With no significant progress made following the special state legislative session this summer, Texas school districts must continue to balance budgets with an outdated funding formula in what some call a broken education system that heavily relies on rising property taxes.


For local school districts, such as Lamar Consolidated ISD and Fort Bend ISD, school officials said over the last 10 years the districts have come to rely on rising property taxes to fund their budgets. However, this upcoming school year each district will receive more state funding than the previous year—unlike most Texas districts.


But according to county and school officials, the broken school finance system and rise of angry property taxpayers will inevitably take its toll sooner rather than later.


“The fact is that we’re educating kids today using funding formulas that are three decades old,” LCISD Superintendent Thomas Randle said. “We need to stop and ask ourselves: ‘Is that best for our children?’”



Not in the status quo


Most districts were hopeful that House Bill 21, the first major school finance reform bill to be considered by the two chambers during the 85th legislative session, would have provided schools with an additional $1.8 billion in state funding. But during the special session, the Senate stripped the bill to $352 million, according to school district officials.


Although the bill does provide some immediate funding to public schools, it does not address any critical reform that is needed in the school finance system, including updating the funding formula. Instead, it authorized for the creation of a commission to study possible finance reform options.


FBISD Chief Financial Officer Steven Bassett was among a group of educators who testified for the bill but to no avail.


“We thought we were going to get some additional funding … but in the end that bill didn’t pass,” Bassett said. “So things are tighter than they’ve ever been.”


LCISD and FBISD are somewhat outliers when it comes to the 2017-18 school year as both districts will receive additional state funding compared to last year but for different reasons.


LCISD is a Chapter 41 district and operates under the “Robin Hood” funding system, which requires that districts equalize their wealth with poorer districts through various means, such as consolidating property or sharing their state aid with other districts. LCISD is unique in that is it a “gap district,” meaning its wealth is not high enough to have to equalize it or in a sense distribute it to other districts through the recapture process, but it is still considered a Chapter 41 district, according to LCISD Chief Financial Officer Jill Ludwig.


The district’s tax rate for 2017 that was approved at an August board meeting was set at $1.39 per $100 valuation. LCISD has gone through the past two bond elections—in 2011 and 2014—without raising the rate, and this will be the seventh consecutive year in a row the district is able to keep it at $1.39.


FBISD’s proposed tax rate will see a decrease of two pennies from $1.34 to $1.32; this decrease will ultimately bring in $11 million in state funding that is critical to the district.


“By doing that switch, the state will actually be sending us just over $11 million more,” Bassett said. “If we didn’t go up to $1.06 on the M&O, [maintenance and operations] we’d be leaving $11.5 million on the table of potential state revenue.”


Another major factor that explains why both FBISD and LCISD will receive additional state funding this school year compared to last year is because of the rapid growth each has seen and the rising student enrollment population.


Even though the two districts will see an increase in state funding this school year, the overall amount of funding each has received from the state has decreased over the last 10 years. If trends continue with rising property taxes, state funding will inevitably continue to decline, according to school officials.


LCISD state funding for the 2016-17 school year was projected at $84.5 million, while the estimated amount of state funding for 2017-18 is $87.2 million. FBISD state funding for the 2016-17 school year was $216.8 million, while this year the district expects to receive $218.6 million.


“In a net, you lose less than you gain,” Ludwig said. “And that typically has been the trend with [LCISD]. We do lose some state aid because of value growth, but our enrollment is increasing so fast that it is outpacing … the losses we sustain from the formula.”



‘Taxpayers in revolt’


One of the biggest problems with the school finance system that financial officers, such as Ludwig and Bassett, deal with on a day-to-day basis is learning to work with the state funding formula that has not been updated since the 1980s.


This formula has allowed the state to lean on property taxes to fund the state’s portion of education funding since around 2008. Prior to that year, the state provided districts with 50 percent of the funds they needed, but that number has steadily decreased over time.


“The state has actually usurped that local right and has allowed their formula to work to the benefit of the state budget makers,” Fort Bend County Judge Robert Hebert said. “They’ve used that dodge [and] they’ve got away with it for nine years, but the numbers have gotten so high that the taxpayers are going to be in revolt.”


Bassett and Ludwig both agreed their districts have had to rely more and more on rising property tax revenues in the last 10 years.


However, Ludwig said when the “Robin Hood” system was put into place years ago, no one saw the values growing at the rate they are growing.


“The bigger the property values, the bigger the number that’s being subtracted from the allotment that we are eligible for,” Ludwig said.


Although Ludwig and Bassett both agree Texas is in serious need of school finance reform and property taxpayer relief, any property tax relief that is provided without addressing the existing school finance system would be detrimental to districts across the state.


“It would be devastating,” Ludwig said. “I don’t think that local taxpayers should have to bear the burden …[but] I don’t think the state is putting their fair share into the system.”


After the shortfall of the special legislative session, districts will not see any reform for another 18 months after the commission makes a report.


“We are going to have to tighten our belts,” Bassett said. “We are going to have to look at ways to be more strategic on how we spend, [but] we are always working hard to be good stewards of taxpayer funding.”


Hebert said he is in strong support of Gov. Greg Abbott’s commission to evaluate school finance reform, but he argues the solution to the issue of state funding and rising property taxes is more complicated than what the public may think.


“We are a much bigger economy than Russia, England, France—we are a much larger economy than all but seven nations on earth. Well, can’t we fund our education needs?” Hebert said. “We have to figure out how to use our wealth wisely so that we don’t punish folks just because they own property.”