Category Archives: Funding

Making better use of the state’s rainy day fund when it’s not raining

The Senate Finance Committee met today to take up a number of Senate interim charges. Among them, the committee took up the charge to examine options to increase investment earnings of the Economic Stabilization Fund in a manner that minimizes overall risk to the fund balance and to evaluate how the Economic Stabilization Fund constitutional limit is calculated; considering alternative methods to calculate the limit, and alternative uses for funds above the limit.

the Texas Economic Stabilization Fund, often referred to as the state’s rainy day fund, is a mechanism that diverts a part of the severance taxes the state collects on oil and gas production and sets those monies aside to fill budget shortfalls resulting from temporary economic downturns. The fund, which has been used many times since its inception, has in recent years grown to approximately $11 billion, larger than at anytime in its history.

During the last session lawmakers facing stiff budget constraints began to discuss how they could better utilize the rainy day fund, other than continuing to stuff cash into the state’s proverbial mattress. One idea floated by Texas Comptroller Glenn Hegar was to take a portion of the fund and invest it as an endowment such that the investment returns could be used to help pay for state priorities, like shoring up the state’s pension funds. Legislators were not comfortable acting on that idea without more time to vet it.

In today’s hearing Hegar reintroduced the idea of investing the whole of the rainy day fund in very liquid assets that would allow for a return that roughly matches the inflation rate and investing a portion of the fund, in excess of what legislators think they might need quick access to, in less liquid assets that would generate a higher return. The Comptroller’s office predicts that an investment of $3 billion, with additional biennial investments over a certain threshold, would within 10 years accumulate to a fund that generates $1 billion a year in usable revenue. In 20 years, that projection jumps to more than $2 billion a year. The idea was received fairly favorably.

One of the things the state has used the rainy day fund for in recent years is to justify credit rating firms’ assignment of a AAA (the highest) credit rating to the state. Having a AAA rating allows the state and school districts through the Permanent School Fund (PSF) bond guarantee program to pay the lowest possible rate on bond debt. It was pointed out in the hearing however, that the rainy day fund is only one factor those firms look at when assigning a score. Another, more heavily weighed factor is the health/unfunded liabilities of a state’s pension funds. Both TRS and ERS need improvement to ensure the state is able to keep its current rating. A downgraded rating could cost the state billions in additional interest over the life of the state’s and school dostricts’ many bonds.

Your chance to talk to the school finance commission!

If you’re a regular Teach the Vote reader (as you should be!), you’ve probably been following our updates from the Texas Commission on Public School Finance. Now’s your chance to participate!

The commission was created as part of HB 21, which passed during the special session of the 85th Texas Legislature. The bill was a consolation prize to public education supporters disappointed with the Texas Senate’s decision to kill a school finance reform bill containing $1.5 billion in additional public school funding for the 2018-2019 budget biennium.

The commission’s titular purpose is to discuss and make recommendations for how to improve the state’s “lawful but awful” school finance system. The first few meetings have focused on broad issues such as demographics, funding, educator retention, and charter schools. While some of the invited witnesses – including ATPE executive director Gary Godsey – have provided important perspectives, the commission has also served as a forum for outside actors with a financial interest in promoting vouchers and other schemes that would weaken the public school system.

Members of the public will now get the chance to address the 13-member commission at the upcoming March 19 meeting. This will likely be the only time educators, parents, students, and other community members will be allowed to speak their minds in front of this group.

The commission will present its recommendations to the governor and legislature at the end of the year. These recommendations may include everything from how much to pay teachers to how many students can be assigned to a single classroom, or whether taxpayer dollars should be transferred from the public school system to subsidize private school tuition. Details of the meeting are as follows:

Texas Commission on Public School Finance

Monday, March 19, 2018 – 9:00 a.m.

William B. Travis Building, Room 1-104

1701 N. Congress Avenue, Austin TX

The commission will hear from invited witnesses before opening testimony to members of the public. Public testimony will be limited to three minutes per person. A sign-up sheet will be posted on the commission’s webpage two days prior to the meeting. Sign-up sheets will also be available at the meeting. Those who are unable to attend the meeting can e-mail their comments to The Texas Education Agency (TEA) will provide a livestream of the meeting that can be viewed here on Monday.

This meeting is expected to last well into the evening, but it is important that educators provide input. Consider that the state currently contributes just 38 percent of the cost for educating our students, down from a roughly 50-50 split a decade ago. As state lawmakers have gradually decreased the share the state chips in, school districts have been forced to increasingly rely on local property taxes to make up the difference. At the same time, some lawmakers are openly discussing ways to remove even more money from the system through vouchers and other forms of privatization. Here are some questions to think about when crafting your message if you plan to testify before the commission:

  1. What resources do you need to meet your students’ needs?
  2. What sorts of programs, benefits, or incentives would help attract and retain quality teachers?
  3. How would you explain the importance of making sure education dollars are spent on our public schools and not funneled out to private entities or used for other non-education purposes?
  4. Are you also a homeowner who pays property taxes? Increasing the state’s share of education funding to at least 50 percent would place less burden on school districts to raise local property taxes in order to keep their schools operating. How might this change help you as a taxpayer while also meeting the needs of our public schools?

There are plenty of resources available if you’d like to do your own research. You can search numerous articles here at Teach the Vote covering the entire universe of public education issues. You can also check out good primers such as this one by the Center for Public Policy Priorities. ATPE members who are considering testifying are also invited to contact our lobby team for any additional guidance.

We hope you take the time to stop by the meeting to testify or e-mail comments if you’re unable to make it. Let’s make sure our teacher voice is heard loud and clear!


House panel report includes education recommendations

On Tuesday, the House Select Committee on Economic Competitiveness released its formal report containing recommendations for ensuring Texas remains the nation’s most desirable destination for relocating or opening up new businesses.

Speaker Joe Straus (R-San Antonio) formed the committee in October 2017 in response to concerns that the 85th Texas Legislature pursued a number of legislative proposals that resulted in Texas dropping precipitously in the rankings of America’s Top States for Business.

“Texas has long enjoyed a booming economy and staggering job growth. Our economic strength has been predicated on a number of factors: high oil prices, geography, the tax and regulatory environment within the state, and the can-do attitude of millions of Texans,” Straus explained when he announced the committee. “However, there are forces, if left unchecked, that could derail the success our state has enjoyed.”

The committee conducted several hearings and weighed testimony from 42 prominent and influential witnesses from the business, law enforcement and local communities. The committee documented several findings related to education. Most notably, the report underscored the important role public schools play in ensuring the educated workforce necessary to sustain businesses operating in today’s economy. The following passage is taken directly from the committee’s report:

Public education teaches students basic skills before entering the workforce and fosters innovation. Policymakers must deal with school finance, examining not just the amount of money allocated for education, but how we distribute it — and how we can better incentivize public educators and institutions. The governor’s recently proposed 2.5 percent cap on property tax revenue will be detrimental to school funding since school districts receive 40 to 60 percent of property taxes across the state. The Texas House passed a 6 percent cap during the 85th Legislature, but the measure was killed by the Senate; this new proposal will severely reduce school resources unless more funding is appropriated by the legislature.

House Bill 21 of the 85th Legislature would have increased the state’s share of school funding and reduced the need for higher property taxes — easing the burden on homeowners — but the legislation died after being altered by the Senate. After all, how can the challenges facing the future competitiveness of the state’s workforce be addressed if Texas turns its back on its public school system, or does not address its method for allocating resources to public schools?

The importance of local control for school districts was stressed with the explanation that local control granted from the state is important for hiring staff and providing a safe campus for students. Educators want their graduates to meet the specific needs of where their district is located, which makes local control imperative for creating curriculum and making decisions about how to meet those needs. Testimony also demonstrated the need for presenting high school students with information about technical programs, rather than only promoting four-year universities. Public schools must address the needs of students with disabilities, but programs to help them transition to the workplace and speech, occupational and physical therapies are consistently underfunded.

Based upon these observations, the committee included a number of proposals specifically related to public education. From the report:

Recommendation: The legislature must prioritize funding for public education that is regularly adjusted to account for growth in population and inflation. Policymakers should closely examine the effectiveness of public education expenditures to ensure that dollars are used to maximize student success, and ensure the state’s academic accountability system increases the performance of schools and students.

  • In response to declines in state tax revenue, the 82nd Legislature reduced entitlement funding for public education by $5.4 billion. While subsequent legislatures have increased funding for public education, the majority of funds have been used only to cover costs created by the growth in the number of students.
  • Adjusted for increases in population and inflation, state spending on public education has decreased by nearly 16 percent since 2008. At the same time, there has been an increase in the number of students who are classified as “economically disadvantaged” and are therefore more expensive to educate.
  • As the majority of new funding provided by the legislature simply addresses population growth, there have been few opportunities to invest in programs that have proven to increase academic achievement — such as technical career education, science, technology, engineering and mathematics or STEM courses, dual-credit offerings, and bilingual education.
  • As the state’s share of public education funding has declined, the burden on local property taxes and recapture payments has grown, eliminating any opportunity for local property tax rates to be reduced. About 54 percent of all property taxes paid in Texas are collected by school districts. Therefore, the fastest and most effective way to reduce the property-tax burden is for the state to pay more of the cost of public education.
  • Many of the school finance formula weights and allotments — such as the Cost of Education Index or Transportation Allotment — have not been updated or adjusted for the effects of population and inflation in more than two decades. Increases in state funding should be tied to regular adjustment of these weights, combined with the elimination of funding elements that are inefficient or no longer represent the diverse needs of Texas’ public education system.
  • The legislature must increase funding for special education programs and Early Childhood Intervention programs so that children with disabilities can successfully enter pre-kindergarten programs, while also providing more reliable funding for programs that help students with disabilities transition to the workplace.

Committee Chairman Byron Cook (R-Corsicana) submitted the report Tuesday. It will be presented to the 86th Texas Legislature, which is scheduled to meet in January 2019. You read the full report here, courtesy of the Texas Tribune.

School finance commission focuses on charters

The Texas Commission on School Finance met for the fourth time Wednesday in Austin. After a late start due to members trickling in the day after the state’s heated primary elections, the commission quickly launched into a debate about just how much of its activities will be open to members of the public.

Texas Commission on School Finance meeting March 7, 2018.

Chairman Justice Scott Brister began by informing members of the commission that commission subcommittees will be free to hold meetings without posting notice to the public. Brister gave members specific guidance in order to avoid having to comply with state open meetings laws, and led a vote expanding the number of members who can attend committee meetings out of the public eye.

State Rep. Diego Bernal (D-San Antonio), vice-chair of the House Public Education Committee, argued for greater transparency, suggesting members of the public have an interest in what the commission is doing behind closed doors. State Board of Education (SBOE) Member Keven Ellis (R-Lufkin) joined in highlighting the importance of transparency. Arguing for more secrecy, state Sen. Paul Bettencourt (R-Houston) noted members of the Texas Senate regularly hold secret meetings.

The committee also discussed logistics for the next meeting, March 19, when members of the public will be able to testify. Before public testimony, the commission plans to invite various stakeholders and interest groups to testify for up to five minutes. Brister stated the list of potential invited witnesses compiled by members and Texas Education Agency (TEA) staff numbered roughly fifty, and asked for help whittling down that number. He warned the March 19 meeting will be long, and members should expect to work well into the evening hours. Sen. Bettencourt asked to reduce the amount of time allotted to public witnesses to avoid a lengthy meeting, and Brister expressed interest in doing so based upon the number of witnesses who sign up.

The topic of Wednesday’s meeting was “efficiency,” with panels dedicated to efficiencies at the classroom, campus and district levels. The first panel featured witnesses from Cisco and Pasadena ISDs to discuss blended learning programs, which combine classroom time with self-paced digital learning incorporating technology such as computers and tablets. Todd Williams, an advisor to Dallas Mayor Mike Rawlings, asked whether blended learning would enable a single teacher to teach more students. Pasadena ISD Deputy Superintendent Karen Hickman indicated that may be possible, but had not been her district’s experience.

The next panel featured witnesses from Pharr-San Juan-Alamo ISD, along with Dallas County Community College and the Dallas County Promise program. College partnership programs allow students to earn industry credentials or college credits by taking courses through local higher education institutions. While praising the work of PSJA ISD, Williams suggested college completion rates in these programs are not always where many would like to see them. DCCC Chancellor Joe May testified that the Dallas program is an efficient way to get students to a four-year degree at a quarter of the typical cost.

The final panel on district-level efficiencies was led off by San Antonio ISD Superintendent Pedro Martinez, who highlighted new innovative campuses and advanced teacher training. Martinez made a compelling argument against basing too much accountability on end-of-course exams, pointing out that SAT scores have a far greater impact on the future trajectory of individual students. Martinez also laid out a nuanced way of tracking income demographics for the purposes of equalization within the district. More controversially, Martinez discussed bringing in charter operators from New York to take over a local elementary campus. These types of arrangements receive financial incentives from the state as a result of SB 1882, which was passed by the 85th Texas Legislature despite warnings raised by ATPE over the potential negative impacts on students and teachers. In consideration of these criticisms, Martinez suggested adding Dallas ISD’s ACE model or similar teacher retention programs as a third option under SB 1882. Martinez further acknowledged that charters are not interested in taking on the task of educating the most economically disadvantaged students.

The commission also heard from Paul Hill, a Washington-based policy consultant whose work has been affiliated with handing campuses over the charters and supporters of broader education privatization, including vouchers. Midland ISD Superintendent Orlando Riddick spoke of districts of innovation (DOI), and confirmed that districts are eager to waive requirements for maximum class sizes and teacher certification. ATPE has repeatedly warned of DOI being used to hire cheaper, uncertified teachers and assign larger classrooms.

The meeting ended with testimony from IDEA Public Schools charter founder Tom Torkelson. While acknowledging that well-trained teachers should earn more money, Torkelson also suggested that class size limits designed to protect students should be waived in order to place more students in a single classroom. Torkelson also suggested eliminating regional education service centers (ESCs), which were designed to increase efficiency by consolidating various support tasks in order to service multiple districts. Torkelson gave no indication what should replace the ESCs in his estimation.

State Rep. Dan Huberty (R-Houston), who chairs the House Public Education Committee, concluded Wednesday’s hearing by directing members to the task at hand: Finding a way to pay for public education for all Texas students. Anything short of that, he reminded members, will not help Texas out of its current predicament. The commission will next meet March 19, and members of the public will be allowed to testify.

TRS board discusses future shortfalls as critical primary election looms

I was listening to a retired educator testify before the TRS board at their annual board retreat this morning. She expressed that retirees are scared about increasing healthcare premiums and upcoming changes that will greatly impact the actuarial picture of the pension fund. She also asked for TRS to advocate on behalf of retirees in dealing with the legislature. It was moving testimony. However, I wish she and all educators, active and retired, would shift their mentality from scared to angry and look not to TRS to take care of them next session, but instead look to themselves to be their own best advocates, at the polls where these decisions are really made.

The reality is TRS is an administrative agency, and while the TRS staff does a phenomenal job, their job is to implement the legislature’s will, NOT to lobby the legislature on behalf of TRS members. In fact, all state agency staff, TRS staff included, are prohibited by state law from engaging in lobbying efforts.

TRS has hard days ahead. If the defined benefit pension system or TRS-provided retiree healthcare are going to continue to exist, active teachers and retired teachers alike will have to use their voices not only at the capitol but also at the polls.

What are the factors that underpin this bleak reality?

First, TRS is set to drop its assumed rate of return from 8 percent to 7.25 percent. This one action, at least on paper, will make the fund go from healthy to anything but. There is already extreme pressure from Wall Street money managers and the politicians willing to work on their behalf to convert TRS to a 401(k) style system off of which they could make huge profits. Without other changes offsetting the drop to 7.25, this pressure will likely increase exponentially as the pension fund will look considerably more vulnerable going forward.

Second, despite the draconian changes to TRS-Care coming out of the last legislature, the retiree health insurance system, as it stands today, still is not financial sustainable. And the issues with retiree health care don’t even take into account the significant health insurance burden on active teachers, which is forcing many of them out of the education profession.

Sometimes there are smart policy initiatives that can solve statewide challenges with little or only indirect additional costs. The challenges facing TRS are NOT those kinds of challenges. The truth is that the state has for years gotten by knowingly underfunding both the pension trust fund and the retiree healthcare trust fund. On the pension side, in fact, the state’s share of an educator’s pension (at 6.8 percent) is less than half the teacher retirement system contribution rate set by the next lowest state not paying into Social Security.

Texas has now reached a point where getting by on barebones funding can no longer happen – not  if we want to continue providing teachers with a pension or retiree health insurance. What has changed?

As stated above, in response to long term market trends and despite best-in-class fund management by TRS staff, the agency is expected to reduce the assumed rate of return on the fund to 7.25 percent, down from 8 percent. This change will increase the pension’s unfunded liability by $10 billion and raise its funding period from just over 30 years to a whopping 86 years. (Anything under a 30-year funding period is considered actuarially sound, and for TRS the 30-year period has been linked to providing cost of living increases (COLAs) for retirees.) At 8 percent there was an expectation that the fund would be in a position to offer a COLA within the next few years, at 7.25 percent the fund would not be considered healthy enough to offer retirees a COLA for at least the next 56 years.
In order to offset the adjustment to the assumed rate of return, the TRS pension fund’s contribution rate will need to be increased enough to generate an additional $1.4 to 1.6 billion per biennium.

TRS must be honest and stay above political bias or pressure in setting its estimated rate of return. In truth, a lower assumed rate of return, as long as it is coupled with a proper contribution rate, will produce a healthier pension system in the long run. However, because it is up to the legislature and not TRS to adjust the contribution rate, it is vital that the agency be diligent and expedient in communicating to its members the realities and potential consequences of a decision to adjust the fund’s assumed rate of return.

In addition to needing $1.5 billion or more in new pension contributions, TRS will also need substantial additional dollars just to sustain TRS-Care at the new 2018 levels. In all, TRS estimates that it will be asking the legislature to appropriate between 2 and 2.5 billion additional dollars next biennium. Lobbyists for each of the four statewide educators groups (including ATPE), the retired educators group, and a group representing school districts, when given the opportunity to comment, expressed their belief that such an ask would be a complete non-starter with the current group of legislators, particularly the Governor, Lt Governor, and the majority of Texas Senate.

Without substantial additional funds; TRS-Care will quickly go bankrupt and cease to exist. Active teachers’ health insurance costs will continue to rise unchecked pushing more and more good teachers out of the profession, and the TRS pension fund will be on a certain path toward being abolished. That is the very likely future, unless retired and active educators alike decide to make their voices heard at the polls this election year. Early voting starts Tuesday, Feb 20, and runs through Friday, March 2. Election day is Tuesday, March 6. With over one million active and retired education professionals in the state of Texas, the question is not whether you can save your retirement, fix your health insurance, and improve public education policy for 5.4 million students in this state. No, the only question is – will you?

Trump releases education budget proposal

President Trump released his 2019 federal budget proposal this week, a proposal that presidents issue annually for consideration by lawmakers on Capitol Hill as they work to hash out a budget for the country. Much like last year’s budget request, Trump’s 2019 budget proposal requests a big chunk of funding for public and private school choice, maintains funding levels for Title I and special education, and seeks large cuts to hand-chosen K-12 programs within the Department of Education (ED).

Trump’s new budget proposal entails a $7.1 billion cut to funding for ED, which represents a 10.5% decrease. Of the overall requested cut, $4.4 billion comes from complete elimination of 17 programs deemed by the administration to be “duplicative, ineffective, or more appropriately supported through State, local, or private funds.” A $2 billion program aimed at recruiting, supporting, and training educators primarily in high-needs schools is once again on the chopping block. Other programs cut under his latest budget proposal include a $12 million program for gifted and talented education and a more than $1 billion program for before-school, after-school, and summer enrichment programs.

Expanding public and private school choice is once again a signature piece of Trump’s plan, totaling $1.1 billion. The proposal notes that the billion dollars requested is intended to be “a down payment toward achieving the President’s goal of an annual Federal investment of $20 billion—for a total of an estimated $100 billion when including matching State and local funds—in school choice funding.” Of that billion, $500 million would go toward a grant program for expanding existing state voucher programs and establishing new voucher programs, among other potential options. Another $500 million would go toward charter school expansion, which saw an increase in funding from Congress following Trump’s last request, and just under $100 million would be dedicated to expanding the number of public magnet schools.

Aside from the bump in funding for charter school expansion, Trump’s school choice funding requests largely fell flat in Congress last year. However, the president does use his budget proposal to tout a piece of the recently passed tax plan that allows families to use 529 college savings accounts to pay for private school tuition or home schooling costs.

Funding levels for Title I are requested at $15.5 billion and the Individuals with Disabilities Education Act (IDEA) would be funded at $12.8 billion. New to President Trump’s budget proposal this year is a funding request for $43 million aimed at opioid addiction prevention. Check back for more from Washington as Congress works to negotiate future federal appropriations.

(Note: the budget deal recently struck in Washington set overall funding levels for the federal government, which entailed an increase in non-defense discretionary spending or the category of funding that covers agencies like ED; the appropriations bills hash out how those overall approved funding levels will be divvied up among specific departments, agencies, programs, and etc.)

School finance commission studies funding in second meeting

The Texas Commission on Public School Finance met for the second time Thursday in Austin, and began by voting State Board of Education (SBOE) Member Keven Ellis (R-Lufkin) as vice-chairman. Justice Scott Brister, the commission chairman, outlined the working groups and expressed his intention to announce assignments by the next meeting.

Texas Commission on Public School Finance meeting February 8, 2018.

Justice Brister announced upcoming meetings of the commission will be held February 22 and March 7. Members of the public will be able to testify before the commission at a meeting to be held March 19. These meetings will focus on successful programs across the state that are improving student results, payment for teachers, teacher recruiting and retention, and closing the gaps between demographic and income groups, among other things.

Brister invited members of the public to submit comments regarding the commission to Sen. Royce West (D-Dallas) recommended the board consider the public use of tax dollars for charter schools, and whether there is an oversaturation of charters in areas where traditional public schools are already doing a good job.

Texas Education Agency (TEA) Commissioner Mike Morath opened the day’s testimony with a presentation casting skepticism on the correlation between per-student funding and student performance from district to district. Morath nonetheless acknowledged that money does matter, and the picture could look very different from campus to campus within a district. Sen. West voiced interest in seeing the correlation between funding and performance and the campus level. House Public Education Committee Vice-chair Diego Bernal (D-San Antonio) pointed out that comparisons using all dollars does not track how much spending actually makes it to the classroom.

Todd Williams, the education advisor for Dallas Mayor Mike Rawlings, pointed out that more than half of Texas students are classified as economically disadvantaged, and emphasized that finding a way to improve the performance of economically disadvantaged students is the single most impactful means of improving student performance as a whole. Austin ISD Chief Financial Officer Nicole Conley Johnson noted that larger districts, which educate majority of Texas students, have a variety of unique funding needs, and countered that increasing funding would in fact have an impact on student outcomes.

Thursday’s agenda featured a panel of witnesses to discuss school finance trends. First up was TEA Chief School Finance Officer Leo Lopez, who summarized the key revenue inputs to the school finance formula. These include the basic allotment, which comes from the Permanent School Fund (PSF), as well as local property taxes for maintenance and operations (M&O) and interest and sinking (I&S). Most revenue growth has come from local property tax collections, which have increase as a result of rising property values. Conley Johnson suggested that efforts should be made to make local taxpayers more aware of the impact recapture payments have on their contributions to local school funding.

State Sen. Paul Bettencourt (R-Houston), a persistent advocate for private school vouchers, stated his intent that with regard to the commission’s exploration of school finance factors, “What gets measured, gets fixed.” Sen. Bettencourt made multiple requests for data excluding I&S funding, which is used to service bonds used for the construction of new facilities as districts grow. Those who argue public schools already receive either enough or too much funding have recently begun to argue that I&S funding should not be included in data that show state funding for public schools has steadily decreased over time. The state’s share of public school funding has fallen from around fifty percent to just 38 percent of the total burden. The education budget approved by the 85th Texas Legislature spent around $2 billion less in state funds – choosing to shift that money onto local taxpayers as a result of rising property values.

Mathew Chingos, director of the Urban Institute’s Education Policy Program, compared Texas scores on the National Assessment of Educational Progress (NAEP) test to those of other states, and found that Texas performs relatively well in reading and math. According to Urban Institute’s analysis, Texas continues to lag average nationwide per-pupil spending, and poor students tend to receive $730 less local funding on average than non-poor students. That gap is narrowed when state and federal funding is incorporated. Chingos testified that district property wealth isn’t always indicative of student need, and median household income doesn’t necessarily correlate with per-student property wealth. He also pointed out district-level funding is not school-level funding, and districts may distribute resources in ways that either reinforce or counter state priorities. Chingos testified that research has shown that while it may not be the top driver, money does correlate with improved outcomes, and scatter charts previously used to question that correlation are somewhat problematic due to the complexity of school finance formulas.

Zahava Stadler, manager of policy and research for EdBuild, testified that Texas relies primarily on a student-based funding formula, but in a way that doesn’t fully realize the advantages of student-based funding. For example, Texas’ labyrinthine funding formulas don’t prove a simple and transparent expectation of funding for a given student. Morever, the local funding responsibility is not based upon clearly defined and uniform factors. Texas adjusts for economically disadvantaged students who are eligible for free or reduced-price lunch by funding them at an additional 20 percent for compensatory education services. According to EdBuild, parallel weights in other states range from five percent to 97 percent. Similarly, Texas funds English language learners (ELLs) at an additional ten percent, while parallel weights in other states range from 20 to 60 percent. The vast majority of Texas students fall into one or both of these categories.

Representing the Education Commission of the States, Michael Griffith and Emily Parker recommended align the school funding system to desired student outcomes. The system should be reviewed periodically to ensure it is aligned with student achievement goals. Lori Taylor from the Mosbacher Institute at Texas A&M University concluded the day’s testimony. Professor Taylor suggested cost estimates for educating economically disadvantaged students are so varied at least in part because student poverty is not well measured or uniformly defined. The kind of poverty felt by students in Houston may be very different from the kind of poverty felt by students in rural Texas. Cost estimates for ELLs are likewise varied due to factors such as age, native language and home environment. Taylor concluded that teacher quality is more impactful than class size when allocating spending, and districts could achieve higher performance with current levels of funding by replicating the best practices of high performing peers.

Responding to a question from Member Ellis, Professor Taylor suggested that the current Cost of Education Index (CEI) multiplier could be updated to within a range of 30 and 40 percent. The CEI is a core component of the current school finance system, but hasn’t been updated in decades.

TRS Annual Review

Each year the Teacher Retirement System of Texas (TRS) puts out an annual review of both the TRS Pension Fund and the TRS health care systems / trust funds which they present to the TRS Board members.

The TRS health care update this year is focused on an in-depth analysis of the changes from the 2017 Care and ActiveCare plans to those going into effect during the 2018 plan year, as a result of legislative action during 85th regular and special sessions. ATPE has reported a number of times on the TRS-Care and ActiveCare changes as they have unfolded. The changes to TRS are set to take effect Jan 1, 2018.

TRS has produced two helpful videos to help explain the new insurance program, one for participants who are Medicare eligible and another for participants who are non-Medicare.

You can click the link here to view the full TRS health care document produced by TRS.

The Board also received its annual review on the health of the TRS pension trust fund, including a preview of some major actions the staff intends to undertake in the coming year. The review of the pension fund was a much rosier conversation in the recent past than the health care discussion, but the board is planning to undergo an experience study in early 2018 that could present some new long term challenges if it results in lowering the assumed return of the fund.

The headline from the pension report is the TRS Trust Fund earned a return of 12.9% and ended the 2017 fiscal year at a market value of $147 billion compared to a market value of $134 billion for the fiscal year ending 8/31/16.

Results of the 8/31/17 valuation and comparisons to the 8/31/16 valuation are summarized below:

The strength of the previous year raises the fund’s 10-year return to over 8%, and the fund’s returns since inception (approximately thirty years) continue to exceed 8% as well.

Despite TRS’s exceeding the assumed rate of return during both of these time frames, there is a strong expectation that external consultants who will perform the experience study in early 2018 will come back with a strong recommendation to lower the assumed rate of return for the fund from 8% to somewhere in the neighborhood of 7.5%. The result of such a move, in isolation, is to dramatically increase the unfunded liability of the fund on paper, which also increases the number of years required to fully fund the pension. Under the state’s definition of actuarial soundness, the funding window must be less than 30 years to consider the fund actuarially sound for purposes of increasing retiree benefits, such as by providing retirees with a cost of living adjustment (COLA).

Should TRS ultimately lower the assumed rate of return, it will be incumbent upon the agency, active and retired teachers, and those groups that represent them to impress upon the legislature the absolute necessity of increasing TRS funding to make up for the assumed loss of investment income. The amount of new funding needed to offset a decrease in the assumed rate from 8% to 7.5% will be approximately $800 million per biennium.

You can click the link here to view the full TRS Pensions document produced by TRS.

Teach the Vote’s Week in Review: Dec. 1, 2017

The weekend is here, and it’s time for your wrap-up of education news from ATPE:

The U.S. House of Representatives Committee on Ways and Means Chairman Kevin Brady (R-TX) provided a guest post this week on the Windfall Elimination Provision (WEP). He calls the WEP “unfair to public servants in Texas and across the nation” and says it is time for a fix.

ATPE has worked for decades to repeal the WEP, an arbitrary formula that affects the retirement earnings of some public employees who are eligible for both Social Security and government pensions (such as TRS). More information from ATPE on the WEP as it currently exists can be found here. In recent years, ATPE has joined with a coalition of active and retired public employee groups from Texas and across the country to bolster our work specific to this issue, working closely with Chairman Brady and his staff in order to repeal the WEP and replace it with a fairer formula for affected active and retired public employees.

Chairman Brady’s guest post addresses his thoughts on the current WEP and his vision for a new approach.


The Permanent School Fund (PSF), an endowment used to help fund public education in Texas in a variety of ways, has hit a record value: $41.44 billion as of August 31. The Texas Education Agency and the State Board of Education (SBOE), which manages the majority of the fund, announced the milestone this week, adding that a projected $2.5 billion from the PSF is expected to be distributed to Texas schools during the 2018-2019 biennium. For more on the announcement, the fund’s purpose, and the a brief history of the fund, check out this post from ATPE Lobbyist Mark Wiggins.


Texas school endowment hits record value

The Texas Education Agency (TEA) announced Tuesday that the endowment used to help fund public education in Texas hit a milestone achievement. The Permanent School Fund (PSF) reached its highest-ever value of $41.44 billion as of August 31, up $4.16 over the previous year.

The nation’s largest educational endowment today, the PSF was created in 1854 with a $2 million appropriation by the Texas Legislature. The Constitution of 1876 added certain public lands and all proceeds from the sales of those lands to the fund, and the Submerged Lands Act passed by the U.S. Congress in 1953 gave the fund control of mineral rights extending off the Texas coast into the Gulf of Mexico.

The majority of the fund, worth $32.73 billion, is managed by the State Board of Education (SBOE). The remaining $8.7 billion is managed by the General Land Office (GLO) through the School Land Board. The fund is invested in a diverse portfolio of assets and undergoes regular audits and performance reviews. Investment decisions often come before the board’s Committee on School Finance and the Permanent School Fund.

“The Permanent School Fund is the gift that keeps on giving to Texas schools,” State Board of Education Chair Donna Bahorich said in a statement provided by the TEA. “With the board’s careful oversight and the continued strong day-to-day administration of the Fund by the Permanent School Fund staff, the Fund will continue to support Texas schools for generations to come.”

“During the 2018-2019 biennium, the Permanent School Fund is projected to distribute $2.5 billion to Texas schools,” SBOE member David Bradley, who chairs the PSF committee, told the TEA. “This is the largest distribution in the Fund’s 163-year history and is $400 million higher than the distribution made in the 2016-2017 biennium.”

The PSF is also used to guarantee bonds by leveraging the fund’s AAA credit rating. Since 1983, the Bond Guarantee Program (BGP) has guaranteed more than $166 billion in bonds without default. In 2011, the Texas Legislature allowed charters to access the BGP. Despite the danger posed by risking taxpayer funds to guarantee loans to charters, which have shown a greater likelihood of financial trouble or default than school districts, the Texas Legislature passed legislation in 2017 to expand the amount of capacity available to charters.