Officials in KISD, which failed to win voter support for a proposal to increase its property tax rate last year, and SISD, where flat enrollment numbers mean state aid will not increase substantially, have said the current funding system is not sufficient to keep up with annual costs.
Under Texas’ public school funding system, the state’s contribution to school districts drops as property values in the districts increase. As a result, the district’s total revenue does not change from year to year unless enrollment also increases.
If no change is made, state funds will account for less than a third of school revenue in 2023, according to the Texas Commission on Public School Finance’s final report in December.
“We have to … give back taxpayers money and at the same time come up with funding for priority projects and education,” said state Sen. Paul Bettencourt, R-Houston, a commission member.
Districts statewide are faced with the challenge of finding revenue for schools outside of the state funding formula, said Bob Popinski, president of policy for Raise Your Hand Texas, a nonprofit organization that advocates for public policy affecting Texas districts.
“A 50/50 [state funding and local property tax] split is a good starting point,” Popinski said. “The hope is this legislative session [the state] allows districts a little breathing room.”
The Texas Commission on Public School Finance was established by the Texas Legislature in 2017 to make recommendations to the Legislature for improving public school financing methods. The commission consists of 13 members, including legislators, education experts and community leaders. Among the recommendations in its Dec. 31 final report are three options for the Legislature to consider to slow property tax growth in 2019, such as the 2.5 percent annual maintenance and operations property tax growth cap suggested by Gov. Greg Abbott in January.
If advanced by the Texas Legislature in 2019, the proposal known as Option A would lead to about a 12-cent reduction on average in district maintenance and operations tax rates—the portion of the tax rate that funds a district’s staff and day-to-day expenses—statewide by 2023. Under the proposal, the state would increase its share of a district’s revenue.
Bettencourt said specific funding instructions were not included in the recommendation, but the money could come from multiple sources, such as the state’s recapture fund and sales tax. The recapture process redirects money from wealthy districts to those in greater need.
Annual recapture funds collected are expected to increase from $2 billion to $5 billion by 2023, according to the report.
The commission’s two other recommendations deal specifically with using money from projected recapture growth. Option B suggests using recapture money to bring about a 7-cent tax rate reduction on average, and Option C recommends exploring other ways—not specified in the report—to use recapture funds to reduce tax rates and boost state revenue.
Bettencourt said he believes Option A would provide the greatest benefit to taxpayers, but a spokesperson for one organization representing Texas school boards said it opposes tax revenue caps.
“We’re not in favor of capping local government’s ability to raise revenue,” said Dax Gonzalez, communications manager for the Texas Association of School Boards Governmental Relations division. “You can only be so [fiscally] responsible before you cut essential programs and services.”
SISD Chief Financial Officer Ann Westbrooks said she finds Option A promising, but she also noted the need for the state to identify future funding sources.
“I’m ecstatic with the recommendations on the revenue side and the expenditure side,” Westbrooks said of the draft report. “My concern is if you do decrease the amount coming from our local share. We have to know for sure that there is funding set aside at the state level to make up the difference.”
Challenges in Klein ISD
An attempt to boost KISD revenue with a tax ratification election was rejected by voters in June. The measure asked voters to approve a 9-cent tax rate increase to help rebuild its fund balance and guard against $30 million in budget cuts. Among the cuts the district made as a response were reduction in benefits and delaying the opening of a new elementary school. The student-to-teacher ratio was increased by one, but no jobs were cut, officials said. Instead positions were restructured, and vacant positions were not filled.
Because 90 percent of the district’s operating costs are teachers and staff, KISD Chief Financial Officer Dan Schaefer said he believes the current funding system does not provide for cost-of-living adjustments.
“The bigger issue is addressing state funding formulas that determine the total state and local revenue per student that districts can generate,” Schaefer said. “For this session the overall goal for school districts is ... improvements in state funding formulas to generate new money on a per-student basis each year.”
Under current formulas, the total amount of revenue a school can generate from both local and state funding sources is calculated by revenue per student, which varies for each district. Therefore a district generally must see an increase in enrollment to allow it to receive higher overall revenue, Schaefer said.
The total revenue received per student in KISD has decreased from 2014-18 and remains below the state average, according to the Texas Education Agency.
Despite KISD enrollment increasing from 49,180 to 52,896 from the 2014-15 school year to 2017-18, the district’s total revenue per student fell from $10,399 to a budgeted amount of $10,074 in 2017-18, the most recent year available from the TEA.
In lieu of state funding changes, the district may attempt another tax ratification election, but that decision has not yet been made, Schaefer said.
Stagnant SISD enrollment
Flat state funding has also been a challenge in SISD, where enrollment is not projected to increase significantly in the next 10 years, Westbrooks said.
“The top priority for us as far as I see is school funding,” Westbrooks said. “Our property values are growing, and local taxpayers are paying more money ... but the district’s total revenue is not going up.”
Enrollment in SISD has decreased slightly since 2015, when it peaked at 37,022, according to district data. Enrollment was estimated at 35,532 in 2018-19, and it is expected to hover just above 36,000 from 2023-28, SISD Director of Communications Karen Garrison said.
Under current funding rules, the district cannot get more state funding per student if enrollment does not increase, Westbrooks said.
“I’m hoping that a lot of consideration [is] given to [Texas Commission on Public School Finance] recommendations,” she said. “It would be some heavy wins if we are able to get some of those things passed.”