In-Depth: Non-FSP Programs and the Permanent School Fund

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency (TEA).
Testifying before the committee were members of the Legislative Budget Board (LBB) and Education Commissioner Mike Morath.
Regarding public education programs administered by TEA outside the Foundation School Program (non-FSP), the LBB reported the following changes in the new House budget:

  • the Technology and Instructional Material Allotment (T&IMA) decreased to $166.7 million from the previous biennium;
  • the one-time Rainy Day Fund use of funding the e-rate program from the previous budget has been eliminated; an increase of $54.5 million in funds for TEA’s safe and healthy school initiative in included;
  • an increase of $50.5 million in GR funds for special education supports;
  • and lastly, a collective $17.2 million increase in funding for the biennium for Communities and Schools, Adult Charter Schools and Advanced Placement Initiative.

Ted Holloday of the LBB testified the TEA non-FSP and administration appropriation has declined by $95.8 million in GR funds compared to ‘18-’19 base amount. 
The T&IMA inspired some back and forth between subcommittee members and the witnesses from LBB and TEA. The allotment is funded by the Permanent School Fund, which receives monies from the School Board of Education (SBoE) and the School Land Board (SLB). Currently, the Permanent School Fund sits at around $44 billion, according to Rep. Howard.
Rep. Gary VanDeaver (R-New Boston) told the committee the technology allotment was lumped in with the instructional and material allotment (IMA) a few sessions ago. When VanDeaver asked about how much of it was spent, Morath testified there has been a reduction in school districts using the technology part of the allotment over time, but the rest of the allotment is used up because of English Language adoption.
Morath also testified about local school districts stockpiling IMA for big purchases related to English Language Arts and Reading (ELAR). He went on to say it is better for local school districts to have broadly available funds rather than a dedicated funding source, such as IMA.
TEA subject matter expert, Monica Martinez, says in the current biennium, the T&IMA is $186.32 per student, and it goes down to just under $180 for T&IMA in House budget. The decrease in the allotment is a result of one of the two revenue sources, the SLB, investing less into the Permanent School Fund than before.
Morath explained this is in large part due to statutory restrictions on what the SLB can invest in: tangible real property, oil & gas private equity and oil/gas infrastructure. He added, “last time I looked, the School Land Board sitting on $4 billion in cash. It’s a drag on return… [and it’s] costing taxpayers $200 million a year.”
On the other hand, Morath said, “uninvested cash doesn’t exist on SBoE.” It has an average return 7 percent while SLB’s average return is 2 percent. “Since 2002, we’ve probably lost a billion dollars in funding we could’ve given kids had we had better policy framework for how to invest funds,” said Morath.
Rep. Donna Howard (D-Austin) asked Morath if there is a percentage the Permanant School Fund is allowed to disburse to the T&IMA. Morath responded no, but historically it has been between two and three percent. Currently, it sits at 2.75 percent.

In-Depth: Early Childhood Education in the House Base Budget

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency (TEA).
Testifying before the committee were members of the Legislative Budget Board (LBB) and Education Commissioner Mike Morath.
Rep. Armando Walle (D-Houston) asked why there was no early childhood education included in TEA’s Legislative Appropriations Request (LAR). Morath responded it was included in the previous session’s LAR; however, the Legislature decided not to fund it. As a result, TEA decided not to include it as an exceptional item in their latest LAR.
Morath added early childhood education is part of their strategic goals, which addresses improving the literacy of third graders. This includes an interagency contract with Texas Workforce Commission, $20 million in the last 3 years, for administrative support to improve partnerships between private child care providers and districts and to improve district offerings for early childhood education.
Rep. Howard asked if Morath agrees early childhood education gives better outcomes for students. Morath agreed, adding there is a demonstrated upside for full day pre-k students from the best research.
“Technical support [for school districts] is needed for scaling new programs like full day pre-K…[and] if we want to change behavior, we might want to put strings attached to the funds”, said Morath.
Reform Austin has previously reported on full day pre-K as policy priority for Texans for the 86th Texas Legislature. The policy was discussed in the House Committee on Public Education’s school finance bill, which is based in large part to the recommendations of the Commission on Public School Finance. It is also included in the House Democratic Caucus’ “Texas Kids First” plan for fixing school finance.

In-Depth: Special Education in the House Education Budget

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency (TEA).
Testifying before the committee were members of the Legislative Budget Board (LBB) and Education Commissioner Mike Morath.
The LBB reported on the state of the special education allotment. HB1 includes an $1.05 billion increase to cover the growth of the special education student population, which is well over the projected cost of $882 million. The LBB estimates the special ed population growth will be a 0.5 percent increase of total student population per year from Fiscal Years 2019-2021. Morath testified the special education population is 9.2 percent of all Texas public school students.
HB1 also includes $50.5 million in special education supports, which would reimburse local districts for increased costs in Comp Ed for identifying students needing special education services.
Relatedly, Morath suggested how helpful increased funding for initial diagnosis would be for local school districts, who currently bear the entire cost. There is an incentive for school districts to not identify students for special education because should the student be deemed ineligible, the schools do not draw state funds for special education.
The House base budget also funds 54 Full Time Equivalents (FTEs) for TEA’s Strategic Plan to address the Corrective Action Response to maintain adequate funding for special education. LBB and Morath testified this was supported by federal funds. Morath told the subcommittee TEA has already hired and filled the 54 FTEs. Rep. Gonzalez asked about their qualifications, and Matt Montoya, TEA Deputy Commissioner for Special Populations, testified 95 percent of the hires have experience in the field in special education, came from schools and service centers, and have at minimum a graduate degree in special education.
Morath also testified on the timeline of the federal government’s case with TEA for not complying with federal laws to assure states spend consistently on special education. In early 2016, the federal government sent a letter to TEA about the $33 million in cuts to special education in 2012. TEA is currently in settlement talks with the federal government after a federal court agreed with the Department of Education on the amount of the cuts.
Morath suggested one way to appease the federal government for settlement purposes would be to include $33 million in supplemental appropriations for special education. Rep. Mary Gonzalez (D-Clint) asked about the total cut to special education since then until 2018. Morath testified the amount is somewhere between $111-117 million. If the state fills the void within the next 5 years, Texas has the ability to access the same amount in federal funds. This can be done if appropriation for special ed language is included in the Foundation School Program formula.
Rep. Gonzalez asked Commissioner Morath to talk about unspent money on special education. He testified TEA federal funds for special education are split into two buckets, administrative and discretionary. TEA currently receives $115 million a year from the federal government. In 2016, Morath’s first year as commissioner, he testified noticing $80 million of federal funds given to TEA for discretionary funds had not been allocated over time because “no periodic review was done by TEA.” He said all of the funds have been since allocated, but was unsure if all had been spent yet.
Rep. Gonzalez asked the LBB to ascertain how much of the $100 million, which was appropriated in the 2018-2019 biennium for special education, was spent.
When asked if the staff cuts to TEA in 2002 and 2011 affected special education oversight, Morath responded the first cut did, and it was not restored until his tenure.
Reform Austin previously reported on the dire state of special education funding and will continue to track it during the 86th Legislative Session.

In-Depth: Charter Schools and Public Education Funding

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency.

Testifying before the committee were members of the Legislative Budget Board (LBB).

One of the issues highlighted by subcommittee members was state funding of public charter students. While the matter of whether charter schools should be publicly funded was not debated, some subcommittee members examined the role of state funding to charter schools in comparison to the split local/state funding of traditional public schools.

Rep. Mary Gonzalez (D-Clint), for example, said she wanted to try to unpack the effect of state funding of charters schools in the interest of transparency.

“Charter schools are teaching 6% of Texas public school students and yet have 100% state funding per pupil as opposed to 94% of students in traditional public schools have 37% [in 2019] of state share funding per pupil,” Rep. Donna Howard (D-Austin) said.

“Any increase in [school district] entitlement is a state cost, barring any increase of property taxes,” Tedd Holladay of LLB said. He added one caveat, “not all school districts receive the same amount of funding per student, nor do all charters receive the same amount of funding per student, generally speaking.”

Rep. Howard said when additional raw dollars were in the budget, a substantially greater amount was distributed to charter schools than traditional school districts.

In-Depth: Hurricane Harvey and its Cost to Public Education

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency (TEA).
Testifying before the committee were members of the Legislative Budget Board (LBB).
Hurricane Harvey left a big impact on Texas public schools in 2017 and the state covering the costs incurred since then is being discussed in the current legislative session.
The Legislative Budget Board (LBB) reported Hurricane Harvey had a $271 million cost to school districts in the 2018-2019 adjusted base. Costs related to Harvey will reach up to $970 million between Fiscal Year 2018 and Fiscal Year 2021.
In the current House budget for the upcoming biennium, $636 million has been allocated for paying down Harvey related costs, a $365 million increase from 2018-2019.
There is an additional and optional $634 million designated for Hurricane Harvey-related expenses in House Bill 4, the supplemental appropriation, according to the LBB.
As Reform Austin previously reported, Commissioner Mike Morath testified to the House Public Education committee the final picture on property value and property collections related to Harvey will not be released until March.

In-Depth: Property Taxes, Recapture and State/Local Share of Public Education Funding

AUSTIN, TX – The House Appropriations Subcommittee (S/C) on Article III held a meeting Wednesday, February 20th to listen to testimony on House Budget recommendations for the Texas Education Agency (TEA).
Testifying before the committee were members of the Legislative Budget Board (LBB).
Aaron Henrickson of the LBB reported the expected rise in school district property value growth is going to save the state $5.05 billion. This relates to the declining state share of public education funding. He added the state share in 2019 was 37.8 percent and is expected to decrease to 34.6 percent in 2021 under current law.
Notably, if the Legislature is able to fulfill the contingency for the $9 billion in additional state funding, the LBB estimates the state share will hover around 40 percent in the upcoming biennium, 41.1 percent in 2020 and 39.8 percent in 2021.
“The state is again seeing a windfall, if you will, off the hook for over $5.05 billion based on increased property values,” said Rep. Donna Howard (D-Austin).
The Property Tax Relief Fund (PTRF) in the current biennium came in lower than appropriated, which required an increase of $163 million in GR funds. Recapture came in higher than appropriated, requiring a decrease in $98 million in GR funds being disbursed, creating a net of $65 million. For the upcoming biennium, LBB estimates the PTRF will bring in $172 million in GR-related savings over the base and recapture will be bringing in $2.345 billion in GR-related savings over the base.
Under recapture, HB1 includes $7.02 billion, which is a $2.35 billion increase over ‘18 -‘19 levels. Under current law, LBB reports recapture paid as a percent of maintenance and operation (MO) revenue has stayed between 3-5 percent between 2006 and 2021, but beginning in Fiscal Year (FY) 2019, it will grow to 6 percent for the first time and will go up to 8 percent in FY 2021.
In FY 2019, an estimated 42 percent of districts will be at the $1.17 school district property tax rate cap, while 41 percent of districts will be at $1.04. To understand what this means, refer to this Texas Tribune explainer.
Notably, when Rep. Howard asked about whether per pupil funding (Foundation School Program without debt service included) in constant dollars prior to 2011 budget cuts is greater than it is in 2019, the LBB responded in the affirmative. She requested LBB for more analysis to be done regarding the amount of state public education funding if Texas maintained the level of funding of 2010 and had increased it based on inflation and population growth alone.
The Austin ISD yield, which determines the golden pennies in the enrichment tier of the school finance formula,  is expected to increase significantly in the upcoming biennium. In FY 2020, the yield will be $126.88 per penny per Weighted Average Daily Attendance (WADA) and in FY 2021 the yield will be $135.92 per penny per WADA. The increase is largely due to “robust property value growth” and a declining student population. Altogether, this costs $2.2 billion. Rep. Mary Gonzalez (D-Clint) asked later if this was in part due to students leaving Austin ISD to local area charter schools. Henricksen said it was a factor.
The yields for both golden pennies and copper pennies are not currently funded in House Bill 1, testified members of the LBB.
Reform Austin has previously reported on the legislative effort to bring property tax relief. The chief property tax reform bill has already passed out of committee in the Senate, and its companion in the House is having a hearing before the Ways & Means Committee this week. Property tax relief is also included in the House Democratic Caucus’ “Texas Kids First” plan for fixing school finance in the form of an increase in the homestead exemptions.