Education Funding

Texas, Despite Surprise Surplus, Foresees Tighter Times

By Michelle Galley — April 03, 2002 5 min read

At a time when most states are struggling to maintain their current levels of education spending, Texas public schools stand instead to receive an influx of cash.

Because property values last year rose nearly twice as much as the state legislature had projected, and because the state’s school finance system relies heavily on property taxes, the Texas school budget is expected to wind up with a surplus of between $400 million and $900 million in the upcoming 2003 fiscal year. Current estimates indicate that the surplus will likely fall into the lower end of that range.

But the party may be over almost before it starts. That’s because Texas budgets two years at a time and is facing an estimated $5 billion deficit for the two-year period beginning in September 2003. The bulk of the surplus money—roughly $300 million—will go to finance school items the state legislature agreed on in its last biennial session, during the spring of 2001. That list of potential expenditures, to move forward only if extra money turned up, includes grants to make debt payments on existing or newly issued bonds for school facilities.

Whatever is left over after that spending will go into the general state coffers and may help combat the looming state shortfall.

“That [remaining amount] is significant, when you are looking at a significant deficit” for the next biennium, said Craig Foster, the founder and former executive director of the Austin-based Equity Center, a group that has worked to direct education funding to the state’s poorer school districts.

Enter Robin Hood

The court-ordered school finance formula for equalizing spending among Texas districts was dubbed the “Robin Hood” system by critics, a shorthand that has since taken hold across most of the ideological spectrum. The 1993 law requires districts with high property values, and thus more revenue per student, to share their wealth with districts whose property values are considered low.

Overall, about half of school funding in Texas comes from general state revenues and federal grants; the rest comes from local money, primarily property taxes. But on the district level, that split varies widely. Some districts, flush with property taxes, get no state aid. Others depend heavily on state money.

Currently 101 of the state’s 1,034 school districts have been classified as “Chapter 41,” or property- wealthy districts. School districts reach that state classification, and begin surrendering part of their property-tax revenue, when the value of their taxable property has reached or exceeded $300,000 per student. When a property- wealthy district reaches Chapter 41 status, district officials do not necessarily have to start cutting checks to the state. They have four other options:

  • Consolidate with a property-poor school district.
  • Consolidate the district’s tax base with that of a property-poor district.
  • Detach expensive property from their district, in effect giving it to an adjoining district.
  • Contract with another district, sending money to a property- poor district instead of the state.

As much as a third of the anticipated surplus will come directly or indirectly from unexpectedly high tax revenues from property-wealthy districts. The rest will come from a large drop in payments the state will send out to property-poor districts which, because property values have risen more than expected, have more local tax revenue as a result.

But as Texas, like the rest of the country, tries to pull out of recession, legislators meeting early next year may need to send more state money to school districts.

“For the 2003-04 school year, it is likely that the state will have to appropriate more money for those districts that have declines in their property values,” said Joe Winoski, an assistant commissioner for school finance for the Texas Education Agency. “Whether the whole state declines or not remains to be seen.”

Before Robin Hood’s birth, the 5,800- student district serving exclusive Highland Park, a small municipality surrounded by Dallas, had a very low tax rate. The district could afford amenities such as brass fixtures in some washrooms, an Olympic-size pool, and air-conditioned tennis courts. Meanwhile, the property-poor Edgewood district in San Antonio couldn’t afford to air condition many of its classrooms.

Both districts have seen changes as a result of the equalization effort. In Highland Park, school officials “had to come to grips with higher tax rates and less money,” said Mr. Foster of the Equity Center. “It’s been different for them to have to say, ‘No, we can’t live like this anymore.’ ”

And Edgewood today is far better off than in the past, said Mr. Foster. Money from the school finance formula has been used to build computer labs and buy window-unit air conditioners. But, Mr. Foster said, equalization has been a slow process. “It doesn’t turn around overnight,” he said.

Making Adjustments

When the upscale Eanes district near Austin became a Chapter 41 district in 1994, its tax levy for operations and maintenance was $1.30 per $100 of property value. That year, the district paid out 8 percent of its almost $30 million in property taxes to the equalization effort, according to Jeffrey W. Weaver, the superintendent of the 7,300-student district.

This school year, the district’s tax rate is $1.50—the cap the state has set for such levies—and it will collect about $85 million in property taxes. But it will have to surrender $41 million, or almost half of their revenue.

And it will just get more expensive for the district, said Mr. Weaver. The equalization formula has meant that the district has had to cut programs, such as foreign language in the elementary schools, and the 5th grade orchestra program. The district has also cut back administrative staff and instructional assistants, and has implemented a $150 activities fee for students who participate in team sports, cheerleading, and the marching band at the high school level.

Even with the cutbacks, Mr. Weaver said that Eanes is a very wealthy district. Only 1.5 percent of its students qualify for free or reduced-priced lunches, he said.

Mr. Weaver said that while he isn’t criticizing equalization, the district can’t raise taxes, must pay more to the state, and has had to cut programs. “Is there a way we can move to the middle?,” he said.

A version of this article appeared in the April 03, 2002 edition of Education Week as Texas, Despite Surprise Surplus, Foresees Tighter Times

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