TEXAS ASSOCIATION OF COMMUNITY SCHOOLS (TACS) Annual Conference San Antonio, Texas September 14, 2015

CONTACT INFORMATION Doug Karr, Ed.D. Contracted Services in School Finance Office Phone: (806) Cell Phone: (806)

THE TASK or CHARGE A Personal Perspective on the Current School Finance Lawsuit “Crystal Ball Gazing” - Future Issues & Concerns

THE CONTEXT A Lesson on Perspective There is BOTH a Scientific & Historical Context for this Current School Finance Lawsuit

THE SCIENTIFIC CONTEXT “For Every Action, There is an Equal & Opposite Reaction” (Sir Isaac Newton) - “Forces always come in pairs – equal & opposite action-reaction pairs” - a.k.a. Cause & Effect

THE HISTORICAL CONTEXT It’s Been Said, “History Repeats Itself” Variations of that saying include: - “History Repeats Itself When Civilized People Ignore Its Lessons” - “Those Who Do Not Learn History Are Doomed to Repeat It”

HISTORY Gilmer-Aiken School Finance Plan - Funding on a Personnel Unit System - Allowed Taxation for Enrichment - Included the foundation for equity & equalization

HISTORY Rodriquez vs. San Antonio ISD Lawsuit Filed - State’s finance system violated the “equal access” clause to the U.S. 14 th amendment - Sought relief for “wealth based discrimination” in property poor ISDs - Upheld by the Federal Court in Reversed by the U.S. Supreme Court in 1973

HISTORY HB 72 - Eliminated personnel units in favor of pupil units - Guaranteed a tax yield (GYA) to ISDs - Funding differences between rich & poor ISDs remained relatively unchanged

HISTORY Edgewood I Lawsuit Filed - District Court rules the system unconstitutional in TX Supreme Court upholds the ruling in 1989 saying the System is Not “Efficient”

HISTORY SB 1 Passed - Increased state aid to ISDs in response to Edgewood I - Little change to the system of equalization - Funding for budget balanced ISDs still greater

HISTORY Edgewood II Lawsuit Filed - In response to SB 1 which did not substantially modify the educational system of funding

HISTORY SB Established 188 County Education Districts (CEDs) - Tax Base Consolidation with effective tax rates of 72 & 82 cents the 1 st & 2 nd years - 1 st Attempt at Wealth Redistribution through a system of recapture

HISTORY Edgewood III Filed - CEDs ruled a “Defacto Statewide Property Tax” without voter approval - Legislature ordered by the Supreme Court to Devise a New School Funding Plan by 1993

HISTORY SB 7 (Robin Hood/Recapture) - Designed to equalize wealth levels through 1 or more of 5 options - Established the $1.50 M&O tax cap

HISTORY Edgewood IV Filed Texas Supreme Court upheld the “Robin Hood” system of recapture as constitutional

HISTORY HB 4 - Additional $10K homestead exemption - Edgewood V Lawsuit Contemplated - Sought relief from some school finance provisions - Not Advanced

HISTORY 1999 – 2003 (SB 4 & HB 2242) - $3K added to each step of the salary schedule - Implemented a guaranteed facilities yield (EDA) - Mandated a statewide health insurance plan that ISDs must provide, not offer - Added $1000 per person to be used for other benefits or for salary

HISTORY West Orange Cove Lawsuit Filed - Argued a required increase in the local share while the state’s share is decreasing - Funding is “Inadequate & Inequitable” - Supreme Court ruled that the $1.50 is a “defacto statewide property tax” allowing for no meaningful discretion

HISTORY HB 1 - Target Revenue & Tax Compression - More Salary Increases ($2500, $500, & $250)

HISTORY HB Adjusted the target reveune ($120 - $350 per WADA) - Supplanted $3.25B in SFSF money - Mandated salary increase = the greater of $800 per teacher or $60 per WADA

HISTORY Senate Bill 1 - $5.3B in Funding Cuts - Phases out Target Revenue & ASATR - Returns Districts to a Formula Driven $1.04 capped tax rate - Provides for Proration in the 2 nd Year of the Biennium, if needed

HISTORY Texas Taxpayer & Student Fairness Coalition Lawsuit Filed - Arguing that the current school finance system is inequitable & inadequate for meeting the state’s mandated accountability system

HISTORY SB 1 - Restored $4B of the $5.3B in cuts from Raised the BA, GYA, & EWL District Court Upholds the Texas Taxpayer & Student Fairness Coalition Lawsuit

HISTORY SB 1 - Increases FSP by just over $1.4B - Provides Facilities Funding (IFA & NIFA) - Raised the BA, GYA, & EWL again - Taxpayer Relief Granted Texas Taxpayer & Student Fairness Coalition Lawsuit Appealed to the TX Supreme Court

THE SCIENTIFIC CONTEXT REVISITED “For Every Action, There is an Equal & Opposite Reaction” (Sir Isaac Newton) Applied to Texas Public School Finance Since 1968, the Cause & Effect Conclusion Might Be: - School Finance Legislation Causes School Finance Litigation OR - School Finance Litigation Causes School Finance Legislation

THE HISTORICAL CONTEXT REVISITED “History Repeats Itself” Since 1968: - What Have We Learned & Accomplished From All This Legislative & Legal Repetition? - Are We Doomed To A System of School Funding That Will Continue to Be Perpetually Broken With Its Wealth Based Inequities, Its Inefficiencies, & Its Inadequacies?

MY PERSPECTIVE ON THE SCHOOL FINANCE LAWSUIT

“CRYSTAL BALL GAZING” FUTURE ISSUES TO CONSIDER Hold-Harmless Calculation for ASAHE A.G. Advice to Comptroller Issued Sept Taxing Entities cannot reduce or eliminate OHE until the end of 2019 tax year - OHEs that were reduced or eliminated in 2015 tax year are ineffective

“CRYSTAL BALL GAZING” FUTURE ISSUES TO CONSIDER Fractional Funding ASATR - What happens when these forms of transition state assistance go away as has been the case with other types of transition assistance such as for salary increases, health insurance mandates, TRS, etc.???

“CRYSTAL BALL GAZING” FUTURE ISSUES TO CONSIDER Future TRS Active-Care, & TRS Care Contributions That May be Required New Tier I Special Allotment Reviews Increasing Demand for Pre-K services vs. Insufficient Pre-K Funding for Full Day No Change to 50 Cent Debt Test for Fast Growth ISDs

“CRYSTAL BALL GAZING” FUTURE ISSUES TO CONSIDER Combining FIRST & Financial Solvency Into 1 System - Went from 20 indicators to 7 (rating year 14-15) & back to 15 (rating years & 16-17) - Proposed Future Indicators Include Minimum # Days Cash on Hand & Others

“CRYSTAL BALL GAZING” FUTURE ISSUES TO CONSIDER THE BIG & FINAL QUESTION - Will there be future cuts to public education like those in 2011 if the price of oil does not rebound?? Two Final Thoughts - Remember Who’s Pouring the Water! AND

SECOND FINAL THOUGHT DO YOU OFTEN FEEL THIS WAY? Runs Good. Missing Seat & Steering Wheel. Ideal for the person who has lost his butt and doesn’t know which way to turn!