Austin ISD
10:32 am
Fri August 22, 2014

'Alarm' Over Texas School Finance, But Changes Not Expected Soon

A decision in the latest school finance lawsuit is expected next week, but it could be years before school districts see any changes to the way education is paid for in Texas.

Right now, the school finance system is largely characterized by something called recapture, or  Robin Hood. If a school district collects more local property taxes than the state has determined it needs using a set of formulas, it has to give the difference back to the state. Then, the state puts that money in a big pot and uses it to fund other school districts, especially those that can’t raise enough local property taxes on their own.

This year, Austin ISD expects to send more than $120 million back to the state because of Robin Hood. The district is in a tricky position. It’s using reserves to balance its budget and enrollment is projected to decline over the next ten years, which means less revenue for the district in the future.

“Austin in particular has invested in programming over the years and now we’re finding ourselves in a place where we really have to make some decisions about if we can continue those investments," says Nicole Conley, Chief Financial Officer for Austin ISD.

On top of all of that, the district is preparing for another part of the school finance system to phase out in 2017, when the district estimates it will eventually lose $18.5 million each year.

It's called target revenue. In 2006, the Legislature told school districts to reduce their tax rates as a result of another school finance lawsuit, but it told the Texas Education Agency to provide additional state aid to school districts. That way, districts would have the same amount of money, even though they were collecting fewer property taxes.

Once that ends, there’s nothing to replace that revenue source.

“So we have less to operate the same infrastructure, services, same teachers, schools, with less dollars on top of new mandates [House Bill] 5, which calls for new investments," Conley says.

House Bill 5 is a law passed by the Legislature in 2013 that requires high school students to choose one of five paths to graduation, depending on their educational and career goals. It radically altered the kinds of courses schools are required to offer and how districts assess student progress. Students are now also required to pass five tests to graduate.

Education experts say compared to other school districts, Austin isn’t the worst off in the state. It receives more funding per student than many school districts and more than the state average. However, most AISD students are considered low-income and the district says it costs more to serve those students.

Austin ISD officials acknowledge their tough financial situation. But unless the Legislature makes changes to the finance system, there’s not much the district can do but cut from its own budget or make major changes to serve its students more efficiently.

“Until there are legislative changes then life is what life is in Austin," said Trustee Jayme Mathias at a school board meeting earlier this month. "The most sobering picture of the day is the gap we’re going to start to feel in 2016 between our reserves, which are quickly diminishing... I’m hearing alarm bells going off, here, am I the only one who is hearing them?”

Experts believe the court will rule the school finance system is unconstitutional, but the state is expected to appeal to the state Texas Supreme Court. That likely means another year or more before a final decision—and another legislative session in between.

“There’s going to be this giant elephant throughout the budget process," says Chandra Villanueva with the Center for Public Policy Priorities, a left learning think tank in Austin. "Everybody knows more money is going to be needed for public education and the Legislature, they can address it without a court ruling. They know it’s going to be ruled unconstitutional and if [the Legislature] wanted to, they could start now trying to figure out a solution.”

If the Texas Supreme Court ultimately finds the school finance system is unconstitutional, they’ll deliver an injunction. Depending on the injunction’s deadline, the governor could decide to call a special Legislative session to deal with school finance. Or, it could have to wait until the next session—in 2017.