Tag Archives: finance

School finance commission discusses list of recommendations

The Texas Commission on Public School Finance met Tuesday at the Texas Capitol to hear recommendations from the working group on expenditures, which is led by House Public Education Committee chairman and state Rep. Dan Huberty (R-Houston).

School finance commission meeting September 25, 2018.

Texas Education Agency (TEA) Commissioner Mike Morath began the hearing by presenting the agency’s annual report, which purported to show an increase in education funding since 2007. Responding to questions from commission members, Morath conceded that the numbers were not adjusted for inflation.

State Sen. Paul Bettencourt (R-Houston) asked Morath to explain the dispute between the General Land Office (GLO) and the State Board of Education (SBOE) over public education funding. Morath stated that through the School Land Board (SLB), the GLO sent $750 million to public education for the last biennium. The GLO only sent $600 million for this biennium, bypassing the SBOE, and representing a roughly $150-190 million decrease in funding.

Sen. Bettencourt appeared to come down on the side of the SBOE in the dispute. SBOE Member Keven Ellis (R-Lufkin) suggested that the dispute will require a legislative fix. The entire SBOE sent a letter asking GLO Commissioner George P. Bush to reconsider the action and increase funding, but Bush refused to do so.

Commission Chair Scott Brister suggested that on the big question, whether to increase public school funding is not up to the commission. Member Ellis rightly pointed out that while it’s true the legislature is the only body that can appropriate funds, it is certainly the commission’s duty to discern what appropriate funding levels are and to make recommendations accordingly. This point was backed up by Austin ISD CFO Nicole Conley Johnson.

Brister added that the commission will require a half dozen meetings in November and December in order to finalize its report.

Rep. Huberty then walked the commission through a list of 22 recommendations from the working group on expenditures, beginning with reallocating cost of education index (CEI) funds. The recommendations are as follows:

Reallocations of existing funding:

  1. Reallocate cost of education funds. The CEI was last updated in 1991 and provides adjustment for cost of educating children in different parts of the state. Huberty argued that this formula is outdated and that funding could be rerouted to add $2.9 billion to the basic allotment.
  2. Reallocate Chapter 41 hold harmless funds worth $30 million annually.
  3. Reallocate Chapter 41 early agreement credit funds for an annual savings of $50 million.
  4. Reallocate gifted and talented allotment funds worth $165 million annually. Rep. Huberty and state Sen. Royce West (D-Dallas) emphasized that gifted and talented (GT) programs will not go away. Pflugerville ISD Superintendent Doug Killian cautioned that districts could come to view GT programs as an unfunded mandate, and suggested weighting GT funding instead. Todd Williams also voiced concern that eliminating dedicated GT funding could lead districts to underidentify GT students as a way to cut costs.
  5. Reallocate high school allotment funds worth $400 million annually.
  6. Move from prior year to current year property values worth $1.8 billion. Huberty suggested that this would more accurately reflect the current needs of school districts. Killian cautioned that this change will cost Pflugerville, which is a fast-growth district, $22.7 million in the first year. Conley Johnson added that this could add uncertainty to the budgeting process for districts.

Increased spending on existing programs:

  1. Increase compensatory education allotment from 0.2 to a spectrum of between 0.225 and 0.275, based on the concentration of severely challenged students. This would be worth $1.1-1.2 billion. Commissioner members engaged in a lengthy discussion on identifying metrics with which to identify need other than qualification for federal free and reduced lunches.
  2. Change the transportation allotment to a mileage-based approach based on at least $0.80 cents per mile appropriated by the legislature.
  3. Provide transportation funding to Chapter 41 districts, at an annual cost of $60 million.
  4. Recreate the small- and mid-size district adjustments as a standalone allotment, at an estimated cost of $0-400 million. Rep. Huberty argued that this would create more transparency.
  5. Increase the new instructional facilities allotment (NIFA) to $100 million per year, which would be a direct benefit to fast-growth school districts.
  6. Expand career and technical education (CTE) funding to 6th through 8th grades, at an annual cost of $20 million.

New programs:

  1. Create a new dual language allotment at 0.15, at an annual cost of $15-50 million. This is aimed to incentivize schools to transition from bilingual to more effective dual language programs.
  2. Create a new dyslexia allotment of 0.1, at an annual cost of $100 million. Currently districts do not receive direct funding for students with dyslexia, despite the fact the number of dyslexic students in Texas is estimated to be anywhere from 2.5 to more than ten percent.
  3. Create a new early childhood support allotment of 0.1, at an annual cost of $786 million. This would benefit students from kindergarten through 3rd grade, and could be used to fund any program that seeks to improve 3rd grade math and reading, including full-day pre-K.
  4. Create a 3rd grade reading bonus of 0.4, at an annual cost of $400 million. This is a simple incentive for students to meet grade level in 3rd grade reading. Williams suggested granting students facing social or economic challenges a greater reward.
  5. Create a college, career, and military readiness bonus at an annual cost of $400 million. This would provide additional funding for each graduating senior who does not require remediation after graduation or who is able to directly enter the workforce or military. This is intended to support the state’s “60×30” goals.
  6. Create a new teacher compensation program, at an annual cost of $100 million. This is a merit-based pay program that would allow certain educators to earn more by performing well on certain evaluation systems. Teachers would also be rewarded for teaching at campuses with higher levels of disadvantaged students. This program could grow significantly in size depending upon district participation. Williams acknowledged that local development involving teachers is incredibly important, and measures other than student STAAR results should be considered. Williams suggested it would be incumbent on the commissioner to develop a set of minimum standards.
  7. Create an extended year incentive program at an annual cost of $50 million. This would be aimed to reduce summer learning losses.

Additional changes:

  1. Utilize remaining funds from reallocations to increase the basic allotment.
  2. Change the guaranteed yield on tier II copper pennies from a set dollar amount to a percentage of the basic allotment.
  3. Link the tier II golden penny yield to a set percentile of wealth per student.

Many of these recommendations were also supported by recommendations from the working group on outcomes, led by Todd Williams. Williams congratulated Huberty on his working group’s efforts to find more efficient ways to provide the support students need, and added that the system will nonetheless need more money. In a final conversation around spending, Brister continued to suggest that more funding is not necessarily the solution. Member Ellis emphasized that the commission must address the adequacy of public education funding.

The working group on revenues, led by Sen. Bettencourt, is now the only working group yet to produce recommendations. Bettencourt pushed back on warnings that time is running short for the commission to complete its work, but did not provide a timeline for his work product.

 

 

Expenditures group considers potential recommendations

The Texas Commission on Public School Finance working group on expenditures met Thursday morning to discuss the group’s recommendations. Group leader state Rep. Dan Huberty (R-Houston), who chairs the House Public Education Committee, indicated no vote would be taken Thursday.

The school finance commission expenditures working group meeting August 9, 2018.

The first potential recommendations related to repeals that could free up “pots of money” to be reallocated. Commission Chair Scott Brister expressed confusion over how specific programs are funded, and suggested eliminating most programmatic funding and directing it toward the basic allotment instead. This included a discussion of repealing the high school allotment, the 1992-93 hold harmless provision, the staff allotment, the gifted and talented allotment, the public education grant (PEG) allotment, the transportation allotment, the local option homestead exemption for certain districts, the recapture discount, and the early agreement credit.

The staff allotment provides $250 for each part-time employee and $500 for each full-time not subject to the minimum salary schedule, which includes counselors and librarians – basically anyone who is not a teacher. State Sen. Royce West (D-Dallas) indicated he would be hesitant to repeal this allotment because he believes it serves its intended purpose. State Board of Education (SBOE) Member Keven Ellis contended that districts would be unlikely to reduce staff if that allotment were to go away.

State Sen. Larry Taylor (R-Galveston), who chairs the Senate Education Committee), proposed repealing the gifted and talented allotment. Sen. Taylor argued that most schools are already receiving five percent of their funding through this allotment, and including it into the basic allotment could allow districts more spending freedom. Sen. West clarified that members are not proposing that this money go away, only that it be delivered through a different mechanism, such as the basic allotment.

The discussion regarding the transportation allotment followed much the same logic. However, Member Ellis noted that rural districts face disproportionate transportation costs due to physical size and population density. Sen. Taylor suggested tying the funding to mileage. Sen. West offered the idea of weighted funding based on mileage. Chair Brister then questioned the value of schools having buses in general, suggesting that some districts would do better to simply encourage parents to carpool.

Rep. Huberty suggested PEG grants should be left alone because they offer a real incentive for districts to accept transfer students. It’s important to note that this is often cited as a key component of the public school choice system.

The group discussed using current year values for Foundation School Program (FSP) calculations, which would affect districts experiencing positive growth and negative growth differently. Rep. Huberty also noted that districts in which a significant portion of the local property wealth is tied to mineral wealth could experience more volatility.

Sen. Taylor suggested that pre-K is one of the areas in which districts could invest general dollars that have been untethered from specific programs, as discussed. The group discussed whether to incentivize half-day or full-day pre-K in order to achieve the goal of getting students reading by the third grade.

The group also discussed changing the equalized wealth level and simplifying the funding tiers, the recapture system in general, and the basic allotment. Brister contended that discussing recapture should be the purview of the working group on revenue, which is led by state Sen. Paul Bettencourt (R-Houston). With regard to the basic allotment, members expressed concern over tying the hands of future legislatures by tying funding to a rising cost such as inflation.

Members discussed the adjusted allotment, and Sen. Taylor proposed additional funding for charters. Sen. West quickly voiced opposition to charter expansion and the group quickly moved onto the next topic.

A larger discussion focused on the cost of education index, which was passed in 1984 and last updated in 1991. Member Ellis discussed moving to a more relevant index that includes teacher salaries. Sen. Taylor suggested districts also experience large variations in the cost of transportation, which could play a part in a CEI replacement. Rep. Huberty pointed out that even if the CEI were updated today, it would be out of date again within a few years.

The group took a look at the district size adjustments for small- and mid-sized districts, and Brister expressed the feeling that many smaller districts should be consolidated. Member Ellis noted that many rural districts have already consolidated services such as transportation and food services. Sen. Taylor suggested looking for ways to encourage districts to consolidate.

Regarding special education, Rep. Huberty indicated he did not feel comfortable tweaking weights and arrangements, and special education funding should be based on need. Huberty confirmed there will be more money pumped into special education, and members should wait and see how that funding affects the system before making modifications. Texas Education Agency (TEA) Chief School Finance Officer Leo Lopez said the increased cost of complying with order to serve all qualifying special education students is projected to be $682 million in fiscal year (FY) 2019, $1 billion in FY 2020, and $1.55 billion in FY 2021. Rep. Huberty also asked to explore fulfilling more private placement services within districts; for example, districts could offer incentives to improve retention of high-performing special education teachers.

On the issue of attendance, Sen. Larry Taylor suggested moving away from attendance-based funding requirements. Again, the argument for doing so was to give districts more flexibility, particularly at the high school level.

Members continued to focus on flexibility with regard to career and technical education (CTE), while expressing support for encouraging CTE and expanding middle school programs from eighth to as early as sixth grade. Regarding compensatory education, members discussed moving the identifying mechanism away from using free and reduced-price lunch. Members also looked at expanding the definitions to serve more low-income students who may not technically qualify under the current system. Regarding weights, the group discussed a hypothetical increase to the compensatory education weight to between .225 and .275.

Moving onto English Language Learners (ELLs), Sen. Taylor suggested the state incentive dual language over bilingual education where possible by offering a separate weight, rather than just increasing the bilingual weight.

On the issue of facilities funding, Rep. Huberty pointed out that legislators already voted to increase the new instructional facilities allotment (NIFA), but the system was stretched so thin that the anticipated benefit was not fully delivered. The next step would be to increase the cap from $25 million to $100 million. Sen. West again voiced concern about the saturation of charter schools.

The group then discussed staffing, beginning with a proposal to allow staff members’ children to take advantage of free pre-K. Rep. Huberty then talked about teacher compensation, including programs intended to incentivize top teachers to work at campuses facing the toughest challenges. Lopez suggested a tiered pay program that rewards high-performing teachers would have a low initial startup cost, but would ramp up over time. Member Ellis emphasized the need for local control in setting salaries and implementing locally-developed programs, such as the Dallas ISD program that is often cited as an example of a working performance pay system. Sen. Taylor suggested providing funding for this on the back end for districts that have already put these programs into practice.

Members were unanimous in its support for mental health and wellness programs, but indicated the subject may be beyond the purview of the commission.

The group noted changes to the Teacher Retirement System (TRS) of Texas ranging from adjusting the anticipated rate of return to rising drug costs and benefit reductions. Chair Huberty also indicated this subject may best be tackled by the relevant legislative committees. Notwithstanding this, the group entertained a discussion of requiring charter schools to pay into TRS at the same rate districts are required to pay. Lopez noted the interaction between district TRS contributions and the CEI, should the CEI go away.

Rep. Huberty asked TEA to pull a report together within the next 30 days, so the working group can schedule another public meeting to formally adopt its recommendations. Brister suggested getting recommendations to the full commission by mid- to late October so that the commission could consider them in November.

Why March 6 Matters: Retirement

Early voting is underway NOW for the March 6 Texas primary elections, so we’re taking a look at some of the reasons why it’s so important that educators vote in this election! Today, we’re taking a closer look at your retirement.


Everyone who decides to become an educator enters into a special agreement with the State of Texas. It goes something like this: If you devote your life to preparing our children for the future, Texas promises to be there for you when you retire at the end of a long career of service.

Only that promise is constantly under attack.

Let’s start with some basics. Your retirement is administered by the Teacher Retirement System of Texas (TRS), which oversees the pension trust fund. The state and individual educators each contribute to the fund, and a team of professional staff supervise a diverse investment portfolio that makes up the body of the fund. These full-time agency employees ensure the fund’s health and safety. After paying for the cost of administration and benefits, the money from those investments is plowed right back into the fund.

TRS is structured as a “defined benefit” retirement plan, which means that an individual who pays into the plan is guaranteed a set amount of money each month in retirement that will last for the rest of his or her life. The more common type of retirement plan is a “defined contribution” plan, such as a 401(k). Unlike the promise of a stable monthly pension check upon retirement offered by a defined benefit plan, a defined contribution plan promises merely a set contribution into an employee’s retirement account while the individual is actively working. Investment returns on that account are subject to the whims of the market. The level of retirement that can be provided by those funds at the end of an educator’s career is not guaranteed. Under a defined contribution scenario, there is a real threat that a retired educator may outlive the retirement funds accumulated during his or her career, and end up with nowhere to turn for help — not even Social Security.

You may have noticed that most businesses in the private sector have gone the defined contribution route. The reason is largely because 401(k) plans are cheaper and don’t require dedicated staff to administer. Most are run for a profit by large Wall Street corporations, and advisers often have a financial stake in the investments they recommend. This leaves plenty of opportunities for others to make money, but little guarantee of stable retirement income for the retiree. The defined benefit plan administered by TRS is, by contrast, of great value to retirees, who can rest easier knowing that they will receive a guaranteed income for as long as they are alive.

As with most big pots of public money, the TRS pension fund has unfortunately become the focus of those looking to brag about shrinking government while making a few bucks for their friends.

In 2017, the Texas Senate confirmed Josh McGee as chairman of the Texas Pension Review Board (PRB), which oversees state pension systems including TRS. Prior to being appointed to that position by Gov. Greg Abbott, McGee worked as a professional advocate for converting public pensions to defined contribution plans that would reduce the money guaranteed to retirees, and his position at the helm of PRB naturally raised alarm bells.

Adding to the concern, lawmakers have filed a number of bills in 2017 and in prior legislative sessions that would likewise weaken TRS. State Sen. Paul Bettencourt (R-Houston) – who made headlines recently with his objections to efforts to improve voter turnout among educators – filed a pair of bills last year aimed at converting TRS from a defined benefit plan to a defined contribution plan or a hybrid of the two. Both bills died without a hearing, fortunately, but Lt. Gov. Dan Patrick is keeping the idea alive as part of his interim charges for the Texas Senate to study before the legislature reconvenes in 2019.

Most troubling is recent news from the TRS Board of Trustees that it intends to vote to lower the assumed rate of return for the $147 billion pension fund from 8.0 percent down to 7.25 percent. The decision was based on observations of current market forces, and while fiscally prudent, it radically changes the plan’s outlook on paper. Like all pension plans, the TRS fund must be considered solvent before the legislature or board can consider any potential increases in benefits. With the lower assumed rate of return, TRS will head into the 2019 legislative session needing an additional $1.5 billion for future solvency, and they’ll be asking for that money from lawmakers who frequently are looking to cut spending, not increase it.

Politicians like Sen. Bettencourt frame their attacks on educators’ pensions by claiming the defined benefit structure is too expensive for the state to maintain into the future. In fact, the state’s share of an educator’s pension (at 6.8 percent) is less than half the teacher retirement contribution rate set by the next lowest state that is not paying into Social Security. The truth is that a more conservative assumed rate of return, coupled with a proper contribution rate, will guarantee TRS stays healthy well into the future.

The bottom line: Like public education as a whole, Texas gets a phenomenal bargain for what it spends, but more funding is necessary to fully realize the implicit promise made to educators.

Lawmakers will face tremendous pressure in 2019 from investors and politicians who want to gamble with teachers’ retirement. Unless Texans elect more pro-public education lawmakers and statewide elected officials, the legislature may very well look to your pension as an area to further cut corners. Texas will only keep its promise to educators if lawmakers respect educators’ voices at the polls in this pivotal election year.


Go to the CANDIDATES section of our Teach the Vote website to find out where officeholders and candidates in your area stand on educators’ retirement and other public education issues. Because voting districts in Texas are politically gerrymandered, most elections are decided in the party primary instead of the November general election. That’s why it is so important to vote in the primary election taking place now. Registered voters can cast their ballot in either the Republican or Democratic primary, regardless of how you voted last time.

Early voting in the 2018 primaries runs Tuesday, Feb. 20, through Friday, March 2. Election day is March 6, but there’s no reason to wait. Get out there and use your educator voice by casting your vote TODAY!