Education Funding

Texas Governor Unveils School Funding Plan

By Michelle Galley — April 14, 2004 3 min read

Gov. Rick Perry of Texas announced a new blueprint late last week for overhauling the state’s school finance system.

The Republican governor’s plan would pump more than $2 billion in new funding into the public schools and restructure the property-tax system so that some of that money would stay in local communities and some would flow to schools through the state.

In addition, Gov. Perry would provide extra financial aid to schools and districts in the form of incentive-based rewards that would be doled out based on student—and sometimes teacher—performance.

“My plan offers Texans a fiscally responsible approach: It invests an additional $2.5 billion in education excellence, and it gives millions of Texas homeowners who are overtaxed an immediate $3.2 billion—or 17 percent—average reduction in school property taxes,” Mr. Perry said in a statement released April 8.

Additional money for schools would be generated by imposing new taxes on adult entertainment and cigarettes, and by allowing video slot machines to be installed at dog- and horse-racing tracks in the state. Voters would have to approve the new slot machines.

Those so-called sin taxes would remain relatively stable revenue sources, regardless of how much the state economy grows—a concern for some critics of the governor’s recommendations.

“We are afraid that the leadership is focused on property-tax cuts without replacing that with a stable revenue stream that grows with the economy,” said Brock Gregg, the governmental relations director for the Association of Texas Professional Educators. With 100,000 members, the Austin-based organization is the biggest association of teachers in the state.

To make the plan a reality, the state legislature, which meets biennially, would have to approve the proposal in a special session. The governor said last week that he could call that special session as early as this month.

Mr. Perry’s blueprint would replace the state’s current “Robin Hood” school finance system. That model was established in 1993 by court order and requires school districts with high property values to share some of the revenue they receive from property taxes with districts that have significantly lower property values, and thus less funding from such taxes.

Under the current system, about half of Texas schools’ funding comes from state and federal money, and the other half from local property taxes. If the legislature approves the governor’s proposal, the state will pick up 60 percent of the school funding tab, and local governments will be responsible for the other 40 percent, according to a news release.

Performance Incentives

Dubbed a “constitutionally linked tax base,” the new system would let local schools keep tax revenue raised from residential properties in their areas.

Tax revenues from industrial, commercial, and other business properties would form “a new statewide employer property-tax base,” according to the news release from the governor’s office.

Money generated from that tax base would be allocated to schools across the state.

In addition, Gov. Perry proposed that residential property taxes be capped at $1.25 for every $100 of assessed value. Business property taxes would be capped at $1.40 per $100 of assessed value.

Both classifications of property now can be taxed at $1.50 per $100 of the assessed value.

A large chunk of the new funding for schools would come in the form of seven incentives that would cost the state roughly $500 million a year. Details would be ironed out in the special legislative session. Those new incentives for schools include:

  • $100 per child to the school for every grade a student completes, as a way to encourage schools to prevent dropouts;
  • $100 per student for every English-language learner who passes the state’s standardized test, the Texas Assessment of Knowledge and Skills;
  • $1,100 for every student who graduates after completing a rigorous course of study, including foreign languages and Advanced Placement courses; and
  • $2,200 for every student considered at risk of academic failure who completes the same course of study.

Those bonuses “should not take the place of an adequately funded system,” said Wayne Pierce, the executive director of the Equity Center, a school funding advocacy group in Austin. “They should be on top of a quality program.”

Whether the governor’s plan is of high quality remains to be seen, he added.

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