$55 Basic Allotment Bump is Just a “Golden Penny” Rebrand

The Texas Senate on Thursday unveiled its revisions to a massive school funding bill that retained many bipartisan House priorities but gutted a proposed increase to the building block of funding for public schools, the basic allotment.

The House last month approved an $8 billion bill that would have included a roughly 6% increase to the basic allotment, which hasn’t been changed since the Legislature set it at $6,160 in 2019. The Senate cut that amount down to a $55 increase, or less than 1% of the current value of the basic allotment.

But the smaller increase that the Senate left intact doesn’t represent a real boost in school funding, because it simply would redirect existing “golden penny” state money for schools, rather than giving them new funding.

Inflation and the changes

The Senate retained that $55 basic allotment increase from the House, which added it to its own committee substitute version of House Bill 2.

House sponsors touted that change as a permanent counterbalance to the years of high inflation that has left many districts struggling to remain solvent. The Legislature last increased the basic allotment in 2019, and many districts since then have closed schools in the face of wrenching budget deficits.

Summarizing their change to the House Public Education Committee, the authors of the substitute framed it as “an ongoing, automatic increase to the BA every biennium, tying it to the growth of property values,” which would offer schools “more predictable, stable public education funding” and reduce local tax pressures.

But that extra money would come from an existing local revenue stream known as the “golden penny,” and it wouldn’t necessarily give districts more money than they would get under the current plan.

“It’s not an inflation adjustment for everybody,” said Bob Popinski, the senior policy director for public school nonprofit Raise Your Hand Texas. “It might work out that more districts, on average, should get the benefit of the $55 [basic allotment increase] than some. But it’s not an across-the-board inflation adjustment. They are moving one pot of money to fund another provision.”

Popinski was speaking about the House Public Education Committee substitute for HB 2 during that April 15 interview with Reform Austin, but the Senate’s substitute uses the same language.

The “golden penny”

The relevant provision is what’s called the “golden penny,” a complex funding stream for school districts that depends on local tax revenue.

Though the basic allotment and other state revenue determines a big chunk of state funding for public schools, nearly as large a share of school funding comes from local Maintenance and Operations property taxes, which is where the “golden penny” comes into play.

The state sets a maximum property tax rate that local school districts can levy to help pay for schools, but it also allows schools to collect an extra 0.8% property tax on top of that — the equivalent of eight pennies of revenue for schools per $100 of property value. Those are the “golden pennies,” and every school district in the state collects them, Popinski said.

“Most districts have, you know, six or so pennies,” he said. “But for the most part, school districts need those extra golden pennies just to meet operating expenses.”

In order to guarantee that school districts with less property, or less valuable property, get similar amounts of money from those “pennies,” the state equalizes the money they generate for school districts by making up the difference to a number called the guaranteed yield allotment. For the current school year, that amount is roughly $129 per student per “golden penny” the district collects.

Imagine that $129 benchmark as a water bottle. The actual money that the district collects from its extra 0.1% property tax is water that goes into the bottle. That water might not even fill up half of the bottle, it might fill it up nearly to the top, or it might overflow. But after that local water goes into the bottle, if it isn’t full, the state fills it up the rest of the way.

For districts for which each of those “golden pennies” bring in more than $129 per student, the district gets to keep the excess money, without the state collecting the extra money to give to poorer districts (as it does for another category of extra local taxes, the “copper penny”).

Growing pennies

Every two years, the Texas Education Agency recalculates the guaranteed yield allotment — that is, how tall the “golden penny” water bottle is, setting it equal to the volume of water that a school district at the 96th percentile of wealth in Texas would put into the bottle.

And because school wealth in part is tied to property value, when property values increase, the guaranteed yield allotment naturally rises, too. When the state established its guaranteed yield for each “golden penny,” it was just $60 per student, Popinski explained. Last year, it was about $126, and now it sits at about $129 per student.

In the analogy, that means that every year, each district’s water bottle automatically grows bigger, guaranteeing that it will get more money even if doesn’t have any more water to put in the bottle than it did last year.

“Some districts are well-above the yield, and so the yield doesn’t necessarily matter to them, because they’re going to get what they get, whatever they can generate on those golden pennies,” Popinski explained. “It’s the low-wealth districts that benefit from increasing the yield year to year.”

Pennies into the Basic Allotment

The change to House Bill 2 would freeze the guaranteed yield allotment at its current value of roughly $129 per student for the next two years. Instead of increasing the size of the water bottle, the state would put that extra revenue into the basic allotment directly, the equivalent of a $55 increase to the figure.

That’s why the House authors described the change as tying the basic allotment to property values — because it would come from existing funding that’s tied to properties.

But it’s hard to say which districts would get more money from that change, and which might see less funding. For each district, the difference would be governed by a complicated mix of local property values, student population and needs and local tax rates, Popinski said.

He cautioned: “That $55 may not make up for what you would have been getting under the golden penny increase.”

Raise Your Hand Texas in a statement praised the Senate for preserving the $8 billion scope of HB 2 but noted the limitation that the small basic allotment increase will impose on local districts.

“Flexible funding, which in our school funding formulas comes through the basic allotment, is critical to allow our vast range of schools to meet the varied needs of their students and communities,” the statement explained. “Unfortunately, raising the basic allotment by $55 means little flexible funding in the Senate’s version of HB 2, limiting the practical capacity of this investment to nimbly meet the immediate needs of all Texas classrooms.”