School Finance Has ISD Eyes On Austin (TX)

June 7, 2011

If there was a dim funding hope for independent school districts across the state as the Texas Legislature moved into overtime Tuesday morning, May 31, it was dashed when bills started to be filed.
Both House of Representatives and Senate committees started considering bills Thursday, June 2, with the same language as the one killed by a Democratic filibuster Sunday night, May 29.
The budget adopted by legislators during the regular session will reduce school funding by $4 billio n over the next two years.
The bill filibustered by Senator Wendy Davis, D-Fort Worth, spelled out how those cuts were going to be imposed.
She argued that the students of the state were being short-changed while there was money in the Rainy Day Fund to reduce the impact of the cuts.
The latest school-finance proposals were channeled through the House Appropriations and Senate Education committees when the special session got underway.
Representative Jim Pitts, R-Waxahachie, was overseeing the House proceedings as chair of Appropriations.
Public testimony got underway with most speakers pleading their case to use some of the Rainy Day Fund to prevent the proposed cuts.
But as in the regular session, an additional allotment from the state’s “fund balance” is not likely.
While titled SB 1 and HB 1 in the special session, according to Hillsboro Superintendent Buck Gilcrease, all the figures appear to be the same as SB 1811, which was killed by the filibuster.
Based on calculations by the Legislative Budget Board (LBB) that were available as the regular session came to a close, Hillsboro would lose $767,673 in state funding in 2012 and $205,979 in 2013.
The estimates could change based on actual and final student counts, property values and tax effort, according to the LBB printout.
Dr. Gilcrease pointed out that the reduction the first year is coming directly from the Foundation School Program and the basic allotment for school districts rather than across the board.
Hillsboro receives a basic allotment from the state of $4,765 based on a weighted average daily attendance (WADA).
Once basic allotments are established, the Texas Education Agency (TEA) then applies adjustments like the cost of education index, small-school formula or mid-school formula.
When the mid-school formula is applied to HISD, its allotment increases to $5,511 per WADA.
While most have been using a six-per cent figure for the amount of cuts school districts will experience the first year, in reality the number is closer to 6.8 percent, the superintendent said.
The accompanying chart shows the Legislative Budget Board’s (LBB) projections on how much state funding each of the area school districts will decrease.
After the first year of cuts from the basic allotment, second-year cuts will come from target revenue, according to Dr. Gilcrease.
Target revenue or Additional State Aid for Tax Reduction (ASATR) was created when the state compressed local tax rates in 2006 and 2007 from $1.50 to $1 per $100 valuation.
Hillsboro is one of 120 districts in the state that bounces back and forth between formula and target-revenue funding from the state.
Because it doesn’t receive a great deal of target revenue, its cut in the second year of the biennium is reduced to only $205,979.
But using Glen Rose as an example, its loss jumps from $940,663 in the first year to $1,527,873 in year two because of the target revenue.
Most districts will be receiving a portion of the $800 million in federal education stimulus money the state recently received that was tied up in Washington, D.C. for over a year.
The so called EDUJOBS money will add $134 per WADA to school-district coffers for the first year of the biennium.
But if the money is used by school districts for salaries, they are responsible for the six-percent contribution to the state’s retirement system.
Earlier stimulus funds could be used to make retirement contributions, Dr. Gilcrease explained.
The legislation being proposed also makes some long-term changes to the education code that are coming to light.
Currently, if the state reaches the end of its biennium and doesn’t have money to make its August payments to districts, the law allows it to basically give an “IOU” to make the payment when funds become available.
That process is eliminated in th e bills working their way through the legislative process.
The state is always behind the curve when it comes to school funding.
Dr. Gilcrease used the analogy that districts are planting next year’s plots in preparing a budget, while using this year’s seed and prices and last year’s revenue estimates.
While the LBB gives districts an idea of what cuts could be forthcoming, it will be months before the TEA will finalize formulas.
Final adjustments for the current school year won’t be made by the agency until April 2013.
Both Dr. Gilcrease and HISD Business Manager Jimmy Adams said that a “balanced budget” will be presented to the HISD Board of Trustees in August.
The administrators have reduced staff over the past three years and don’t anticipate any further cuts for the 2011-12 school year.
But they noted that there is no “cushion” in the budget.
“It’s hard to know what gasoline is going to cost in 2012,” Dr. Gilcrease noted. “We will do our best to budget properly, but with the state cuts, there is no cushion in the budget should costs spike.”
The superintendent added that officials are also looking at what was going to happen five years from now because he predicted that the 2013 legislative session is not going to be any better where school finance is concerned.
The business tax that was implemented to replace the local property taxes when they were reduced in 2006 remains structurally deficient.
Until the legislators address the tax-system issue, lawmakers are projected to face an education-funding deficit each session.