The ABCs of School Finance

Public school finance is one of the most complicated parts of state government. It is easily the largest component of state spending and arguably the most important.

Because of the Texas Constitution and several state Supreme Court opinions, Texas must fund its public schools equitably, meaning school districts are entitled to approximately the same amount of funding per student as other school districts that have the same property tax rate.

As a result, Texas has one of the most equitable funding systems in the country. However, this system, which has served us well for the last eight years, is under a great deal of stress because of rising property taxes and the unpopularity of the "Robin Hood" equalization mechanism.

Local property taxes form the backbone of the public school finance system in Texas. The state also contributes more than $11 billion per year to pay for schools. The two major components of school finance that provide basic funding for school operations are the basic allotment and the guaranteed yield. Both are set in the state's budget.

In order to receive the basic allotment of $2,537 per student, school districts must levy a tax rate of at least 86 cents on every $100 of assessed property value. A school district's property value determines how much of the $2,537 can be raised locally. If a school district cannot raise $2,537 per student with an 86 cent tax rate, the state makes up the difference. The poorer the district (i.e. low property tax wealth), the greater the state's share. If a school district raises more than $2,537 per student at an 86 cent tax rate, the extra amount is usually shared with other school districts.

The guaranteed yield is a set amount of funding provided to each weighted student in a school district. For the 2001-2002 school year, districts are guaranteed $25.81 per weighted student for each penny of tax above 86 cents.

(In 2000-2001 it was $24.70 and in 2002-2003 it will be $27.14.) If a school district cannot raise the $25.81 through property taxes, the state makes up the difference. School districts that raise more than the guaranteed amount can keep up to $30. If a school district, however, collects more than $30, the extra money must be shared with other less wealthy school districts. The sharing of money in excess of the basic allotment and guaranteed yield is the "Robin Hood" mechanism.

In Senate District 5, there are almost 90 independent school districts. Out of those districts, seven are "Robin Hood" districts, including College Station, Fairfield, Dew, Anderson-Shiro, Leon, Groesbeck and Bremond. Except for College Station, which became a wealthy district this year, these "Robin Hood" districts exist because of large power plants or an above average number of oil and gas wells located inside their boundaries.

I read many articles on school budgeting that are confusing and misleading. It is a complicated issue. Much of the confusion surrounds changing tax collections and the state's response. For example, there is a one-year delay between property value changes and the state's response with respect to the guaranteed yield. This means a district's increased revenue due to higher property valuations will not be offset by a reduction in the state's contribution for at least one year, and school districts get to keep the extra funds.

Also, when a district raises its tax rate, it does not necessarily mean the district will receive additional money from the state. The state's funding is capped based on a school districts' tax rate for the school year during which the state budget was written. This is done so a more accurate calculation of the state's obligation can be made during the budget process. At best, additional state funding will not be available until the next two-year state budget is written.

Public school finance will be a major topic of study during the next two years, and proposed changes may dominate the next legislative session. I will write several columns on the issue over the next few months to help my constituents better understand this complicated issue.

Senator Steve Ogden's Senate Page