Burden of public school funding shifts to taxpayersThe Texas Legislature passed a bill allocating additional funding to public education during the special legislative session in August, but Spring and Klein ISD officials said it was significantly less than the districts need.

House Bill 21 would have allocated an additional $1.8 billion for public education. However, the final version of that bill—with revisions from the Senate—was passed by the Legislature and signed into law by Gov. Greg Abbott, providing only an additional $311 million for public education, KISD Chief Financial Officer Thomas Petrek said.

“The original House version of the bill would have provided much-needed assistance to school districts, but the final version was severely depleted,” KISD Superintendent Bret Champion said.

Some lawmakers, including Rep. Tom Oliverson, R-Cypress and Rep. Kevin Roberts, R-Spring, said they believe in order for the state to fix its school finance system, the state must also reform property taxes—which account for an increasingly larger portion of school revenue.

“As the state reduces our budget dollars to public schools, additional cost is picked up through property taxes,” Roberts said. “So, if you truly want to reduce property taxes, first we need to reform school finance.”

Burden of public school funding shifts to taxpayersFunding shifts

The steady rise of property values throughout Spring and Klein has increased the revenue school districts receive from property taxes, shifting the burden of public education funding away from the state and onto taxpayers. Petrek said the state’s funding formula calculates how much a district should receive in state aid by subtracting the amount the district will receive in local revenue—which primarily consists of property taxes—from that total.

“Let’s just say I earned $1 million of state aid for the year, but locally I collected $500,000 in property taxes, so the state would give me $500,000 as well,” Petrek said. “Let’s say the next year I earn $1 million and the local property taxes went to $600,000. The state is only going to give me $400,000.”

Petrek said taxable property value in KISD rose around 9 percent last year and is projected to increase 6 percent this year, which will provide the district with an additional $13 million in revenue from property taxes. However, the district will receive $6 million less in state aid than it did last year, he said.

“It’s unfortunate our community thinks as our property values go up, we’re benefiting from it—but no. The state is benefiting from it,” Petrek said. 

Based on KISD’s 2017-18 budget, state funding will provide about 48 percent of the district’s revenue. This is 10 percent less than in 2013-14, when the state provided about 58 percent of KISD’s revenue, according to general fund information provided by KISD.

SISD has experienced a similar trend.  SISD Chief Financial Officer Ann Westbrooks said taxable value in SISD was more than $8 billion in 2009, and is now about $12.5 billion. The state provided the district with almost 70 percent of its revenue for the 2013-14 school year and will provide about 56 percent of its revenue for the 2017-18 school year, Westbrooks said.

According to research from the Center for Public Policy Priorities—an Austin-based organization that uses data to advocate for policies it believes are beneficial to
Texans—the state’s share of funding has decreased from 46 percent of an average public school district’s revenue in 2012 to 41 percent in 2017.

However, overall state funding for public education has increased over the past decade, according to data from the Texas Education Agency.

Including higher education costs, the state allocated about $13.2 billion in public education funding for the 2004-05 school year and about $24 billion for the 2015-16 school year—an increase of 82 percent. During the same time period, local spending increased from about $17 billion to $26 billion, according to the TEA.

Despite additional statewide funding, Petrek said KISD feels the pressure of the district’s continuous growth and the expenses that growth brings, including the opening of new schools. Klein Cain High School opened in August, and Intermediate School No. 10 will open next fall.

The new high school will cost the district an additional $5 million a year to operate and maintain, and the new intermediate school will cost an additional $3.5 million a year. However, Petrek said the state does provide additional funding to districts that experience growth like KISD.

“We keep getting more students and we get money for those additional students, but overall state aid went down and the reason for it is because local property taxes went up,” Petrek said.

Burden of public school funding shifts to taxpayersHouse Bill 21

Petrek said if HB 21 had passed in its original form—injecting $1.8 billion into the state’s public education system—KISD would have received an additional $7 million in state funding. However, only smaller districts in need of serious help will receive relief after the Senate cut about $1.5 billion from the bill.

Westbrooks said additional funding from the state would allow SISD to reduce class sizes, offer targeted programs to address the needs of individual students and develop a more robust compensation plan for its employees.

However, Sen. Larry Taylor, R-Friendswood, said he believes the $1.8 billion proposed by the House was not realistic because of budget constraints. As part of HB 21, the Senate also tasked a school finance commission to study how the state should raise and spend money on public education.

Taylor said he believes the current school finance system is complicated, outdated and in need of total reform. The 15-person commission will work for the next 18 months to update a system the Supreme Court described as “Byzantine” in a 2016 ruling, he said.

“With the Supreme Court decision saying that the system is constitutional, but it’s messed up, they’ve actually given us an opportunity to do real finance reform starting from the ground up,” Taylor said.

CPPP Senior Policy Analyst Chandra Villanueva said federal lawsuits regarding the state’s education system began in the 1960s. A key driver in this issue is the amount of money it would take to restructure the entire system, she said.

“It’s becoming a real challenge when neither the House nor the Senate wants to talk about revenue and long-term investments into the system,”
Villanueva said. 

Sen. Paul Bettencourt, R-Houston, said the Senate recognizes the need for widespread reform and that the objective of the school finance commission is to find long-term solutions.

Roberts said he believes the House’s original version of HB 21 was a good first step in addressing school finance reform and is disappointed with the bill’s final version, including the amount of funding stripped by the Senate and the commission it established.

“[The Senate] established a Texas school finance commission, which basically says ‘here’s the composition of this commission, you guys go study school finance,’” Roberts said. “Well we’ve been studying it for 40 years. At some point you’ve got to begin acting.”

Burden of public school funding shifts to taxpayersProperty tax reform

Bettencourt was one of the authors of Senate Bill 1, which would have required cities and counties to hold an election for residents to approve or reject a proposed tax rate if an entity’s property tax revenue rose more than 4 percent from the previous fiscal year.

Bettencourt said school taxes usually make up the largest portion of an individual’s property tax bill. For example, KISD’s tax rate in 2016-17 was $1.43 per $100 of valuation, while the county rate was 42 cents per $100 of valuation.

Despite school districts making up a significant portion of tax bills, SB 1 was not designed to reduce property taxes going to school districts, but rather to cities and counties, which Bettencourt said are experiencing rapid growth.

“School districts currently operate under a rollback rate with an automatic election provision, similar to what the Texas Senate passed in SB 1,” Bettencourt said. “However, local ISD revenues have been the slowest growing portion of tax bills over the last decade.”

Taylor said although no bill was discussed throughout the special session specifically addressing how public school finance reform would help provide property tax relief, it is an idea the school finance commission can examine in the coming months. The commission will provide lawmakers with a report before the next legislative
session in 2019.

Additional reporting by Anna Dembowski, Vanessa Holt and Christopher Shelton.