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Volume 2, Number 1 Winter 2012

InDepth

Understanding Texas School Finance Published Quarterly

This Winter 2012 edition of InDepth picks up right where we left off last fall -- showing you just how crucial it is that we have an equitable and adequate school finance system for all Texas students and taxpayers.

state will actually keep up with that change so districts are not forced to access inequitable pennies to provide core instruction. And that has simply not been the case, as our page six article on facilities funding fully demonstrates.

Some have suggested that equity up to some level (sometimes one hears up to a “general diffusion of knowledge” or for some number of pennies of M&O tax rate) is all the equity that is justified.

Lastly, as long as certain districts can routinely spend more than their neighbors, most districts will always be behind the curve when it comes to having fair access to recruiting teachers, building facilities and offering the best programs. Equity only up to some level will simply reinforce the cycle of lower-funded schools not being able to compete with high-funded schools, and the students will suffer the effects. Our article on page two digs deeper into this.

An equity up to some level scheme would prove disastrous for public education, and answering this simple question should put the matter to rest: Can “equity up to some level” ever be an acceptable level of equity? We respond that it is not equity at all. There are several problems with this “equity only up to a level” angle. First, it assumes that the amount of revenue available at that level (before equity dissolves into an “every district for itself” free-for-all) will be sufficient. In view of the state’s questionable track record when it comes to fully funding public education, banking on an adequate funding level even in the beginning would not be prudent.

We know that now is the time for an equitable system for all Texas taxpayers and children. Let’s stand together and make a new call for equity -- in our districts, in the courts and as we plan for the next legislative session.

Partial Equity

The next problem is that the target is always shifting. Not only will districts need to keep up with continually rising expectations, everincreasing academic standards, or to access newly developed educational tools and counter inflation pressures over time, the “equity up to some level” argument assumes that the

Winter 2012

Is Never Equitable

Equity Center InDepth


Facing the Facts: School Finance Concepts

Adequacy is a Moving Target

(and only equity guarantees you’ll hit it) Anyone who has aimed at a moving target knows that you won’t hit it by aiming straight at it – you will fall far behind the bulls-eye. This concept is useful to understand the various school finance lawsuits. There is a phony argument that equity is the same thing as “leveling down;” that those who advocate for equity would be happy to see “good” districts dragged into mediocrity. Not only is that a vicious lie, the opposite is actually true. Those who support equity have consistently called for “leveling up” to a high level of adequacy and beyond – by also calling for equity in enrichment (which the advocates of “adequacy only” either ignore or oppose). There is an even bigger truth that we must recognize: Inequity makes it unlikely that adequacy for all districts and students will be reached and guarantees that adequacy will not be maintained. This is true even if what is “adequate” is agreed to by all (highly unlikely) and is fully funded (at least temporarily) by the Legislature. Let’s analyze three reasons why this is a fact. FIRST: The Cost of Adequacy Constantly Changes This is a real no-brainer. The per-student cost to school districts of adequacy – whatever that means (neither the state nor the courts have ever defined it) – constantly increases with inflation and new mandates. The cost of the state’s constitutional obligation to provide “suitable” support must therefore reflect those cost drivers plus the cost of additional students in our rapidly-growing state. Yet once the Legislature sets a funding level, it is unlikely to change it for many years. The basic allotment stays static for years. Transportation is funded based on 1983 costs, the CEI is based on 1989 data and compensatory and bilingual education,

Winter 2012

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unchanged since 1984, are still at half or less of the levels that repeated studies have identified as necessary. We have tried for years to have these costs recognized. For many years, the Education Code included requirements for ongoing “accountable cost” studies that were to be used to update the formula levels. Yet, the Legislature never bound itself to implementing the recommendations of those studies.

again dutifully ignored.

One court decision striking down the school finance system disparaged their ineffectiveness, calling them “a thermometer, not a thermostat.” The Legislature finally dropped all pretense and repealed those requirements, contenting itself with occasionally calling for new studies which it

The most recent session carried the trend of not recognizing cost increases to its “logical” conclusion, failing to fund student growth for the first time since the Foundation School Program was established over 60 years ago. The comments of many in the leadership indicate that this may not be a one-time occurrence. SECOND: Inequity Changes What is Adequate The presence of inequitably greater resources (the ability to raise more money per student – after adjusting for cost differences – at a given tax rate) automatically changes what is adequate. Suppose we determined an appropriately “adequate” cost and the Legislature funded it, but kept the current inequities in place. Your lower-funded district has its funding increased to reflect the justdetermined adequate funding level. Your neighbor, whose $1,000/WADA funding advantage was preserved when every district was raised by similar amounts (which is exactly what the Legislature has done for over a decade), Equity Center InDepth


Facing the Facts: School Finance Concepts then uses that advantage to entice away your best teachers and principals with higher salaries, smaller class sizes and newer and better-maintained buildings.

This can result in a reduction in funding for public schools compared to what public schools would have received if the pressure to fund them was uniform on all legislators.

Doesn’t the amount you must pay – and therefore, your cost of adequacy – increase in order to compete in that free market? Absolutely!

This helps explain why the Legislature has never funded either the basic allotment or the program weights at the levels their own studies have indicated were “adequate.” It also explains why, once the inadequate levels are adopted, they stay unchanged, becoming more and more inadequate.

But if every districts’ taxpayers have to pay the same rates to achieve a given level of funding, the likelihood is that those advantages would not be so great that your district could easily be relegated to “farm team” status.

CONCLUSION: Equity is the Only Way to Achieve Adequacy There are communities in Texas with enough political influence to ensure their districts will be adequately funded at a minimum. In fact, they have enough influence to guarantee that sufficient funding will be provided to keep them at high levels, regardless of the consequences.

Your neighbors, like you, would have to balance the cost of higher salaries, or smaller classes, or better buildings, with the political cost of raising taxes, just as you must. It is when they can offer those advantages at the same or even lower tax rates that the impact on you spirals out of control. If their taxpayers can offer those benefits without shouldering the burden your taxpayers would have to pay, as many districts now can, your “adequacy” will immediately be rendered inadequate.

In 1990, Gov. Bill Clements (who had been elected on a “no new taxes” platform) vetoed both the school finance bill and the tax bill designed to pay for it during successive special sessions that he had called to meet a Supreme Court deadline for “fixing” the school finance system.

THIRD: Inequity Reduces Support for Adequacy “Only adequacy” as a guiding principle will never account for the cost changes described by the first two points. Access to inequitably greater resources for some reduces the political support for adequate resources for all.

When the deadline was reached without progress, the Court released a proposed redistribution within then-current revenues that would meet the Edgewood I mandate of “similar revenue for similar effort.” This would have “leveled down” all of those favored districts.

Here’s how: Advantaged districts aren’t dependent upon what the formulas provide to attain adequate revenue, so their legislators seek to divert available money outside of the basic allotment and weights of the formulas to items that can specifically benefit them, such as reduction of recapture, increasing the per capita distribution from the Available School Fund, grant programs, or giving every district a per-student “raise” on top of their Target Revenue.

Clements called the Legislature into a fourth special session and signed virtually the same finance and tax bills he had previously vetoed.

We saw this pattern repeatedly over the past two decades as money “outside the formulas” grew from a small amount into billions of dollars. Even worse, since the high-funded aren’t as dependent on state support, their legislators also are more likely to support spending less overall in public education, so that more revenue can go to other areas of the budget from which their communities benefit.

Winter 2012

Would the current Legislature, or any likely future one, allow the education programs in those influential communities to be significantly diminished? It is only through a finding for equity that the rest of the students in Texas will be granted that same respect. If, instead, we merely require a determination of what is adequate at the time of a given lawsuit, we will keep shooting far behind the target, will never reach true adequacy, and continue to punish children in our lower-funded districts.

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Equity Center InDepth


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Facing the Facts: School Finance Concepts

Is the Legislature Allergic to Fair? Taxpayer and student equity in school finance are simple, straightforward ideas. Simply stated: The state system for funding public education should provide the children in one district the same level of funding it provides any other district at the same tax rate. Whatever state and local funds a penny of tax effort generates to educate children in my district should be the same amount generated to educate children in yours. The number of pennies adopted by local school boards then becomes a matter of local control, instead of a rate forced upon it by the state’s remarkably inequitable funding system. These commonsense principles reflect the Texan ideal of fairness and efficiency. They don’t guarantee a certain outcome, but they would guarantee an even chance for the best possible outcome. Over the years, unfortunately, the state has unwisely created and relentlessly maintained a school funding scheme with so many caveats, special deals, exceptions, entitlements, outside the system earmarks and so forth that it has become increasingly difficult to understand, allowing the simple concepts of taxpayer and student equity to be completely trampled. The table below shows the M&O and I&S tax rates and revenue per WADA for a select group of districts at maximum M&O and I&S tax rates. The I&S numbers demonstrate the additional inequity within our system because recapture is not a part of the state’s facilities funding plan (while a resulting low guaranteed level is). The Texas school funding scheme unfairly burdens the vast majority of property tax payers and cheats their children out of educational opportunities that will impact them throughout their lives. The fact that the state has willingly allowed it to continue is appalling.

Total revenue per student* available at maximum tax rates 2011-12 Lake Worth, Lake Dallas, and Blue Ridge ISDs are already at the maximum total rate of $1.67.

District

Broaddus

Lake Worth

Lake Dallas

Blue Ridge

Alamo Heights

Glen Rose

Westbrook

At $1.17 M&O At $0.50 I&S At $1.67 M&O + I&S

$5,277** $799*** $6,076

$6,038 $1,245 $7,283

$5,968 $1,360 $7,328

$5,723 $1,055 $6,778

$7,272 $4,698 $11,970

$10,950 $7,707 $18,657

$15,265** $8,845 $24,110

*Student in Weighted Average Daily Attendance (WADA) **Lowest and Highest Revenues per WADA at $1.17. ***Local revenue only. Since Broaddus ISD did not have an I&S tax rate in 2010-11, the state system would provide NO state assistance until 2013-14.

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Equity Center InDepth


Facing the Facts: School Finance Concepts

On the Origin of the Specious: An Important Lesson Learned from the Evolution of School Facilities Funding In January 1995, the Texas Supreme Court held that the school funding system adopted by the Legislature in 1993 was constitutional. (SB 7, Edgewood IV)

Those who don’t remember the past are often scammed in the present.

Albert Kauffman, the lead attorney for the Edgewood Plaintiffs in all four Edgewood cases and now a law professor at St. Mary’s University in San Antonio, said that the district court had found the facilities funding system so inequitable it was unconstitutional, but that finding was reversed by the Supreme Court. Even so, and although recapture applied to both M&O and I&S in SB 7, the Supreme Court expressed concern with the inequities that still existed in school facilities funding at that time and warned they might soon violate the constitution. As a result, the Legislature passed a series of state facilities funding bills over the next three sessions that created and strengthened facilities funding. According to Kauffman, “The compromise was that the state would give money to the lower wealth districts, but the price was that the funding would be based on ADA rather than WADA and [there would be] no recapture [beginning in 1997-98] from the wealthy districts.” By the fall of 1999, 91.2% of ADA were in 906 districts (88%) that could benefit from a state-equalized facilities funding system with a $35 per ADA guaranteed level (not all of these districts had I&S debt, of course). With an equity level of 91.2%, what could it possibly matter if 8.8% of ADA were in districts that were above the system—even if their $82 per ADA average revenue level could fund the same facilities projects at less than half the tax rate required of districts in the system with similar needs? As it turns out, it mattered a great deal, and it continues to matter more and more with each passing year. State facilities equalization crashes and burns With 128 high-wealth districts no longer tied to the system by recapture, there was no reason for these politically powerful districts to help pressure the state to increase the $35 per ADA funding level. Winter 2012

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In fact, it makes perfect sense in retrospect that any pressure exerted by these districts would be for just the opposite. The pressure, directly or not, would be to NOT increase the yield. After all, these districts would not benefit from any increase, and whatever state money went into increasing the guaranteed funding level was money that might otherwise be made available for them in some other way. And so, over the years the guaranteed level has remained frozen at $35 per ADA. Since taxable values in even low-wealth districts tend to increase over time, the state share of the $35 guaranteed level began to drop. Districts with wealth levels closer to $35 per ADA moved out of the equalized system entirely, further lowering the state responsibility. As the cost of construction rose and eventually doubled, a higher I&S tax rate was required to build the same facility. Soon, rates for districts still in the system began to rise above the $0.29 EDA limit1 , at which point all of the increasing costs were passed on to local taxpayers. By the 2010-11 school year, the state share of facilities funding had dropped to less than 15%, and the equity level had dropped to about 55%. Without significant changes, the state facilities funding program is in a free-fall. Remember them? During those same 12 years while the EDA-IFA guaranteed level stayed at $35 per ADA, the level for the top districts with 8.8% of the state’s ADA rose to an average of $160. A district with a $160 per ADA funding level can raise as much with a dime I&S tax rate as a similar district within the equalized system can raise with a $0.46 I&S tax rate—that is, if the lower-wealth district can string 3 or more IFAs on top of its EDA funding. Bottom line? Equity up to a level is not equity at all. The state’s facilities funding train-wreck shows why the lack of equity results in inadequate funding for all but those at the top. 1

The $35 guaranteed level applies only to the first 29 pennies of I&S

tax rate. Above that, there is no state EDA assistance.

Equity Center InDepth


Facing the Facts: School Finance Concepts

What is EDA? The Existing Debt Allotment program (established in 1999) provides assistance to school districts in making debt service payments on previously existing qualifying debt through a guaranteed yield program. Qualifying debt is defined as debt for which taxes were levied in the last year of the prior fiscal biennium and for which the district does not receive aid under IFA. EDA only guarantees $35 per ADA (per penny) for the first 29 pennies of I&S tax rate.

What is IFA?

The Instructional Facilities Allotment is a state-funded program to help fund construction of instructional facilities. Funding is not automatic, and districts must apply to TEA to be considered. Priority is given to the poorest districts until the amount appropriated by the Legislature is spent. Usually, there is only one round of funding per biennium, but there will be none this biennium since the Legislature failed to appropriate any funds for new IFA projects.

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Equity Center InDepth


Join the Fight!

Be It Resolved Nearly 400 school districts have passed a resolution to join the Texas Taxpayer & Student Fairness Coalition. The Coalition represents more than 38% of the districts statewide and nearly 1.3 million children. If your district hasn’t yet decided to join a lawsuit, we hope you will resolve to join the fight. And if you’ve already joined the Coalition, don’t forget to talk to your neighbors and friends to make sure they’ve joined. Even with numbers as impressive as these, we must push for every district in the state to be actively involved.

E L P

M A S

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Equity Center InDepth


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Winter 2012

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Equity Center InDepth


Get Involved!

Join the Fight! For those of you who attended our Midwinter Conference on January 29, you already know that we’re taking it to the next level to spread the word about the Texas Taxpayer & Student Fairness Coalition and the importance of this legal fight. Now we need your help! It’s time to spread the word to your teachers, parents, taxpayers, local businesses and community groups. Here’s how everyone can get involved: For the Individual: 1. Click on the Join the Fight! icon on our website and go to the sign-up page and register. By submitting a name and e-mail address, any individual can support the lawsuit and be on our list to receive periodic updates and information about Coalition activity, litigation and related legislation. (Signing up online in no way obligates anyone legally or financially.) 2. After you’ve registered online, e-mail the registration link to everyone you know who supports public education. 3. If you’re a member of Facebook, “Like” the new Texas Taxpayer & Student Fairness Coalition page. 4. Share our message on your Facebook page!

5. Share our message on your Twitter page! 6. Link to the Join the Fight! sign-up page from your district’s website (and thanks to Andy Peters, Supt. at Poth ISD for this great idea!). For the Group: Many of you have seen the wonderful efforts made by Pflugerville ISD Superintendent Charles Dupre (who is also President of the Coalition) to engage his community. If you haven’t heard about it, go to www. equitycenter.org/resources/litigation to watch a great video and get resources like a sample resolution and FAQs. We encourage all Coalition members to work with local community groups like the City, County, PTA, Lion’s Club, Rotary Club, and others to get their support for the efforts your district is making on behalf of your taxpayers and students. Thank you for joining the fight and sharing our message!

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Winter 2012

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Equity Center InDepth


Chronicles

Beyond the Capitol Dome:

Chronicles of an Underfunded District

The local district impact of school funding decisions made at the state level is usually lost in the magnitude of a system that serves five million children with myriad needs. Statewide decisions are sometimes like bombs dropping from 40,000 feet. The strain put on the communities below goes unrealized. Let’s imagine for a moment what this local impact looks like, without ignoring the collateral damage… The Scene: Local school board meeting. A gaggle of disgruntled patrons are gathered around the sign-up sheet to speak before the board. As the school board members take their seats following the opening activities, the Board President calls the first speaker, Mr. Taxpayer, to the podium.

Mr. Taxpayer: Mr. President, members of the board, everybody knows the state has cut funding for our district, and the district raised taxes to offset some of the loss. That happened; nothing we can do about it. The problem is that we are now paying higher taxes than ever, but funding for programs and teacher salaries are still drying up at our elementary school. We are sick and tired of it! We pay through the nose in property taxes. We know there are other parts of town that do not pay nearly what we do, yet their schools are funded just as well as ours. Why can’t our hard-earned money be spent on our children? If you dedicated the property tax revenue you received from our neighborhood to our school, it would more than make up for the cuts handed down from the state. It might even be enough to add a few teachers and new programs that our kids can use! Board President: I appreciate the fact that you and the other parents here are so invested in your children’s education, but there would be some serious consequences to allocating our resources as you’re suggesting. Mr. Taxpayer: We’re only asking that our hard-earned money go toward what it should -- the campus where our own children attend school. Board President: Well, let me ask you something. Would it make sense for your tax dollars to go toward only building the roads you personally use? What about funding police protection just for your family? Such a mindset would not only result in an incredibly inefficient use of our resources, but it also ignores the fact that we live as a deeply connected community. If we don’t take steps to provide the same educational opportunities to all children in our community, we all will suffer the consequences of higher levels of unemployment, a less skilled workforce, and a higher dropout rate for those students we decide to leave behind. The local economy will suffer, and that will hurt all of us. Mr. Taxpayer: I can see how only putting our neighborhood’s money toward our own elementary school might not be ideal for the community as a whole, but isn’t it only fair that we get what we pay for? Superintendent: Absolutely. And what you’re paying for is a public school system for the entire school district. Your tax dollars are like a single piece of a large stained-glass window. The picture just doesn’t make sense if you look at one section of colored glass. It’s the entire picture that tells the story. It’s just the same with funding our kids. We are all patrons of this entire district, and our school board is charged with managing the education for the entire district. So we’re obligated to use your tax dollars to tell our district’s “story” for all of our children, including those who live in neighborhoods across town from you. Mr. Taxpayer: I see your point, and I like how you explained it. But I have one last question -- I have friends in the school district just down the road. They have more teachers and programs after the cuts than we had before the cuts—and their tax rate is lower, too. Why does the state think that is okay? We are all Texans. Board President: Well, Mr. Payer, I’m sure you won’t find anyone on our board who thinks that it’s okay, but I’m afraid that’s another conversation for another day—perhaps in the spring edition. For now, your three minutes are up! [To be continued...] Winter 2012

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Equity Center InDepth


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