Bloomberg News

Texas School Finance Fix Eludes Perry as Students Do Without Art

December 01, 2011

Nov. 28 (Bloomberg) -- Students at elementary schools in Amarillo, Texas, don’t get drawing lessons as a five-year-old finance plan from Republicans led by Governor Rick Perry hasn’t delivered funding needed to avoid cuts and improve education.

“We’d love to offer art or foreign languages,” said Rod Schroder, Amarillo’s superintendent. “But we have never had the revenue to put in those programs.”

Perry, a contender for the 2012 Republican presidential nomination, and legislative leaders in Austin have blamed this year’s public-education funding shortfall on a weaker economy and flaws in a 2006 tax overhaul that hasn’t met projections for revenue. In the two-year budget that began in September, aid to local schools fell short by more than $5 billion, a situation that business leaders have said threatens the state’s economy.

“Texas needs a structurally sound school-finance system that isn’t continually underfunded,” Harvin Moore, a board member of the Houston Independent School District, said in a telephone interview. The fourth-biggest U.S. city by population has the state’s largest system with about 200,000 students.

“Numerous legislators told me and others that they would rather leave the system broken and wait for districts to sue,” letting a judge make the hard choices involved, Moore said. The two-year budget passed in May eliminated a deficit estimated to be at least $15 billion and provides $53.8 billion for schools.

A Budget Priority

Perry has said little on the issue this year, while in his presidential campaign he has called for the elimination of the U.S. Education Department, returning the funding it distributes to the states. His budget proposal, submitted to lawmakers in February, made few references to school finances. Its introduction calls public education a priority and says budget writers had to sort needs from wants in completing their plan.

In terms of spending per student, Texas ranked 43rd among states at $8,562 in the school year ending in 2009, down from 36th a decade earlier, Lynn Moak, a partner at Moak, Casey & Associates, said in October at a conference of school administrators. His firm in Austin advises schools on finances. National Education Association data show Texas ranked 39th in the past school year, at $9,128 per pupil.

Local business leaders including Ed Whitacre, the former AT&T Inc. chairman, have warned that a decline in the quality of public education may undermine efforts to increase jobs.

Aid Trails Growth

State aid hasn’t kept pace with the estimated 80,000- student enrollment increase each year, dropping as much as $400 per pupil this year, according to Lauren Cook, a spokeswoman for the Equity Center in Austin. The nonprofit organization represents 690 less-wealthy systems and organized a lawsuit that claims the state’s financing mechanism is unconstitutional and seeks to force an increase in funding.

Similar complaints have been brought against other states such as Connecticut and New Jersey, where Governor Chris Christie was ordered to raise spending in the 31 poorest districts by $500 million. In a 3-2 ruling in May, the New Jersey Supreme Court said “full funding” for the schools was a “constitutional mandate.”

Connecticut schoolchildren haven’t been given sufficient resources by the state to make up for disparities in local property-tax revenue, according to Philip Streifer, the superintendent of the Bristol system and president of the Connecticut Coalition for Justice in Education Funding. The group is the lead plaintiff in the lawsuit, which may go to trial as early as next year.

‘Expensive’ Endeavor

“I wish politicians would understand that given the requirements and labor laws and mandates, education is expensive,” said Streifer, an educator in Connecticut since 1971. “This funding problem is systemic. It was in place when I started 40 years ago and it hasn’t been resolved.”

Past court action has helped determine state aid for Texas schools. Perry led an effort in 2006 to revise public-education financing and resolve lawsuits that claimed funding wasn’t adequate in districts with smaller property-tax bases.

The changes cut local property-levy rates by a third and broadened business taxes to apply to more operations, including partnerships. Yet revenue from the expanded tithe has missed forecasts by billions of dollars, both Republican and Democratic lawmakers have said. Perry opposed raising taxes this year.

Inadequate Tax

The so-called margins tax generated less than $4 billion in 2009, compared with initial projections of $5.9 billion a year, Joseph Henchman, a Tax Foundation vice president in Washington, said in an August report. His analysis for the nonprofit research group showed that numerous exemptions and confusion on applying the rules raised compliance costs and curbed revenue.

New or higher levies for education are opposed by most Republican lawmakers following a decade in which schools showed limited improvement after receiving more state aid, said Michael Quinn Sullivan, president of Empower Texans, a nonprofit organization in Austin that promotes limited government. Most Republicans, who run the Legislature, have signed pledges to oppose tax increases, he said.

“The schools just want more money flowing in and that seems to be their only way to measure success in education,” Sullivan said in a telephone interview. “Never mind that we doubled per-pupil spending over the past decade yet SAT scores and other measurements remained flat and half of our graduates going to four-year institutions require remediation.”

Fallout Concerns

Opposition to increased aid to schools may cost Texas its economic edge as better teachers leave and businesses decide against expansion in the state, Meria Carstarphen, the superintendent of the Austin Independent School District, said Nov. 3 in a speech to a local civic group.

“Never in my life have I seen the amount of blaming and finger-pointing against educators that I saw in this last legislative session,” said Carstarphen, who led St. Paul, Minnesota’s school system before moving to Austin two years ago.

While student test scores in her district exceed state and national averages, she said, “I don’t want us to go down with the Titanic like the rest of Texas.”

Texas schools still rely on property taxes for about 47 percent of their funding, with the state supplying 42 percent and the balance from federal sources, according to Equity Center figures. The state’s 512 districts with the lowest property valuations get about $5,200 to spend per student, compared with $7,155 for the 154 districts with the highest real-estate prices, the group says.

Dealing With Disparity

To reduce the disparity, 134 wealthier districts such as Austin must hand over a portion of their property-tax revenue to the state for distribution to poorer districts. Austin has contributed more than $1 billion to the so-called “Robin Hood” program over the past decade, Carstarphen said.

Instead of increasing school aid enough to meet previously mandated spending levels, lawmakers rewrote the rules in June, effectively cutting support even as enrollments rose. They set aside a reserve fund estimated to reach as much as $7 billion.

“Legislators are telling us, sue us, and sue us soon because that’s the only way we’re going to change things,” said Annette Carlisle, who leads Amarillo’s school board. Her three sons all graduated from the city’s schools, which have about 32,600 students, or 350 more than last year.

Large districts from Amarillo to Austin, Dallas and Fort Worth have joined the lawsuit over school funding or have voted to allocate money to support additional legal action. The complaint already filed claims the state failed to spend enough on public education while cutting support more severely for poorer districts than rich ones, even as it led the U.S. in job creation and population growth over the past decade.

Job Cuts

“It’s difficult for individual legislators to take a bold stand and say we need to start over, we need to raise more money or change the way we fund districts,” Carlisle said. After receiving $6 million less in state aid than it would have under last year’s funding formula, Amarillo balanced its budget by cutting health-insurance payments, overtime and travel, and eliminating 16 non-classroom jobs, Superintendent Schroder said.

“We have a horribly complicated school-funding system,” said Carlisle, a Republican who is seeking election to the state Education Board after 16 years helping to oversee Amarillo’s schools. “We really need to simplify it.”

Voters should have a chance to amend the Texas constitution so that a statewide property tax may be imposed and the current system eliminated, state Senator Steve Ogden, the Finance Committee head, said Nov. 8 at an Austin conference. Under his plan, districts might also add a “local enrichment” levy to supplement their finances.

“We need to let people tell us what they want,” said Ogden, a Bryan Republican who is retiring at the end of his term next year. “The problem has been well-identified for more than 20 years.”

--Editors: Ted Bunker, Stacie Servetah.

To contact the reporter on this story: David Mildenberg in Austin, Texas, at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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