Journal of Education Finance

funding priorities for p-12

By 2018, the system had 5.385 million public and public charter students, 59 percent of whom are economically disadvantaged and 18.9 percent considered to be limited English proficient (Snapshot, 2018). The 86^th Texas Legislature passed the most comprehensive school finance legislation in decades. Property tax reform, increase funding to public schools, change the funding formula, and teacher compensation were the major legislative goals. The following sections provide a brief overview of how these priorities are reflected in the current law.

changes to funding formula for p-12

The Texas 86^th Legislature passed a watershed school finance bill that substantially changed the funding system for districts and public charters. House Bill 3 (HB3) was a result of a two-year school finance study charged with developing a system that incorporates the legislative priorities for tax reform. Funding increases focus on four areas: teacher compensation, funding equity, learning outcomes (full day PK, dual language, SPED, CTE, extended school year) and blended learning (Texas Education Agency, 2019). The Basic Allotment was increased from $5,140 to $6,160 with 30 percent of the year over year gain shall be dedicated to teacher pay increases for the most experienced teachers (5+ years). 75 percent (of the 30 percent) must be paid to teacher classified positions and 25 percent to other employees except for administrators. The law requires the district to create a differentiated compensation system and an increase in benefits can be included in the 30 percent. The law creates a new minimum salary schedule increase from $,5,580-$9,030 depending on experience (Budget Planning, 2019).

The Legislature's tax reform goals include creating a long-term and systemic balance between the state and local share of funding and reduce property tax growth and the reliance on recapture as a funding source. The Tier 1 tax rate in prior law was $1.00 for most districts with options for Tier 2 enrichment up to 17 additional cents. The new law compresses the Tier 1 rate by 93 percent and restructures the Tier 2 enrichment pennies. The result for districts is an M&O rate reduction from 7-10 cents. Tax compression continues in year two of the biennium. The new law reduces projected recapture from $4.8 to $2.3 billion by 2023 reducing the number of districts projected in recapture from 292 to 161. Substantial changes were made to the recapture calculation. The cost of education index (CEI) was repealed and recapture calculations no longer use equalized wealth as a component of the calculation. It is now based on formula funding [End Page 360] (Tax Rate, 2019).

Significant tax policy changes are part of the new law. Districts are required to do an efficiency audit at least 4 months prior to an election proposing a tax rate increase. All tax ratification elections (TRE) must be held on a uniform election day. Districts can no longer raise M&O rates to lower debt service, commonly referred as a "tax swap". District bond election notices must state "THIS IS A PROPERTY TAX INCREASE" (Tax Rate, 2019).

pressing state issues affecting p-12

Texas districts are stressed to implement a new school finance system with significant mandates to address compensation and implementing a new formula. New tax reforms have eliminated tax strategies being used to increase M&O funding by reducing debt rates in order to avoid raising, or in some cases lower, tax rates. New requirements for tax rate elections could make it more difficult for growing districts to pass bond referendum's or allow districts to raise M&O rates requiring voter approval. The A-F accountability rating system is now fully implemented with districts challenged to communicate the meaning to stakeholders. In spite of the state's efforts to broaden the system to lessen the impact of the single state assessment by considering student growth, affluent districts continue to grade significantly higher than districts with high percentages of economically-disadvantaged students.

The 2020 pandemic crisis will no doubt have a significant negative impact on the states biennial budget. The previously referenced legislative priorities in...