraught with inaccuracy and inequity unless the state first closes vast funding gaps among districts or increases funding for schools.

“I believe it would be very difficult to fairly and accurately create and maintain a system in which all districts would be adequately measured, compared and grouped, and I believe previous attempts to create these comparison groups have been unreliable at best,” said Johnny Hill, assistant superintendent for business, financial and auxiliary services for Lake Travis schools who testified on behalf of the Fast Growth Schools Coalition and the Texas Association of School Business Officials.

But the panel’s Republican members said finding a way to tie funding to performance needs to be explored now.

“It’s all about productivity,” said state Sen. Larry Taylor, the Friendswood Republican who chairs the panel. “And I don’t think we’re looking at cutting any spending, but we’ve got to do as well as we can with the money we have.”

Officials from several companies, and one university researcher, testified about ranking systems they have developed to compare the money schools spend to student academic performance. They argued that public education overall would improve if lower-performing school districts were required to mimic the best practices of the most efficient school districts.

Some lawmakers and educators pushed back, saying it would be unfair to place the same expectations for academic and financial performance on smaller, poorer districts with needier students than larger, wealthier ones with less poverty.

State Sen. José Rodríguez, D-El Paso, said he wasn’t sure how lawmakers could feasibly require a tiny district like Fort Davis in West Texas to mimic the practices of a larger, better-funded district. It has had to cut its UIL program because of lack of funding, he said.

The education panel will publish official recommendations ahead of the 2017 legislative session.

Author:  – The Texas Tribune