Fate of the ‘Hold Harmless’ Funding Mechanism Could Affect the Bottom Line for School Districts

Dec 29, 2016

Texas lawmakers are about to spend a lot of time talking about how the state funds its public schools. The question is: Will they make any changes during the legislative session that starts in January? If they don’t, there’s a part of the system that’s set to expire next year. That could be a problem for some school districts across the state.

About 10 years ago, the state legislature provided some property tax cuts by compressing property tax rates. But public schools in Texas depend on local property taxes for funding. School districts were worried what this might do to their bottom line. So, lawmakers put in something called a "hold harmless" provision.

“They promised districts they wouldn’t lose any funding as a result of that tax rate compression so they created this ASATR, Additional State Aid for Tax Reduction," explained Chandra Villanueva, a school finance expert with state policy think tank the Center for Public Policy Priorities.

Instead of funding schools based on the formulas school districts currently use, schools were simply guaranteed the same amount of funding they got in 2006.

“That just set their funding frozen in time based on that level. So, it no longer matters how many economically disadvantaged students they have, how many [English language learners], all that matters is they get that historic level of funding," Villanueva said.

Over the years, lawmakers have tacked on a variety of hold harmless provisions, and they’re political.

No lawmaker wants to head home after the legislative session and have to tell their school districts they lost money. That’s why when lawmakers put ASATR in place, most Texas school districts got funding from it because most districts were affected by the compressed tax rate.

But, slowly, districts were weaned off that system.

Most Central Texas districts don’t receive money through ASATR anymore, but nearly 175 school districts still do. That provision is set to expire in September and some districts say without money from ASATR, they’ll have to close their doors. For instance, Webb CISD outside Laredo gets nearly half of its maintenance and operations budget from ASATR.

“It’s a weird one because it’s not a whole lot of money, but the districts that get it, they need it because their district’s funding is so low," Villanueva said.

Closer to home, Lago Vista ISD gets 13 percent of its funding this school year from ASATR. Lake Travis ISD gets 7 percent—about $4.2 million dollars. Eliminating that would mean budget cuts at those districts, unless lawmakers make changes to the system. Villanueva says if those changes include new hold harmless provisions, she thinks they need to be temporary. 

“There is room for hold harmlesses, but they should see as more a transitionary than a permanent feature of school finance system," she said. "It’s okay to build in transition times to get districts used to new rules and new ways we fund, but they should always have an expiration date.”

But not everyone thinks ASATR should end this year. State Rep. Paul Workman, who represents parts of Austin, has filed a bill that would extend ASATR funding for two more years. And Lubbock Rep. Dustin Burrows has filed a bill that would extend that funding for another decade.