Funding Public Education

F. Scott McCown, Executive Director mccown@cppp.org

Center for Public Policy Prioritieswww.cppp.org

July 2011

The Legislature Cut Spending on Public Education

Schools are down roughly $1,000 per pupil, unless local taxes go up

What They Knewand When They Knew it:The 2006 School Tax Cut

Created A Structural Deficit

In 2006, the Fiscal Note said that for 2008-2009:

Predicted Cost of Property Tax Reduction $14.2 BPredicted Amount of New Revenue $ 8.3 BPredicted Shortfall $ 5.9 B

And then the gap grew: Our $10 Billion Structural Deficit

Bill $

Legislature Left Money in Rainy Day Fund

• RDF is designed to pay for ongoing expenses during an economic recession

• Contrary to the spin, the Legislature did not spend or commit the RDF—over $6.5 billion remains unappropriated and some project $9.5 billion

• The Legislature even rejected the contingent use of the RDF – Howard Amendment would have been spent RDF

to fund enrollment growth– But only the amount above $6.4 billion already

projected to be in fund at end of 2013– And only to the extent needed to fund enrollment

growth, but not more than $2.2 billion

Legislature Abandoned Historical Commitment

to Fund Schools

• Created Regular Program Allotment Adjustment Factor—change in philosophy

• Allows legislature to adjust funding by a multiplier that produces an across the board cut

• This is done through appropriations rather than through regular lawmaking

• Rep. Patrick’s Amendment eliminates this trick after they write 2014-15 budget

• Watch out for an extension

Equity is a Sword, not a Shield.• Every Texas student is equally valuable to us

and therefore we should invest in each of them equally

• Every Texas student ought to have same opportunity

• $5.5 billion in Target Revenue– A Measure of Need, not Inefficiency

• Requiring equitable funding is the only way to produce adequate funding

Same... District Tax Rate* Revenue**

LocationAlamo Heights $1.04 $6,243

San Antonio $1.04 $5,036

SizeGlen Rose $0.825 $8,424

Diboll $1.04 $4,881

Tax RateAustin $1.079 $6,171

Amarillo $1.08 $5,094

RevenueLamar Cons. $1.02 $5,475

Calallen $1.17 $5,475

Examples of Inequity

Courtesy of Equity Center

Local Property Taxes Alone Can’t Make up the Cut

• At maximum tax rate of $1.17, schools could only raise about $2.4 billion in new revenue

• More than a fifth of the districts are already at the maximum rate of $1.17

• Some districts can’t pass an election, which is required for any increase over $1.04.

The Legislature Has Choices• Increase Property Taxes

– ($0.10 about $1.7 billion)

• Increase Sales Tax Rate or Expand Base– ($0.01 about $3.2 b on current base)

• Eliminate Tax Loopholes ($2 b?)

• Fix Business Tax ($2 b?)

• Enact Healthy Texas Taxes

– Increase cigarettes a buck a pack for about $1.5 billion

– New penny an ounce sugar-loaded beverage tax for about $2.5 billion