School Finance 101 Your name Your school district Date Contact Information

School Funding Sources Shared Arrangement The local share: property tax revenue The state share: sales tax revenue, business taxes, lottery proceeds, fuel tax, etc. The federal share: ESEA, Title I (and other grant programs); IDEA, Special Education, other federal funds

Sources of Revenue School Year Funds from these three sources amount to $44.3 Billion – Local share = 45.7% – State share = 44.8% – Federal funds = 9.5%

Basic Principles of School Finance Equity Equal access to resources for public education for all school districts, regardless of property wealth (known as ‘fiscal neutrality’) – The Foundation Program formulas in law help Texas approach this equity goal Each student has access to programs appropriate for their educational needs and that are substantially equal to those available to similar students in other school districts

Basic Principles Meaningful Discretion Meaningful discretion is the ability of a school board to set tax rates and provide resources to educate students at or above state requirements The requirement for meaningful discretion is a key component of the Texas Supreme Court ruling on school finance (2005)

Hold Harmless In 2006, the Legislature compressed local property tax rates by 1/3, providing tax relief To make up for the lost education revenues due to tax compression, the state guaranteed to hold harmless each district at the higher of its 2005 or 2006 funding levels per student Hold harmless state funding, plus teacher salary increase funds, a high school allotment, and some other elements form the Revenue Target for each school district

Where Are We Now? The state is currently in the 4 th year of using Revenue Targets – Over 740 districts are funded with targets – Almost 300 districts are funded using the foundation program formulas Revenue Targets are out-of-date

Where Are We Now? Funding with Revenue Targets is less equitable than formula funding Per-student Revenue Targets range from a law of $3,600 to over $12,000 per student – The average is about $5,075

Where Are We Now? Most important Neither Revenue Targets nor foundation program formulas are linked to the chose of achieving academic performance requirements in law today. The connection between what schools must do and the resources available to accomplish those goals is missing.

Tax Rate Increases Districts may raise property tax rates by an additional 17 cents above the compressed rate The first 4 cents can be levied by the school board without an election. The pennies are guarantee to generate the same level of revenue as Austin ISD, and without recapture

Tax Rate Increases Two more pennies of tax also yield the same revenue as Austin ISD, but voters must approve the board’s action to adopt these two pennies The remaining 11 cents also require voter approval and yield less revenue per penny. Recapture applies to these taxes.

Tax Rate Increases Aside from money provided for student enrollment growth, the only way for districts to access additional funding is by asking local voters to approve a tax rate increase or asking the Legislature for more resources.

Effect of Property Value Increases There is an inverse relationship between local property tax revenue and state funding for schools: – If property values increase in a district, the state’s obligation to provide funding to that district decreases.

What Drives Rising Costs? Teacher and other educator salaries Transportation costs and utilities Rising food prices Competition for auxiliary staff and rising salaries for those staff Higher academic standards Increased high school graduation requirements

Current Funding Problems The funding system established in 2006 was intended to be temporary The school finance system is not adjusted for current instructional requirements and performance standards The finance system is no longer appropriately adjusted for regional cost differences

Current Funding Problems Target Revenue system exacerbates inequities Out-of-date state funding levels push property taxes higher If there is no fix in the 2011 session, the system will continue through to the school year (7 years)

Solutions Conduct a state study in 2012 to examine the true cost of education, taking state standards and requirements into consideration Increase general revenue support for school districts to move more districts off Target Revenue and back on to the foundation program formulas Permit school districts more flexibility to set tax rates

What Next? – Contact your legislators to express concern for the adequacy and fairness of the school funding system – Describe the local situation to your legislators so that they have a clear picture of the needs in your district.