Law & Courts

Texas Poised to Close Long Chapter on School Aid

By David J. Hoff — May 23, 2006 3 min read
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After several failed attempts, Texas is about to get a new school finance system.

Gov. Rick Perry said last week that he would sign the package of tax and appropriations bills that the legislature passed to meet the state supreme court’s June 1 deadline to rewrite Texas’ property-tax code and still adequately finance schools.

The measures also contain a series of policy changes that include a boost in teacher pay and additional course requirements for high school graduation.

“Because of this plan,” Gov. Perry, a Republican who is seeking re-election in November, said in a May 16 statement, “our schools will improve, our economy will grow, and our state will prosper.”

Some legal advocates and finance experts doubt, however, that the plan is a long-term solution. They note that it relies on the state’s $8.2 billion surplus for short-term financing and doesn’t provide enough tax revenues to pay for schools in future years.

“This is yet another quick-fix,” said David Hinojosa, a staff lawyer for the Mexican American Legal Defense and Educational Fund, one of the plaintiffs in the case arguing that the state inadequately finances its schools.

“They seem to be digging their own grave” for the future, he said, referring to the legislature.

Cuts and Increases

Working in response to last year’s Texas Supreme Court decision, the legislature convened last month in a special session to overhaul the school finance system.

In November, the court overturned a lower-court ruling that said the state inadequately financed its schools. But while the high court did not require the state to spend more on schools, it did order a revision of the tax system, which caps the amount districts can assess when taxing property and requires wealthy districts to share a portion of their revenues with poor districts.

The court ruled that the property-tax cap amounted to a statewide property tax—something the Texas Constitution prohibits. (“Texas School Finance Ruling Draws National Attention,” Dec. 7, 2005.)

Lawmakers had failed in their efforts to revise the finance program in their regular 2005 session and two special sessions last year, and in a special session in 2004.

But the task was made easier this year by a projected $8.2 billion surplus in the $72 billion budget for fiscal years 2006 and 2007.

The series of bills the legislature sent Gov. Perry last week would cut property taxes, close loopholes in a business tax, and raise cigarette taxes. At the same time, the package would increase K-12 spending by $1.8 billion in the next school year—about a 5 percent increase—with most of the money going toward a $2,000 teacher-pay raise and Mr. Perry’s plan to improve high schools.

In his statement, Mr. Perry said that, under the proposal, property-tax payers would save $15.7 billion over the next three years.

Under the revisions to the way property-tax revenues have been shared, $1 billion in tax revenues would stay in local communities rather than be redistributed across the state through what is known as the “Robin Hood” system.

Policy Changes

The bills would also make some significant policy changes.

They would create a $260 million pool to pay teachers bonuses based on their students’ achievement gains. The bonuses, worth as much as $10,000 each, would be distributed based on rules devised by local school districts. A mentoring program to help new teachers adjust to their jobs would also be started.

In addition, future students would be required to take four years of mathematics and four years of science to earn their diplomas. For a regular diploma, the state now requires three years of each subject.

While the governor and his allies bragged about their accomplishments last week, his opponents warned that the tax bills wouldn’t generate enough revenue to pay for all of the proposed K-12 programs.

Texas Comptroller Carole Keeton Strayhorn, an Independent candidate in this year’s gubernatorial election, estimates that the bills would fall $23 billion short of the revenue needed to pay for the bills’ programs over the next five years. The plan would use all of the state’s projected surplus to pay for the school finance program, she said in a letter to Gov. Perry.

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A version of this article appeared in the May 24, 2006 edition of Education Week as Texas Poised to Close Long Chapter on School Aid

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