The 85th Legislative Session Equity Center Testimony Senate Finance Working Group on School Finance 1.27.17 Equity Center

Highlights of this Plan Less complicated, more innovative Simplifies school finance to a 1-sentence formula Reduces number of recaptured schools Local districts & taxpayers determine the local tax rate Stabilizes school district funding Eliminates inefficiencies Eliminates penalties to districts facing property value declines Provides schools with a steady, reliable revenue source Addresses student needs Increases the Basic Allotment All revenue is based on state-recognized costs of education Works within available funding Equity Center

A Plan for Fixing Texas’ M&O Funding Problem Simple – Fair – Efficient

Efficient Funding for Special Needs and Costs All districts are guaranteed access to the full allotment to which they are entitled for the categories below. This plan does not change current student and district weights for these categories, but does fix the small district and CEI penalties. Changes to weights are determined by the Legislature, but should be based on unbiased and objective studies to reflect actual costs. Regular Program Allotment Special Education Allotment Career and Technology Allotment Compensatory Education Allotment Bilingual Education Allotment Transportation Allotment Equity Center

A formula so simple we really don’t even need one Sum of Instructional Allotments X M&O Tax Rate + Transportation = Funding Transportation Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech X $1.00 + = Transportation Equity Center

A formula so simple we really don’t even need one Sum of Instructional Allotments X M&O Tax Rate + Transportation = Funding Transportation 4% Enrichment Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech X $1.04 + = Transportation Equity Center

A formula so simple we really don’t even need one Sum of Instructional Allotments X M&O Tax Rate + Transportation = Funding Transportation 17% Enrichment Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech X $1.17 + = Transportation Equity Center

A formula so simple we really don’t even need one Sum of Instructional Allotments X M&O Tax Rate + Transportation = Funding Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech Transportation 90% of Reg Program + Sp Ed + Comp Ed + Bilingual + Career &Tech X $0.90 + = Transportation Equity Center

Determining District Program Funding (Another view ) Examples: Assume a district’s 5 instructional program allotments (not including transportation) total $1 million. If its ATR = $1.00, its funding equals $1,000,000 x 1.00, or $1,000,000 If its ATR = $0.90, its funding equals $1,000,000 x 0.90, or $ 900,000 If its ATR = $1.04, its funding equals $1,000,000 x 1.04, or $1,040,000 If its ATR = $1.17, its funding equals $1,000,000 x 1.17, or $1,170,000 (ATR = the district’s adopted M&O tax rate) Equity Center

Determining State/Local Funding for M&O The State provides whatever is lacking after applying the Available School Fund Per Capita payment and the M&O tax collections (both current and delinquent) for the school year. District Funding Amount (including transportation) State Funding Local Tax Collections for the School Year Local M&O taxes collected during the school year constitute a district’s local share. The first payment to fund a district’s M&O funding amount comes from its Available School Fund Per Capita distribution. ASF Per Capita Equity Center

Determining M&O Recapture for Property Wealthy Districts Local Tax Collections for the School Year Excess to Formula Funding District Funding Amount (including transportation) Local M&O taxes collected during the school year constitute a district’s local share. In some very wealthy districts, ASF Per Capita plus collections will exceed the district funding amount. The first payment to fund a district’s M&O funding amount comes from its Available School Fund Per Capita distribution. ASF Per Capita Equity Center

Determining M&O Recapture for Property Wealthy Districts Local Tax Collections for the School Year M&O collections in excess of the M&O funding level are recaptured and are used to increase the Basic Allotment, enriching the total system for all districts, taxpayers, and children. District Funding Amount (including transportation) Local M&O taxes collected during the school year constitute a district’s local share. The first payment to fund a district’s M&O funding amount comes from its Available School Fund Per Capita distribution. ASF Per Capita Equity Center

It is essential that we spend public education taxes on public education 100% of taxes collected for public education must be spent on public education—usually through the Basic Allotment 100% of recaptured funds must be spent on public education— with any increase used to increase the Basic Allotment, to the benefit of the entire system Equity Center

A Transition Plan – Should the Legislature Determine it is Appropriate Should the Legislature decide a transition plan is warranted, we suggest the transition be done differently to avoid the problems created by current hold harmless funding methods. Establish a dollar amount (not an amount per student or based on a formula) Separate it completely from the new funding as a separate line item in the budget for simplicity and transparency Phase funding down each year, beginning in the first year Equity Center

A Transition Plan – Should the Legislature Determine it is Appropriate Six years of fair warning has already been given for ASATR—it should not be re-adopted. There are no free lunches. Other districts and taxpayers pay for ASATR through a lower-than-necessary Basic Allotment and higher taxes. The current budget does not include funding for a new ASATR hold harmless. The Senate is correct in doing this and creating efficiencies to benefit the whole system. Equity Center

The Foundation School Program Per Capita Funding Outside the System ASAHE Double Dipping Early Agreement Credits Maintenance & Operation (M&O) Generally, the costs of running the school district Interest & Sinking (I&S) Generally, to make bond payments Fractional Funding Local Funding State Funding Ad valorem or Property tax collections generated by a locally-adopted I&S tax rate Instructional Facilities Allotment (IFA) & Existing Debt Allotment (EDA) Tier 1 Basic Instructional Program Regular Program Allotment - Special Education - Compensatory Education Bilingual Education Career & Technology Education Transportation New Instructional Facility (NIFA) - Public Education Grant High School Allotment Gifted & Talented 9 Special Purpose Allotments Tier 2 Enrichment Tier 2, Level 1 Golden Pennies First 6 pennies of adopted M&O tax rate above the compressed tax rate; called “golden” because high funding level and no recapture All pennies of M&O tax rate above the golden pennies (at least 11); called “copper” because low funding level and recaptured Tier 2, Level 2 Copper Pennies High School Allotment CEI Penalty Compressed Tax Rates Outside the System NIFA Funding Staff Allotment Prior Year Values Small Schools Penalty Wealth Hold Harmless

Terms No Longer Needed to Calculate Funding Tier 1 Compressed Tax Rates Tier 1 Equalized Wealth Level Tier 2, Level 1 Guaranteed Level Tier 1 Collections Tier 2 DTRs Multiple Basic Allotments Tier 2, Level 2 Copper Pennies Austin Level Tier 1 Local Fund Assignment Prior Year Values ASATR Tier 2, Level 2 Guaranteed Level Tier 2 Level 2 Collections Tier 2, Level 2 Equalized Wealth Level Tier 2, Level 1 Golden Pennies Tier 1 Local Fund Assignment Target Revenue WADA Wealth Hold-Harmless Tier 2 Level 1 Collections Equity Center

The New School Finance System Maintenance & Operation (M&O) Generally, the costs of running the school district Interest & Sinking (I&S) To make bond payments Local Funding State Funding Ad valorem or Property tax collections generated by a locally-adopted I&S tax rate Instructional Facilities Allotment (IFA) & Existing Debt Allotment (EDA) Instructional Program Regular Program Allotment 5 Special Purpose Allotments - Special Education - Compensatory Education Bilingual Education Career & Technology Education Transportation

Final Thoughts Funding for Texas’ students needs to make sense for everyone. It cannot be based on one district’s crisis or even on a set of runs. Funding decisions must be based on actual costs to educate students…holding to the TEC §42.001 promise to provide substantially equal access to a similar education at a similar tax rate. Funding Texas’ schools should be fair to Texas’ taxpayers. Your dollar should generate the same level of funding for your children as my dollar does for mine. When? Equity Center

Summary: Highlights of this Plan Less complicated, more innovative Simplifies school finance to a 1-sentence formula Reduces number of recaptured schools Local districts & taxpayers determine the local tax rate Stabilizes school district funding Eliminates inefficiencies Eliminates penalties to districts facing property value declines Provides schools with a steady, reliable revenue source Addresses student needs Increases the Basic Allotment All revenue is based on state-recognized costs of education Works within available funding Equity Center