The Twisted Saga of Texas School Finance: Our Bucket's Got a Hole in It
Jack Wright: It brings a pretty warm feeling when you see a kid that has a physical disability or a learning disability walk across the stage and get their diploma. You know, that's how I got into it.
This is Jack Wright. He’s the board president of the Aransas County Independent School district on the Texas coast. And they were in the eye of the storm when Hurricane Harvey made landfall last August.
Jack Wright: And we're still healing. The community is doing better, but the school district took some real hits. Every one of our campuses had severe damage.
It wasn’t just hits to the school buildings that hurt them. The hurricane meant that 800 kids- about a fourth of all the students- had to leave the district.
Jack Wright: By the end of the year, that number had dropped to 600, which was good. It showed that there were people still trying to make their way back in. The reason why the numbers are still down- I think we’re still down 400 at the beginning of the year- is, frankly, there's no housing. All of our apartments, with one exception, had major damage and none of them have finished rebuilding. And so we're probably- likely, permanently lost 400 kids.
Funding for education in the state of Texas is directly tied to daily attendance. So school board President Wright and his trustees tightened their belts.
Jack Wright: With 400 students being gone, we know that we had to make changes in personnel. We don't need the same number of teachers and aides and everybody. So starting last May, we aggressively made cuts to staffing to keep up with what our numbers looked like at that point in time. And we reduced staff by over 60 personnel, 12 percent in round figures of our total staff. That reduced our salary budget by $4,200,000. We thought that we could take that money and provide a reasonable raise to teachers. Little did we know what the state's funding formula was going to do to us. That $4,200,000 savings evaporated.
That savings evaporated because daily attendance isn’t the only thing the state accounts for in its financing formula. You also have to consider a district’s property wealth. If you’re property poor, you’re considered a “Chapter 42” district, and receive money relative to your enrollment.
Jack Wright: If you're a Chapter 41 district as we are, you give more money to the state. And we've been a Chapter 41 district for the last 17 years. We've given upwards of $50 million to the state of our local property taxes. We're $5,000-7,000 underwater from everybody around us. We're to the point where we're cutting off fingers and toes to save other body parts because of what Robin Hood funding has done.
This system, known formally as recapture, is often referred to as “Robin Hood,” because it’s meant to equalize funds between districts of different wealth levels. Take from the rich, give to the poor. But property wealth isn’t a direct indicator of a school district’s socioeconomics.
Jack Wright: Nearly 75 percent of our students qualify for free and reduced lunch, and yet we are a quote wealthy district by definition. We're a retirement community, which means that there's a lot of second homes. Our kids don't live in those second homes, though. By federal definition, we were 92 percent homeless on our kids.
So, to recap: a community ravaged by natural disaster is being further strained by a funding formula that takes into account real estate, but not reality for our kids. And the fact that the Aransas County school district is staring down bankruptcy isn’t Harvey’s fault. It’s Austin’s.
Jack Wright: One of the things that we're most proud of is we have a very large Special Ed population. We have families over the summer move into our county because of the job we do with Special Ed kids. It costs more to educate Special Ed kids. So while we're doing a good job, it financially isn't helping us. We're just getting by. And yet the state has no- there's no real incentive for them to change things, as long as they can fund education without it taking from the General Fund, which is where, in my opinion, it should come, or develop new revenue sources and fund education that way, it's only gonna get worse. I don't think the legislature intended to have this multiple effect hurt us the way that it has, but it doesn't change the fact that it has hurt us. This little bitty school district on the coast of Texas, that got slammed by Harvey but who's been resilient enough to recover, is three years away from insolvency if we don't change something at the state level. When is the first school district going to file for bankruptcy? There's bound to be districts out there in worse shape than we are. Are we really going to put the nail in the coffin for Texas public education in certain areas of the state?
That depends. It depends on our elected officials. It depends on the upcoming legislative session. It depends on you.
Welcome to the Twisted Saga of Texas School Finance. Powered by InvestEd TX.
Garrett Landry: The word antiquated and convoluted doesn’t even begin to describe how complicated our funding system is here.
This is Garrett Landry, Senior Officer of Education Strategies at the Williams Family Foundation, and expert on school finance in Texas.
Garrett Landry: It's a very complicated process and a lot of people need to be educated on it. When people talk about tax rates and what's the best way to keep taxes down- if you don't fix school finance, you can't fix tax reform in the state, because the largest portion of property taxes goes to schools.
So whether you’re a parent, property-owner, or a taxpayer, it’s important to understand this system, however antiquated and convoluted it may be.
Say you’re a school district. The Texas Education Agency hands you a bucket. The bucket represents how much the state feels you need in order to educate all of your students. The size of your bucket is based on attendance. But with a twist.
Garrett Landry: Each type of student has a weight, so if you are a special education student, you have a particular weight added to you, if you’re a gifted and talented student, an English language learner, a number of different situations, and what that weight does is says “we’re going to fund this student as if they are themselves plus… a little bit extra.”
Now these weights are meant to address inequity across school systems. Special needs students like the ones in Aransas County require additional resources with extra costs that these weights are meant to cover. And Garrett understands why Jack Wright feels like he can’t fully fund his exemplary program. Those weights?
Garrett Landry: They haven’t been updated since the 80s. A lot is different today. I think the perfect example is a talented and gifted student gets a larger weight than an English language learner. There’s been tremendous demographic shifts over the past forty years, which means now one in five students in the state are English language learners.
But districts will qualify for more funding- that is, get a bigger bucket- from serving a talented and gifted student than they will an English language learner, because our weights are out of whack. Add to that something called allotments:
Garrett Landry: Different schools of different sizes, etc., get different funding, so there’s a midsize allotment, there’s a rural schools allotment, there’s a transportation allotment, there’s a textbook allotment…
Okay, okay, we get it. There’s a lot of allotments. The size of these allotments, much like the value of the weights, haven’t been adjusted since they were implemented. Unfortunately, school districts can’t ask for a 1987 price on a school bus. But combined with your weighted attendance, they create the magic number that will, ideally, ensure your district is adequately funded. The size of your bucket. But then… you have to fill it.
The money comes, mainly, from local property taxes. Each Independent School District gets to set their own rate, and if the money they collect doesn’t reach the top of the bucket, it’s the state’s job to fill it up the rest of the way. But as property values go up and local taxes increase, the schools don’t see a direct benefit.
Garrett Landry: When you talk about funding at a local level, taxpayers see the check that they're writing get bigger, and they assume that that money is going to their local school district. The reality is the school district doesn't see more of that money. As the local share goes up, the state just contributes less, and then if you get to a certain point, the state contributes less and you write an additional check to the state.
The Dallas Independent School District, like Aransas County and hundreds of other districts across the state, has reached that point. Its total taxable property value over its weighted attendance exceeds the “Equalized Wealth Level,” a totally arbitrary number that also hasn’t been updated in years. The bucket is overflowing, and the district is set to lose 50 million dollars as a result.
Garrett Landry: There are only so many cuts you can make until you have to start making cuts that really start hurting the district, right? About 80 percent of the budget is people. It's salary. There’s 20,000 employees. 10,000 teachers. So you're going to get very close to a point where you have cut all the auxiliary, and you're going to have to start cutting, who knows, academic support. We just wouldn't want to go down that road.
Landry has a personal stake in this discussion, as both a homeowner and dad to two young boys. He’s been involved in a campaign to increase the property tax rate in DISD in order to stave off a budget crisis and continue funding a full day pre-K program.
Garrett Landry: The state funds half day Pre-K. We are not a full day Pre-K state. And research shows that full day pre-K is by far better for kids. So DISD pays the second part of that. Even though those kids are in a full day program, the state only counts those kids as half, because the state only funds half. If a district is providing full day, they should be counted as a full student, that child is in school for a full day. We are basically punishing districts for doing the right thing and providing greater services to their kids.
We know that a full day pre-K program makes students significantly more prepared for later grades. It even makes them more likely to attain a postsecondary credential. But as recapture payments go up, it will be more and more difficult for the district to pursue this proven avenue to success.
Garrett Landry: Some taxpayers, rightfully so, because this is not a very well known subject, say, I don't understand this, my check gets bigger and bigger and bigger and bigger every year because my property values are rising. DISD's had the same tax rate for a decade. They actually have one of the lowest in the state, but valuations are increasing, and so that check is getting bigger and they're like, well, what are you doing with this money? You must be wasting it. Well, the district doesn't see that money.
But to Garrett, Robin Hood himself isn’t the bad guy here. Much like the weights, recapture was meant to increase equity. But it’s proven no match for inertia.
Garrett Landry: The beliefs behind it are right. It's just that it has gotten so outdated and there are not the adjustments made year over year to accommodate for inflation. And there's been so many little things put into it over the past decades that are no longer either relevant or necessary. It just needs to be looked at with fresh eyes, with a fresh outlook of where we are currently.
The good news is, a set of lawmakers, educators, and community leaders is doing just that. The Texas Commission on Public School Finance has been meeting throughout the year. And what they’ve found is that everyone, urban and rural, all have needs that are going unmet.
Dr. Doug Killian: On my resume, it says "Career goal: to make the most positive impact on the most Texas children."
This is Dr. Doug Killian, a member of the school finance commission. He’s also a former first grade teacher and current Superintendent of Pflugerville ISD. And along the way, his career as an administrator has taken him through a variety of school districts, each with their own unique issues, starting with the small town of Poteet.
Dr. Doug Killian: We happened to be property poor, and so under the finance system we didn't have a lot of local money and local discretion in our funding. A lot of it came from the state or the feds and it comes with a lot of strings on how you can spend it. So the flexibility the other districts that are more wealthy have, we didn't have. And we were also pretty low funded. The property tax rolls were just not enough to be able to spend on new facilities. So we had to patch things together a lot. Then we moved, my wife and I moved to Huffman, which is just outside of Houston right next to Humble. It was a bedroom community. So I've learned a new part of the finance system that really hurts, we were basically a lot of rooftops. We didn't have a lot of industry and so the tax base was overburdened with our local property tax owners, the families in our community. So some of the things that we wanted to do were difficult to do in a district like that.
Killian then moved to the suburbs of Austin, first to Hutto and then his current district of Pflugerville. It’s an area that’s growing at a remarkable rate, faster than local districts can keep up with.
Dr. Doug Killian: For instance, our demographer is projecting that we're going to grow about 700 students a year over the next five years. And so that's roughly the size of an elementary school a year. And so you just couldn't keep up with the building. You were constantly having to rezone kids. That makes you the most popular person in town when you're rezoning people's kids. So all those kinds of challenges are in the funding formulas. You think you move from this district to the next, it's more wealthy. Well, then they have another challenge.
Josh: You've had a very varied career.
Dr. Doug Killian: Yeah.
Josh: And the one common denominator is in no situation are you getting what you need.
Dr. Doug Killian: That's exactly right. You know, we have this thing called 'The Texas Miracle' as Governor Rick Perry used to say, and most of the places where fast growth districts are located are exactly where big companies that were brought into the state ended up locating. Well, they tend to buy houses and have kids and those kids have to go to school. So, we've had this great Texas miracle and we've offered incentives to businesses to come, but we haven't done what we needed to do to pay for the facilities that are needed and the infrastructure in those areas.
Given the breadth of his experience, Dr. Killian’s main suggestion for a policy change is fairly straightforward: increase the basic allotment. That’s the amount of funding provided for each Texas student, before adjusting for weights and the rest of the formula. In other words, give everyone a bigger bucket.
Dr. Doug Killian: I think a lot of districts are hurting in different areas and for different reasons and if you raise the basic allotment, it would help districts with pretty flexible money to meet those individual needs, whatever they are. If it's recapture, the pressure of recapture, if we raise that basic allotment, it's going to help everybody.
And in a state as big and diverse as Texas, finding a fix that helps everybody is no small feat. But there are some issues inherent to Killian’s suggestion that have to be considered.
An increase to the basic allotment, which was actually considered in the 2017 legislative session and recommended by a subcommittee of the Commission, would infuse new money into the system. But it wouldn’t improve the system itself. Making structural changes to the formula, like adjusting the weights or adding inflationary measures, would be a longer term solution. It would also be far more politically fraught.
But simply suggesting an across-the-board increase, without systemic changes, comes with its own political costs. Not to mention, a pretty big price tag.
Bob Harvey: Finding $3,000,000,000 in a state budget is truly difficult. I mean, I say that from experience, I mean, you know, a billion here, a billion there.
This is Bob Harvey, CEO of the Greater Houston Partnership, a Harris county chamber of commerce that’s often referred to as “the voice of business.” And that voice is expressing concern with increased funding that isn’t tied to fundamental reform.
Bob Harvey: I think the business interests are not convinced that the public education system is being run in a fashion that warrants putting additional money in it in its current form. If we don't create the metrics and the accountability that they would expect to see in any other area of business, they're not going to quickly get behind the idea of more funding.
To be clear, Mr. Harvey and his organization like public schools.
Bob Harvey: Public education has become an increasingly key priority of the Partnership and of the business community. Whether it's an issue of inequity or how do we just support a vibrant economy, how do we create the state we want to create, public education is at the heart of all that.
But it’s also his job to consider the multifaceted needs of his community, and the unintended consequences that a well-meaning but short-sighted fix could incur.
Bob Harvey: We have property taxes, we have sales taxes, and we have franchise taxes, and that's pretty well it. So unless you think we're going to raise property taxes, which is a nonstarter today, sales tax, no one is yet out there bravely saying that we need to raise the state sales tax. And then the franchise tax, it hadn't generated the funds people thought it would and it's just become a huge irritant to the business community. So I will remind people that until you're brave enough to stand up and advocate for a state income tax, be careful advocating for a material increase in public school finance because I don't know where the money's gonna come from.
The point of this podcast is not to advocate for a state income tax. We’d like people to actually listen to it. I’m only going to say one more thing about it, and if you don’t want to hear it, you can fast forward fifteen seconds.
A state income tax would be deductible, up to a point, from the federal income tax. If we capped it at that point, we could keep the amount of taxes that Texans are paying the same, while sending more money to our schools and less to the federal government.
But, again, that’s not the point here. The point is, like with any good business, an investment in our public education system needs to be accompanied by measures that ensure a return.
Dr. Lori Taylor: The challenge right now is that a lot of folks, myself included, don't have great confidence that putting additional resources into the system won't leak out of the bucket rather than going into improve student performances. So we want to fix the vessel before we fill 'er to the brim.
This is Dr. Lori Taylor, head of the public service and administration department at Texas A&M University, and economist who studies school funding and efficiency. Luckily, she has some suggestions for fixing some of our finance leaks that don’t involve the third rail of Texas politics.
Dr. Lori Taylor: Our salary structures tend to reward endurance in ways that don't always align with classroom effectiveness. There's a lot of reworking that could be done in the way we handle labor costs in education. Labor costs are different in different locations. If you fail to recognize those labor costs differences in the state, what you're doing is disadvantaging these school districts and communities where a certain level of teacher salary just isn't competitive.
Our school finance system actually includes a measure meant to address this exact issue, called the Cost of Education Index.
Dr. Lori Taylor: I should probably fess up that I was involved in the original estimation. In my cradle. But I was involved in the original estimation of the Cost of Education Index in '89.
The problem now is- you guessed it- it hasn’t been updated since Dr. Taylor was in her cradle.
Dr. Lori Taylor: And so it's reflecting the pattern of teacher compensation in 1989. And things have changed a bit in Texas. You know, it was an incredibly sound idea, It's still an incredibly sound idea, it's basic supply and demand economics. But the pattern has changed and the funding formula needs to change as well.
And that’s not the only thing Dr. Taylor wants to change.
Dr. Lori Taylor: We do a really poor job of identifying a student's socioeconomic status and poverty. The kids in poverty in some parts of the state are much more desperate in their home circumstances than the kids identified in poverty and other parts of the state. Where labor costs and housing cost is low, you will have intact, two parent, high school graduate households below the poverty threshold. In other parts of the state, it's much more severe home circumstances to be eligible for free and reduced price lunch. And when you don't measure poverty well, you don't target your compensatory education resources well, and as a result, you get a lot of leakage out of that bucket.
These and other policy changes that Dr. Taylor has written and spoken about at length over the years are far from what you could describe as simply “throwing more money at the problem.” But in recognizing there are inefficiencies in the system, she’s also realistic about the fact that solving for some of them will require a greater investment.
Dr. Lori Taylor: Even in the most lean and economic and efficient modeling of cost of education work, there were still districts out there that needed more resources than they currently have to be able to accomplish the goals we have for them. And I don't want us to let the goals slip, so I've got to recognize that more resources are needed there. Revenues will be needed. How many depends enormously on what we expect the schools to accomplish. What are the outcome goals? What fraction of the graduates do we want to have college-ready? The higher our standards and expectations, once you ring the inefficiency out of the system, the more money it's going to take.
So what are our outcome goals? At what level do we want our children to achieve? Governor Greg Abbott has a stated goal of 60% college completion by the year 2030. So what’s going to get us there? We asked Dr. Killian, who served on the outcomes subcommittee of the school finance commission.
Dr. Doug Killian: One of the things that informed my practice and my beliefs was the experience I had as a first grade teacher, actually, and how important it was to read on grade level at a very early age. And we had a lot of data presented to us in the commission about how important third grade reading is and how that's so predictive of success into middle school. And then actually how Pre-K could impact postsecondary readiness. So one of the things that came out of that subcommittee, was a move to try to fund some type of Pre-K early literacy. And I was really happy to see the rest of the subcommittee see the same thing in the data, that we needed to do something for all day Pre-K for our most at risk children in the state.
The Texas Commission on Public School Finance began its year-long process with a working group dedicated to determining the outcomes we want to see. In doing so, they ensured that all of the recommendations made are directly tied to measurable goals to which teachers, administrators, and elected officials are held accountable. It’s exactly what was needed to get community members like Bob Harvey on board.
Bob Harvey: I am very pleased at where they have chosen to focus and the degree to which they have chosen to focus. The great opportunity is to focus on third grade literacy, where I think we can all get involved. We can all be supportive. There is a missed opportunity if you don't work with children in preschool and in those early, early years of school to get them caught up. And if you don't get them caught up, it's very unrealistic to expect even a great education system to mitigate that beyond the third grade. There's just no good argument against a focus on third grade literacy. So what that says is, is there a place for money in this system? Will money help? Yes, but it's money that's alongside changing the principles. It's money that's alongside attracting the best teachers to the schools. It's money alongside the community coming together to provide more support to the schools.
The business community wants to see all of our students succeed. That’s why they are insistent on strategies that work -- principles that advance achievement.
There’s a number of ways you can measure student outcomes and compare them across other states and countries. But by just about any of those measures, Texas, currently, is sitting in the middle of the road, dragging along a bucket with a big ol’ hole in it. Our postsecondary completion rate is under thirty percent, half of where Gov. Greg Abbott wants us to be in just over ten years. More troublingly, our outcomes are even worse for low-income and English language learning students, and that population is steadily increasing in our state.
Garrett Landry: We put in less money and we get average outcomes.
Again, Garrett Landry.
Garrett Landry: Some people see that as a positive. I would argue that that shouldn't be the bar. We don't need to be number one in funding, but we should want to be number one in outcomes, and we should fund to get outcomes. Money doesn't do everything. More money isn't always the answer, but more money into things that are proven by data to increase outcomes always works.
Texans shouldn’t be satisfied with half measures. We have an opportunity to lead the country- yet again- with innovative solutions, this time in the way we fund public schools.
We can ensure the success of our youngest scholars by focusing on early literacy. We can galvanize instruction through strategic compensation. And by working toward greater postsecondary completion, we can increase our economy by billions of dollars.
But achieving those outcomes requires an investment- from lawmakers, families, and communities.
The return on that investment is limitless.
The Twisted Saga of Texas School Finance is powered by InvestEd TX, and produced by me, Joshua Kumler. It is executive produced by me, along with Rob Shearer and Kathryn Mikeska. Mixed and mastered by Adrien Palmer. Music by Trevor Yokochi. Special thanks to each of our interview subjects. If you’d like to learn more, you can visit our website, Investedtx.org, and read or listen to the full interviews from Dr. Doug Killian, Dr. Lori Taylor, and Bob Harvey. You can also hear from other school leaders across the state about their experiences working within our current finance system. And you can read the entire outcomes working group white paper for more information on what state leaders want to see all Texas students achieve. This podcast is dedicated to two groups of hard-workers who don’t get paid enough for all they do: teachers and Texas legislators. The future is in both your hands. We’ll be back next month with more of the Twisted Saga.