Tag Archives: revenue

School finance commission discusses initial recommendations

School finance commission meeting Dec. 11, 2018.

The Texas Commission on Public School Finance met Tuesday in Austin to discuss recommendations for the commission’s report, which is due to the legislature by the end of the month. The initial draft recommendations can be viewed here, and additional resources can be found here.

The draft report includes a recommendation that the 86th Texas Legislature “inject significant additional annual state revenue” through new strategic allotments and weights outlined in the commission’s report, including about $1.7 billion in specific areas. The report adds that for the purposes of new funding, members should note that an increase of $500 million in state funding is equal to a roughly 0.9 percent increase over the last budget biennium. This would be formula funding, targeted at the neediest studies, and tied to specific outcomes.

Commission Chair Scott Brister voiced reservations, suggesting that asking the legislature for significant additional funding is not the commission’s job. He later clarified that his chief opposition was to placing a dollar figure on additional funding. Several members pushed back, including House Public Education Committee Chair Dan Huberty (R-Houston), who said he would not sign a report that does not call for additional school funding.

The report also calls for reallocating $5.34 billion in existing funds to more impactful spending and greater system-wide equity. The commission recommends significant investment to substantially increase third grade reading levels. Outcomes-based funding would be targeted toward early literacy and post-secondary access of career, military, or higher education without remediation.

The commission is recommending a high-quality teacher allotment, initially funded at $200 million, for districts wishing to offer differentiated compensation to pay their most effective educators higher salaries sooner in their career. This would be contingent on districts creating locally-developed, multi-measure evaluation and compensation systems based on an outline created by the legislature. This includes the state setting a goal that top teachers have a path to a $100,000 salary and incentivizing districts to assign top teachers to the most challenging campuses.

Finally, the draft report calls for statutorily increasing the basic allotment, though it does not specify a specific amount. It calls for increasing the yield on “copper pennies” and compressing the rate in order to provide tax relief, as well as reducing the role of recapture in the school finance system. The report makes no recommendations regarding special education, instead suggesting that the current corrective action plan approved by the U.S. Department of Education should be completed before any additional reforms are discussed.

Discussing the commission’s major findings, Brister acknowledged that schools are being asked to do more than ever before. This includes higher security standards and providing for the physical and mental well-being of students in addition to educating them. He then asked to strike language from the report that says the state has failed to adequately fund public education.

After breaking for lunch, the commission returned for more in-depth discussion on individual recommendations. Commission member Todd Williams of the Commit Partnership in Dallas pointed out that the teacher compensation portion of the plan (Section D) does not include specific funding for strategic staffing such as that implemented by the Dallas ISD ACE program, which is intended to incentivize top teachers to teach at the highest-need campuses. Williams argued the evaluation system and strategic staffing system should be treated as separate and funded accordingly.

State Sen. Paul Bettencourt (R-Houston) then laid out the recommendations from the working group he chaired on revenues. The group’s primary recommendation is to adopt Gov. Greg Abbott’s plan to cap local property tax revenue growth. The plan suggests capping growth at 2.5 percent annually, and replacing revenue lost by school districts with state funding. The governor’s office does not specify how much this would cost or from where the replacement funding would come.

Texas Education Agency (TEA) Chief School Finance Officer Leo Lopez presented a chart addressing the three plans endorsed by Bettencourt’s group, which suggests that the governor’s plan would reduce local maintenance and operations (M&O) tax collections by nearly $1 billion and increase school district revenue by $300 million in 2020 at a cost of roughly $1.3 billion. By 2023, the governor’s plan is projected to reduce M&O tax collection by $3.7 billion while increasing school district revenues by $74 million. Lopez pointed out that this is primarily a tax relief plan, as opposed to a school finance plan, which explains why future funding is projected to flatten out.

The commission discussed the level of emphasis that should be placed upon the governor’s revenue cap plan. Members pointed out the interrelation of property taxes and school finance, as well as the need to focus on the commission’s statutory charge, which is to fix the school finance system. The governor’s plan alone would not change the fundamental mechanics of the school finance system.

Sen. Bettencourt has argued that the state’s coffers will be flush heading into the next budget cycle based on tax revenue from booming oil and gas production, but the state comptroller has yet to release a formal biennial revenue estimate (BRE) with hard numbers upon which to base a budget. State Rep. Ken King (R-Canadian), who represents oil and gas-dependent west Texas, cautioned against relying on oil and gas as a reliable, long-term funding source. A combination of the governor’s plan and the commission’s recommendations for additional public education spending could add up to a price tag north of $5 billion for the upcoming budget biennium.

The commission is scheduled to meet next Wednesday, Dec. 19, 2018, to vote on final recommendations. The commission is required by law to submit its report to the legislature by December 31.

Finance commission group finalizes recommendations

The Texas Commission on Public School Finance working group on revenue met Tuesday at the Texas Capitol to discuss recommendations to deliver to the full commission. State Sen. Paul Bettencourt (R-Houston), who leads the working group, indicated he is open to using the economic stabilization fund (ESF), which is commonly referred to as the “Rainy Day Fund,” to help fund public education.

School finance commission working group meeting November 27, 2018.

Bettencourt opened the meeting suggesting that state revenues are looking bullish heading into the next budget biennium. Again, Sen. Bettencourt emphasized his priority is phasing out the “Robin Hood” system of wealth equalization through recapture. According to Bettencourt, freezing recapture would cost approximately $2.3 billion.

Before Bettencourt began his presentation, commission member and Austin ISD Chief Financial Officer Nicole Conley Johnson told the group she had identified $14 billion in new programs to propose to the commission.

According to figures Bettencourt provided to the group, the state comptroller increased the revenue estimate for the next biennium to $110.2 billion in July 2018 from $104.9 billion in 2017, a $5.3 billion increase. During the first two months of fiscal year (FY) 2019, sales tax revenues, which represent 58 percent of all state tax collections, are expected to be up ten percent compared to FY 2018.

Bettencourt asserted two point upon which most agree: Without school finance reform, the state’s share of public education funding will continue to shrink, and the amount of funding districts pay into recapture for wealth equalization will continue to increase. Bettencourt emphasized his prediction that increased revenue in FY 2019 will provide additional general revenue (GR) which will be available to help fund schools.

State Rep. Diego Bernal (D-San Antonio), who is vice-chair of the House Public Education Committee, raised a question over how equity would be preserved if legislators make changes to or eliminate the recapture system. State Rep. Ken King (R-Canadian), who is also a member of the House Public Education Committee, also raised a concern that any increase in school funding will need to be sustainable.

Bettencourt presented the governor’s tax cap plan as the solution. The plan would increase funding for districts that increase teacher pay and improve student outcomes, however Rep. Bernal noted that outcomes-based funding threatens to reward districts that already have the resources necessary to improve while neglecting districts that have failed to improve precisely because they lack the necessary resources. The plan would also limit property tax revenue growth to 2.5 percent per year, which the plan promises to make up for with state funding.

Another proposal discussed by Bettencourt is one presented by the Texas Public Policy Foundation (TPPF), a far-right pro-voucher organization, which would aim to eliminate all school district maintenance and operations (M&O) property taxes. This would cost roughly $51.3 billion for the 2018-19 biennium. The TPPF proposal claims to be able to pay for itself by dedicating future increases in state revenues to public education, but Bettencourt conceded that this is an optimistic view.

Bettencourt also briefly discussed the idea of “sharing” recapture. In this plan, property value growth would be divided by thirds, and the benefits from the growth in property values would ostensibly be shared. Additionally, Bettencourt suggested using the increase in production severance taxes – largely due to oil and gas activity in the Permian Basin – to help fund public education. This funding stream currently already flows to public education and general revenue, with an overflow stream that is bifurcated between highway funding and the ESF. Despite the Senate’s opposition to spending ESF dollars in previous legislative sessions, Bettencourt indicated he’s now open to spending ESF money to help fund public education. Johnson argued that this represents a redirection of existing revenues and does not represent the new revenue necessary to improve school performance.

The working group voted to advance each of the proposals except the plan offered by TPPF to be considered by the full commission. Rep. King made the motion to table the TPPF plan, which he declared nonsensical. Several members expressed similar concerns. Closing the meeting, commission chair Scott Brister suggested that legislators should feel less constrained by court rulings enforcing equity. As a justice, Brister was a dissenting voice in the West Orange-Cove school finance ruling.

The full commission will meet Friday, again on December 5, and at least once more during the third week of December. The commission will get a chance to react to Tuesday’s recommendations and will arrive at a decision by the December 5 meeting on what the final report should look like. The following meeting will focus on what the report should say. The commission is required to submit its report to the legislature by December 31.

Brister asked commission members to do their best to reach a unanimous consensus on recommendations, and said that in lieu of a minority report, individual members will be allowed to place letters in an appendix to the final report.

 

Finance commission group meets to discuss revenues

The Texas Commission on Public School Finance working group on revenues, led by state Sen. Paul Bettencourt (R-Houston), met Tuesday at the Texas Capitol to hear testimony. Sen. Bettencourt began the meeting by stating the state must “wean” itself off of the “Robin Hood” system of wealth equalization through recapture.

School finance commission working group on revenues meeting November 13, 2018.

Bettencourt set a target date of November 27 for a vote on recommendations and anticipated sharing those recommendations with the full commission in December. The commission’s report is due to the legislature by the end of December.

Austin ISD Chief Financial Officer Nicole Conley Johnson followed up Bettencourt’s remarks by stating a separate goal of identifying $6 billion in additional funding for public schools. Johnson and Bettencourt have stood on opposite sides of most school funding discussions.

Dale Craymer, president of the Texas Taxpayers and Research Association (TTARA), was the first witness invited to testify. Craymer testified that the recapture system is likely required based upon school finance court rulings, and noted that reducing recapture and reducing property taxes are not one in the same. Craymer suggested property taxpayers could be provided relief by using value growth to reduce the compression percentage downward, yet offered no direction with regard to relief for schools. Craymer suggested legislators must first determine what outcomes are desired before determine how much funding is needed.

Chandra Villanueva with the Center for Public Policy Priorities testified that recapture is necessary to level the playing field between school districts with vastly unequal property wealth. Instead, Villanueva testified that the overall system has failed and suffers from underfunding. Villanueva suggested instead updating the costs of education, adjusting for inflation, and slowing the growth of charter schools, which are pushing some districts into recapture.

Scott Brister, who chairs the commission, challenged the notion of inadequate funding. Villanueva responded that adequacy targets are an appropriate goal, and waiting to invest more resources only deepens the deficit lawmakers must eventually address. Johnson launched into an impassioned explanation of the fiscal challenges facing schools, which have seen funding decline while being asked to do more.

Vance Ginn with the Texas Public Policy Foundation (TPPF), a think tank funded by supporters of school privatization, offered a number of discredited claims regarding school funding, and argued for eliminating school district property taxes in favor of reduced state funding.

David Thompson testified that the shift from the state toward local property taxpayers is being driven by value growth, and urged legislators should commit at least a portion of value growth to increasing the basic allotment every session. Thompson also recommended closing a number of tax loopholes, such as for online retailers, and increasing the gas tax.

Speaking on behalf of Gov. Greg Abbott, former state Sen. Tommy Williams testified that the state should pay teachers more and reduce the burden of property taxes, which will require additional state funding. Notwithstanding this, Williams said funding should not be increased without accompaniment by school finance reform. The governor’s plan contains three essential elements: Rebalancing the state share of funding, paired with compression of local school property taxes rates; slowing the growth of local property tax bills; and treating all students equally, based on individual student needs as opposed to school district property values, which will require reducing the growth of recapture.

Williams then proceeded to outline the governor’s plan, which can be found here. In it, the governor’s office suggests capping school district Tier 1 maintenance and operations (M&O) tax revenue growth at 2.5 percent and replacing the lost funding with state dollars. The plan does not specify a funding mechanism or source. The plan also proposes outcome-based bonuses, awarding charter school attendance credits, and paying stipends to teachers who teach in more difficult classrooms, along the lines of Dallas ISD’s ACE program. This marked the first time the plan has been presented in public.

Asked by Sen. Bettencourt what the governor’s idea of additional state aid looks like, Williams suggested he would rather lawmakers not “back into that number” from available revenue, but rather to try and put a price tag on the recommendations from the commission’s working group on expenditures. Johnson followed up with a question regarding how much it would cost to buy down the tax rates as suggested by the governor. Williams did not offer an estimate.

In last-minute meeting, revenue working group gets orders

The Texas Commission on Public School Finance working group on revenues met briefly Tuesday evening after the commission’s formal meeting adjourned. Unlike the other two working groups, the revenues group led by state Sen. Paul Bettencourt (R-Houston) did not post a public notice following Texas open meetings guidelines.

Texas’s open meetings law was passed to limit secret government meetings and ensure the public has access to deliberations of public interest. The law explicitly applies to the school finance commission as a whole, however its application to working groups of the commission is less clear. The only notice was posted the day of the meeting in an obscure portion of the Texas Education Agency (TEA) website. Because notice was not provided according to guidelines laid out by the open meetings law, few people attended the revenues meeting and no audio or video of the meeting is available.

According to those inside the meeting, Sen. Bettencourt stated the working group will aim to score various spending and revenue proposals, including raising the state sales tax or gas tax, enacting the performance pay program proposed by TEA Commissioner Mike Morath, limiting recapture, extending the Universal Service Fund (USF) tax on land telephone lines to cell phones, and the 2.5 percent tax cap proposed by Gov. Greg Abbott during the special session. Bettencourt requested members submit their ideas for study topics before the full commission meets again July 10.

A snapshot of the proceedings was posted on social media:

School finance commission talks property taxes

The Texas Commission on Public School Finance met Thursday morning in Austin to discuss the role of tax revenue in the school finance system. Chairman Justice Scott Brister began the meeting by apologizing for comments about disabled children he made during a meeting of the working group on expenditures.

Texas Commission on Public School Finance meeting April 5, 2018.

“I never suggested that any group of kids should be excluded from public funding or from being educated,” said Brister. State Sen. Larry Taylor (R-Friendswood), who chairs the Senate Education Committee, blamed the media for taking Brister’s comments about “slow” children out of context.

Brister followed by announcing that the working groups are not working as intended, specifically noting that attempts to hold meetings by teleconference have yielded less than stellar results. The chairman suggested members may instead call additional witnesses to the full commission’s May and June meetings and postpone working group recommendations to later in the year.

Additionally, Brister indicated what sort of recommendations he is seeking. Those recommendations include “how to get more with what you’ve got,” “all you can get from the taxpayers otherwise,” and how to address the concerns of those who argue still more funding is needed.

The chairman also offered a brief recap of suggestions submitted during public testimony last month. Those recommendations included raising the basic allotment for all students, increasing funding for gifted and talented and special needs students, funding pre-K, funding smaller class sizes, mentoring teachers, restoring additional state aid for tax relief (ASATR) funding, increasing teacher salaries and reducing health care costs for active and retired teachers, updating the cost of education index (CEI), and restoring state funding to at least 50 percent of the burden of paying for schools.

Texas Education Agency (TEA) Chief School Finance Officer Leo Lopez was the first to testify, and outlined state sources of school revenue. State Sen. Paul Bettencourt (R-Houston) argued for recapture, or “Robin Hood” taxes paid by local taxpayers, to be counted as state funding. House Public Education Committee Chair Dan Huberty (R-Houston) pointed out that the state comptroller has consistently counted recapture as local funding. If recapture were counted as state funding, it would falsely inflate the percentage of school funding contributed by the state, which is currently around 38 percent.

The next panel featured a pair of representatives from the comptroller’s office. Texas does not have a statewide property tax, but it does have a statewide sales tax. Various sales taxes account for around two-thirds of all state revenue collections. Collections from the business franchise tax, which was initially created in order to help ease the property tax burden on homeowners, have steadily shrunk as lawmakers have chipped away at the tax over time. State Rep. Diego Bernal (D-San Antonio), vice chair of the House Public Education Committee, asked the comptroller’s office to prepare a report on education funding streams that have been cut by the legislature over the past ten years.

San Jose State University Professor Anette Nellen presented what an ideal tax system should consider, and her presentation led to a spirited conversation about whether the internet should be taxed. Nellen was followed by former chief revenue estimator James LeBas, who offered a summary of a book he wrote on tax law turning points. LeBas concluded that previous attempts to “buy down” local property taxes were thwarted by increases in property values, bond elections and other factors. He argued no such effort will be successful without continuously increasing funding, restricting local tax increases, or some combination of both.

The final panel involved testimony from several businesses, including Phillips 66, Texas Instruments and P. Terry’s Burger Stand. Business interests emphasized that taxes are a major consideration when it comes to where companies choose to locate and do business. A representative from the Texas Association of Builders testified that high property taxes are a hurdle to home ownership, however many homeowners choose where to buy based upon the quality of local schools. Patrick Terry, the founder and owner of P. Terry’s, testified that the rapid increase in property taxes is making it more difficult to provide discretionary benefits to employees and make charitable contributions to community organizations. More significantly, Terry suggested it is likely discouraging more entrepreneurs from entering the economy. Wayne Gerami, vice president at Austin Habitat for Humanity, suggested that some states utilize a “circuit breaker” provision, which caps an individual’s property tax burden at a certain percentage of their income.

Before adjourning, Brister confirmed that the reports from commission working groups will be delayed until September. The commission is scheduled to meet again on April 19.