School Districts III April 7, 2016

State Tax Caps Before 2006 Before 2006, the legislature limited the M & O rate to $1.50 per $100 valuation. It capped the I & S rate at $0.50 for debt incurred since 1992 plus whatever rate was needed to pay off debts incurred before Since 2006 In 2006, the legislature and governor reduced the maximum M & O rate to $1.00. Local school boards could add another 4 cents to the rate for local enrichment if they wished. They could go as high as $1.17 with voter approval. The I & S cap remained unchanged.

Education Funding The legislature increased the cigarette tax and raised taxes on business to make up for the money lost in property taxes, but the new taxes failed to generate as much money as the property tax cut lost.

Funding Shortfall Budget analysts estimate that the gap between the amount of money raised by the revised franchise tax and the tax cuts adopted in 2006 to be around $10 billion each budget period, leaving the state deep in the hole with an ongoing shortfall. This situation is known as a structural shortfall because it is a permanent result of policy decisions rather than the result of a temporary economic downturn.

Education Spending

Shortfall Means Budget Cuts In 2011, rather than address the shortfall, the legislature and the governor cut more than $4 billion from public schools, leaving each district not only with less money than before but also without funds to provide services for increased enrollment. School districts responded to the loss of state funds by dismissing teachers and other personnel, increasing class sizes, raising local property taxes, dipping into their reserve funds, and charging fees for extracurricular activities and even bus transportation. In its 2013 session, the legislature restored most of the funding cut two years earlier. How do larger class sizes save money?

Class Sizes Go Up Larger class sizes reduce teacher costs.

Issue of Funding Equity Property Wealthy Districts The Glen Rose ISD in Somervell County benefits from having a nuclear power plant in its taxing district. As a result, the taxable value of property located in the Glen Rose ISD is nearly $2.1 million per student. With a relatively modest tax rate of $0.894, Glen Rose ISD generates $11,118 a year per student locally. Property Poor Districts Crystal City ISD in Zavala County includes no refineries or power plants within its boundaries. The taxable value of property in Crystal City ISD is only $96,677 per student. Even with a relatively hefty property tax rate of $1.51, Crystal City ISD raises just $2,240 per pupil in local revenue. What is the issue here? Equity

Edgewood ISD v. Kirby In 1989, the Texas Supreme Court ruled in the case of Edgewood ISD v. Kirby that the state's system of financing public education violated the Texas Constitution. It ordered the state to adopt a system of school funding that ensured that districts would generate similar revenue per student at similar levels of tax effort. Note: Districts are not required to have the same amount of money per student. The issue is the same amount of money if they have the same tax rate.

Robin Hood Plan The legislature responded to Edgewood v. Kirby by adopting the Robin Hood Plan, which was a reform of the state’s school finance system designed to equalize funding among school districts by redistributing money from wealthy districts. The legislature equalized funding by reducing funding for wealthy districts.

Redistribution of Revenue More than 300 districts qualify as wealthy and are forced to redistribute more than $1 billion in revenue because of the Robin Hood Plan. Why is Robin Hood controversial? In , for example, Glenn Rose ISD sent the state more than $14 million out of local property tax revenue of $25 million.

School Funding Equity transfers is money redistributed because of Robin Hood.

HISD Budget

Formula Issues Even though nearly 80 percent of HISD students come from low- income families, the district is considered property-wealthy under the state’s current funding formula because of rising property values throughout the city. In 2016, the district will have to send millions of dollars back to the state. The HISD board of trustees is struggling to cut the district budget by more than $100 million.

Another School Finance Lawsuit Numerous school districts have filed another school funding lawsuit. In 2010, the state’s poorest school districts had $2,500 less to spend per student than the wealthiest school districts despite levying higher tax rates, a clear violation of the of the funding principle established in the Edgewood case.

School Funding Gap Is there a problem here? What? Similarly situated school districts have significantly different amounts of money per student.

Leadership Gap on Education Finance Historically, the governor and legislature have failed to address education funding except when ordered by the courts.

Quiz Robin Hood dealt with which of the following? A) Equalizing funding by increasing state education spending. B) Equalizing funding by reducing funding for all districts. C) Equalizing funding by reducing funding for wealthy districts. D) Equalizing funding by increasing funding for poor districts. The answer is C.

What You Have Learned How are school districts funded? Why is property tax funding for schools controversial? What is the significance of Edgewood v. Kirby? What is the Robin Hood plan? Why is Texas once again facing a school funding lawsuit?