Richards Announces Finance Plan; Special Session Looms

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Gov. Ann W. Richards of Texas last week launched yet another attempt to devise a school-funding system acceptable to the state supreme court by unveiling a plan that would funnel commercial-property taxes into state coffers.

Aides said the Governor plans to call lawmakers into special session next month to draft another finance bill. The supreme court earlier this year nullified the legislature's second attempt at a law aimed at rectifying disparities in school funding.

In its ruling, the court allowed the law's tax provisions to stand through 1993, giving lawmakers ample time to try again. But Ms. Richards wants to avoid having later this year to collect a property tax that has already been declared unconstitutional.

The plan announced last week by Ms. Richards would wrap reforms--including incentives for school performance and teacher raises--into the finance-formula revisions. She maintains that the proposal would not require any new funding.

Observers voiced initial reservations about the plan, while applauding the Governor's participation. But some groups that have long been involved in the finance battle said the plan was not a viable solution.

No Local-Funding Caps

The cornerstone of Ms. Richards's finance changes would be converting business-property taxes from local to state collection. The state would set the business rate, which would be known as the School Equity Tax, within the current levy limits applied to school districts.

Property taxes paid by homeowners would remain in local school districts, with funds from the state business-property tax used to equalize funding. The state would establish a new minimum local tax rate required to qualify for state aid.

The formula would establish three tiers of school funding. The first tier would support a basic school program through state and local taxes, guaranteeing a certain amount of funding per student. The second tier would support enrichment and school facilities and would guarantee a set amount of revenue for each penny of a district's tax rate.

Unlike earlier plans, the Governor's proposal would not recapture local tax revenues above the guaranteed amount.

The plan's third tier would consist solely of local tax revenues, with no state participation.

While arguing that the plan would provide near-perfect equity, the Governor stated that she is opposed to imposing funding caps on districts. "The level of enrichment is an issue for local taxpayers to decide,'' according to a summary of the plan.

Incentives for Performance

The proposal would convert the existing Available School Fund, which is currently allotted to districts based on enrollment, into a Quality School Fund that would reward districts for innovation or progress in student achievement and lowering administrative costs.

In addition to receiving a share of the $1-billion fund, the Governor said, the schools recognized under the program would be given greater regulatory flexibility.

The plan also would modify the state's Cost of Education Index fund, which covers some districts' higher operating costs. Ms. Richards urged that 70 percent of the $1-billion fund be devoted to salary increases for teachers and other "non-administrative'' workers.

While some education groups said last week they were still studying the plan, others criticized its continued heavy reliance on property taxes for school funding and worried that it would create conflicts between the state's powerful business and education organizations.

"It misses the mark entirely as far as we're concerned,'' said Craig Foster, the executive director of the Equity Center, a group of poor districts.

The plan fails to produce funding equity between districts, Mr. Foster said. "It's just bad public policy.''

But Al Kauffman, a lawyer who argued the original school-finance challenge, said that the Governor's plan takes a step in the right direction by adding businesses to the state's tax rolls. "That removes some of the greatest disparities,'' he said.

Vol. 11, Issue 30, Page 12

Published in Print: April 15, 1992, as Richards Announces Finance Plan; Special Session Looms
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