Dallas ISD Board Briefing

Summary

Texas Public School Finance Commission

Final Report

January 10, 2019

Presented by:

Louann Martinez, DISD Legislature Consultant, Thompson & Horton LLP

and David Thompson, Thompson & Horton LLP 1

The Commission has made a series of 34 recommendations to fundamentally restructure the Texas school finance system.

The recommendations seek to do the following:

Create a long-term systemic balance between the state and local share of public education

Reallocate outdated or otherwise inefficient allotments, weights, and programs

Increase investment in low income and other historically underperforming student groups

Significantly reduce the growth rate of property taxes and reliance on recapture

Encourage data-informed best practices that deliver improved results for students

Immediately infuse, net of property tax relief and new funding needed for student growth, significant additional state resources to fund the data-informed strategies that will improve student outcomes

Formulaically increase per pupil funding in the future (relative to current law) as outcomes-based funding grows from the successful investments in early learning, teacher effectiveness, and high school supports made possible by the implementation of these recommendations

Commission Executive Summary

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Although this Commission report was unanimously approved by the Commission members, it has no bearing on the legislative process. This recommendations proposed still need to be drafted as bills and go through the legislative process.

This report does not contain any specific appropriation.

Some of the members discussed supporting an additional $1.8 B for public education, while others talked about adding $3 B; however there was no commitment in the adopted report.

*Note: Joe Straus (outgoing Speaker of the House) stated to the San Antonio Express News on December 18, 2018 that the House budget would commit an additional $5 B to school finance. To date, we don’t know if the House members – particularly the House Appropriations Committee and new Speaker of the House - will keep that level of additional funding in the budget.

General Comments

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Key Recommendations

“Savings” to the State:

Eliminate CEI (saves $2.9 B annually)

Use Current Year Values (from prior year – saving $1.8 B)

Eliminate Chapter 41 early agreement credits (saves $50 M annually)

Note: It is projected to cost Dallas ISD approximately 4 percent discount on their recapture payment

Eliminate Chapter 41 1992 Hold Harmless (saves $30 M annually)

Eliminate Gifted & Talented Weight (saves $165 M annually)

Eliminate High School Allotment (saves $400 M annually)

Eliminate guaranteed per capita Available School Funding for Chapter 41 districts (potential state savings unknown)

It is assumed the savings from above will be used to implement many of the Commission’s recommendations and anything that might be left over will go to increasing the Basic Allotment (currently $5,140). 4

Key Recommendations, cont.

New Costs to the State:

Increase Comp Ed funding and allotment based on poverty spectrum

o Increases current 0.2 weight to 0.225-0.275 depending on level of concentration of low-income students

Provide Transportation based on mileage (no cost as it removes linear density formula)

Provide Transportation Allotment to Chapter 41 Districts (costs $60 M annually)

3rd Grade Reading Allotment ($780 M annually)

o Based on 0.1 weight for every Pk-3 eco dis, or ELL [0.2 weight if they are both])

3rd Grade Reading Outcomes Funding ($400 M annually)

o Additional $3,400 for low-income students that achieve Meets Standard on 3rd grade reading; $1,450 for additional for non low-income students that Meets Standard.

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Key Recommendations, cont.

New Costs to the State, cont.

Educator Effectiveness Allotment ($100 M annually growing to $1 B by FY 2029)

o Optional funding weight available for districts to provide higher salaries for most effective teachers as

measure by evaluations that meet certain criteria priority

New Dual Language Allotment ($50 M annual cost, which could reach $100 M by 2023)

o Additional 0.05 weight for bilingual students in dual language programs

New Dyslexia Allotment ($100 M annual cost)

o Weight for students with dyslexia

Expand Career & Technical Allotment to grades 6-8 ($20 M annual cost)

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Key Recommendations, cont.

New State Costs, cont.

Full-day Pre-K attendance ($27 M annual recapture reduction)

o Districts choosing to offer full-day pre-k would receive credit in their WADA calculations -for chapter

42 districts- this would mean additional funding; for chapter 41 districts, a reduction in recapture

Allow children of educators to be eligible for Pre-K ($50 M annually)

o 3 & 4 year-old children of public school educators would qualify as eligible, but if there are space

constraints, low-income and ELL students get first priority

Creates Fast Growth Allotment –spending $280 M annually for those ISDs in the top quartile of student-

growth

College, Career, & Military Readiness Outcomes Funding ($400 M annually)

o Additional $5,380 for every low-income senior graduating and meeting 1 of 3 achievements targets;

additional $2,015 for every non-low income graduate meeting 1 of 3 targets 7

Property Tax Relief Assumptions

We know the Legislature – certainly the Executive Branch- is intent on providing relief

We don’t know how much relief will go to school districts and property taxpayers. Will it be a 50/50 split; 1/3 to ISDs and 2/3 to the taxpayer, or what?

We don’t know the mechanism

When the state provides property tax relief with school taxes, they need to provide the revenue to make up the difference for schools that would otherwise face funding cuts

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Tax Rate Compression Recommendations

Consider one of three options:

Governor’s 2.5% revenue cap (which compresses districts’ Tier 1 tax rate)

Texas Taxpayers and Research Association (TTARA) proposal to use the growth in recapture to compress tax rates

Share the growth in property values by one-third between school districts, taxpayers, and the State budget

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Revenue Recommendations

The Commission set up subcommittees on Expenditures, Outcomes, and REVENUES

Recommendation No. 32 - Prioritize Projected Revenue Growth to Fund Education and Property Tax Reforms.

Recommendation No. 33 - Redirect a portion of severance taxes currently designated for Rainy Day Fund will provide increased revenues

Recommendation No. 34 - Expanding the sales tax base to include internet sales associated with vendors not having a physical presence in the state of Texas

The Commission would also reallocate current expenditures like the CEI (take money from ISDs), but the state currently offers $60 billion in tax exemptions.

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Big Improvements Require Bold Solutions

Texas Public School System:

o Educates 5.4 M students

o Employs 357,000 teachers

o Operates 8,700 campuses

Paying for student growth (50,000 students per year) costs approximately $1.7 B for biennium

Property Value Growth is expanding rapidly. There is enough to offset these costs if the Legislature allows it to stay in the education system.

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Historical Context

If history is a guide, lawmakers will look at ways to even-out printouts…. In other words, ensure

that no district(s) lose money

The Legislature will also look to ensure district(s) do not receive more increases than others. In

other words, relative uniform increases

Conservative Legislature: overriding concern that school districts are not efficient with their

dollars

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What Does $5 B New State Dollars Yield?

Realistically, even large amounts of state dollars spread across Texas doesn’t help as much as you

might think

Example: An additional $5 B new state dollars only equates to approximately $231 more per

student (How? $2.5 B for each year, 50/50 split between tax compression and new school

finance funding schemes results in $1.250 M. Dividing that between 5.4 million students=

$231 more per student than current law.)

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Issues that Merit Further Discussion

Current Year Values. This will be a huge cost on the backs of urban and suburban districts as that is where

property value growth occurs (not in rural areas of the State). The money saved from eliminating the use of

prior year values ($1.8 B) will be at schools’ expense. Districts will have to make up that loss or reduce

funding at a time when the state’s share of education funding is already declining.

Elimination of CEI: Although sorely outdated and complicated, the CEI was developed due to the

recognition that urban districts face higher costs than other areas of the state. Teachers have higher

rent/mortgages, overall higher living expenses; consequently large urban/suburban districts must higher

salaries to employ/maintain teachers. Currently it spreads over $6 B in the urbans/suburban ISDs.

Tax Rate Compression. Compression in 2006 (only over a 2-year period) caused massive budget reductions

because the Legislature did not appropriate the funds to fill in the local budget gaps. How will a plan to limit

local taxes be any different this Session?

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Looking to the 86th Legislature

Appreciate the genuine focus on:

generational poverty

students that are English language learners

Impact of early childhood learning

Importance of quality educators

We look forward to working with the Dallas Delegation, the House, Senate and Governor’s office

to ensure we have the best educational system possible

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