The Checkered History of Texas School Finance

by Dr. Jerry Burkett
Originally Published: February 29, 2012

*In light of our latest round of school finance law suits facing the Texas Legislature, I was asked by a teacher to explain, in her words, “Why is this happening again?”  I am writing this to provide to readers of this blog a brief history of school funding since 1984. Use this information for your staff, teachers, friends, colleagues, and discussions related to school finance in Texas.  It is a topic that should not be ignored.

School finance in Texas has a checkered and varied history, as lawmakers in modern eras have sought to meet their state constitutional requirement to provide a free education.

In the late 1980s the state of Texas faced a school funding crisis. This crisis was different than that facing school districts today – this time the issue was property taxes and a school district’s ability to levy funds from local sources. The result of the crisis was several law suits, including a groundbreaking suit known as Edgewood ISD v. Kirby.

Edgewood ISD in the San Antonio area has been a historically poor school district with limited ability to levy property taxes comparable to neighboring districts. For example, home values in Edgewood ISD were relatively low when compared to the affluent Alamo Heights ISD. By sheer comparison of home values, Alamo Heights could levy local taxes at a near 3-1 rate when compared to Edgewood. Since this was the sole source of school funding at the time, the issue of equity was raised in the courts.

Edgewood would win their case as the courts asserted that the issue of equity was contrary to the intent of the constitution’s Texas Education Clause. The state had always provided a minimum per student wealth to school districts with a provision to allow local school districts to levy their own taxes.  With that, Edgewood proved inequity thorough their inability to levy taxes equal to property wealthy districts.

The legislative result of this lawsuit was the requirement to develop a new system of funding which ultimately became known as “Robin Hood.” The Robin Hood system was aptly named as it recaptured funds from wealthy school districts and redistributed those funds to poorer school districts in an effort to balance equity. School districts would continue to levy local property taxes, but property wealthy districts would have to send money back to the state for redistribution to property poor districts.

The system successfully achieved the goal of balancing equity. Clearly, property poor school districts benefitted from the program as it gave them increased funding for programs, instructional supplies, teachers, and other needs. Independent School Districts (also known as County Education Districts) were developed on the county level redistribute funds to school districts on at a local level and more oversight was given to monitor the spending of funds. The program worked well for property poor districts that now had equitable funding to compete with property wealthy districts.

However, Robin Hood was not well received by most property wealthy districts. With the recapture of their local funds by the state, affluent areas were beginning to struggle to meet growing student populations, housing booms, and cost of instruction.  With the increased student growth in the 1990s and a robust economy, the cost of education was rising and districts were forced to raise taxes to meet the needs of students; particularly in wealthy districts whose budgets were shrinking each year from recapture. By the late 1990s, nearly 10 years into Robin Hood, most school districts in the state of Texas had reached the state-mandated property tax cap of $1.50 per $100 valuation of a property.

As costs continued to rise, as well as frustrations over recapture, a contingent of property wealthy school districts sued the state of Texas to again fix school funding; this time over both equity and adequacy. Additionally, they challenged the legal authority of the state to issue a statewide property tax (unconstitutional in the state of Texas), which became evident with nearly 95% of the school districts in the state capped at $1.50.

The suit resulted in our current funding formula system, which is a system that takes into account a variety of funding factors known as weights to distribute funds from the state back to the school districts. These weights take into account technology, programs such as special education, and bilingual education, as well as other costs to education.  Funding considerations are also made for regional variations in costs of living, as well as areas that experience declining property values.

With the state promising to pick up some of the slack from the cost incurred by levying local property taxes, in 2006 the state lowered, or compressed, the local property tax rate for school districts from $1.50 to $1.04 (or lower in some areas). The state promised to make up the difference in funding through state revenues and reduced the burden on property owners.

However, that promise has proved challenging for the state of Texas as their biennial contribution to school districts has steadily declined. To make up the difference, the state instated a tax on businesses in the state which has fallen short of expectations (the tax is currently being challenged in the Texas State Supreme Court as an income tax on business). In addition, with increased foreclosures and decreasing property values across the state, localities have struggled to make up the difference in funding for local districts.

Lastly, the formulas used to process state funds to local districts has proven itself broken and inadequate, giving some school districts significant discrepancies in per student funding when compared to other districts.

Now, with $5.4 billion cut to education funding from the state in 2011, school districts are again suing the state of Texas to fix our broken funding system in the name of equity and adequacy.

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