I. Overview
Across our education systems, it is important not only to find what we spend, but also to determine from where the money comes. Elementary, secondary and post-secondary education institutions are all funded through a diverse mix of local, state, federal and – particularly in higher education – private sources. This section on education expenditures will review the following:
- The funding mix for the nine area independent school districts;
- The implications of state policies on school financing;
- New federal policies from the No Child Left Behind act;
- The complexities in funding for higher education;
- Some basic expenditure information from the 2000-2001 school year for the nine school districts and six colleges and universities.
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II. Public Schools
The sources of revenue for public education vary greatly across the nine districts in our assessment area. Those districts that are deemed “property wealthy” by the state receive very little state support. Statewide, 48.5% of all revenue for public elementary and secondary education comes from local taxes and 43.6% comes from the state. But for the nine districts in our area, the ratio is 79.7% local, 13.3% state. The percent of revenue coming from the state demonstrates substantial differences in property value. It is very telling that the three districts with the lowest state contribution, Austin (4.2% state), Del Valle (6.9% state) and Manor (6.9% state) are the same districts that have the highest percentage of low income students.
State Policy - Chapter 41:
State policy governing school finance is intended to provide equity across all districts statewide, ensuring that all students have equal access to education resources. Under a system based upon property taxes, like Texas’ system, the potential exists for huge disparities among districts. For a century, the state of Texas has grappled with the challenge of bringing equity to public schools. Initially, the equity debate was centered on disparities between urban and rural school districts. In 1971, the Rodriguez v. San Antonio ISD court case shifted the debate to disparities between rich and poor school districts. More than a decade later, the debate was renewed when Edgewood ISD v. Kirby was filed. This suit contested the state’s reliance on property taxes to finance public education, contending that this method was intrinsically unequal because property values varied greatly from district to district. In April 1987, the state district judge ruled for Edgewood; in December 1988, the Third Court of Appeals reversed the decision; then finally in July 1989, the Texas Supreme Court ruled for the plaintiffs and ordered the state legislature to implement an equitable system by the 1990-1991 school year.
A lengthy legislative process has paralleled this legal history. A series of legislative efforts to reform school finance have become law, beginning with House Bill 72 in 1984. When HB 72 was ruled unconstitutional, Senate Bill 1019 in 1989, Senate Bill 1 in 1990 and Senate Bill 351 in 1991 followed it. Each was, in turn, found unconstitutional. Finally, in 1993, the legislature passed Senate Bill 7, which was ultimately accepted as constitutional by the Texas Supreme Court. Under this legislation, each school district would help to equalize funding through one of five methods: 1) merging its tax base with a poorer district, 2) sending money to the state to help pay for students in poorer districts, 3) contracting to educate students in other districts, 4) consolidating voluntarily with other districts, or 5) transferring some of its commercial, taxable property to another district’s tax rolls. If a district failed to take one of these options the state would order the transfer of taxable property. If property wealth continued to exceed the state defined threshold ($300,000 per Weighted Average Daily Attendance in school year 2001-20021), the state would force a consolidation. It was this legislation that was translated into Chapter 41 of the Texas Education Code, and brought “recapture” into the language of school funding.
Following this approach, the state of Texas has made great strides toward equity in school funding for all districts and all schools. However, the examples of Austin, and Manor ISDs also point to an unexpected consequence of this approach: it is possible for a district to be “property wealthy” yet still have significant poverty among its enrollment, with educational needs frequently outstripping available resources. By the 2001-2002 school year, 28 of 101 Chapter 41 districts in the state had enrollments that were more than 50% low income. Austin ISD was, however, the only major urban district on the list.
Local Impact – Chapter 41:
As more area districts become subject to “recapture” under Chapter 41, the implications become increasingly problematic for our community. Attempting to balance rapid growth, rising expectations and increasing diversity within fixed resources is proving to be a difficult proposition. In the 2001-2002 school year, five area districts were subject to recapture under Chapter 41 (see Table 1).
Some examples of what this has meant for the individual districts follow.
Eanes ISD was designated a Chapter 41 district in 1994. Since that time, Eanes has remitted approximately $182 million to partner districts. In 2002, Eanes ISD will pay over $41 million ($5,687 per student), a figure that is expected to rise to over $50 million in 2003 ($7,070 per student). The district has steadily raised its maintenance and operations tax rate each year to compensate for resources lost under Chapter 41. However, in 2001, Eanes reached the state-mandated maximum of $1.50 per $100 in property value. Now that no increase in local revenue is possible, recapture will result in a budget shortfall of approximately $5.7 million in fiscal year 03. This is the equivalent of 142 full time employees in a district of approximately 1000 employees.
Austin ISD is the largest Chapter 41 district in the state. AISD has been subject to recapture under Chapter 41 since 2000. Since that year, the district’s payments have grown rapidly: from $32 million in 2000, to a projected $179 million in 2003-2004. As in Eanes ISD, this growing cost has driven the district to raise its tax rate to the maximum (pending approval by the board of trustees). Payments to the state (by way of partner districts) have limited the district’s ability to raise teacher salaries to keep pace with the cost of living, reduce class sizes, and provide enrichment and support services to students in need.
Lake Travis ISD has been subject to recapture under Chapter 41 since the 1999-2000 school year. As with Austin ISD, their recapture payments have grown many times over in just a few years: from $4.5 million in 1999-2000, to a projected $26 million in 2003-2004. For a district whose total operating budget is $28.2 million, recapture payments are a significant portion of resources available in the district.
As a result of Chapter 41, the district has been forced to reduce staff by 5%, resulting in increased class sizes, reductions in instructional programs, support programs and administration.
Manor ISD is in its second year as a Chapter 41 district. Over the past two years Manor ISD has made a number of adjustments to the budget to compensate for state recapture. These cuts have impacted every aspect of the district: central administration, instruction, technology, transportation and support services. At all campuses and all levels, these cuts have resulted in increased student-teacher ratios.
In the 2002-2003 school year, even more local districts will become subject to recapture under Chapter 41. For example:
Round Rock ISD is expected to send nearly $10 million out of the district in 2002-03. This will result in an increase in staffing ratios and larger classes at the secondary levels. At the elementary level, classes will be closely staffed at the 22:1 ratio according to current enrollment rather than staffed for projected growth. Ratios have increased for campus administrators as well and more than $500,000 in staffing reductions and reassignments were made at the Central Office. Department budgets were cut by 10 percent and employee calendars above 187 days were reduced by one day. The number of teacher and technology facilitator positions has been cut.
To increase revenue, high school students who participate in designated extracurricular activities and athletics will be assessed a $50 participation fee. To increase the number of students attending Round Rock ISD schools, thereby reducing the property wealth per student and the Chapter 41 liability, the district this year is offering tuition-free enrollment at campuses and in programs where space is available.
If the state system remains unchanged, Round Rock ISD expects a loss of up to $25 million in 2003-2004.
Federal Policy
The No Child Left Behind Act: On January 8, 2002, the No Child Left Behind (NCLB) Act was signed into law. This law serves to reform the educational system in the United States by giving state and local educational authorities more flexibility in administering and allocating resources to schools, while stressing higher levels of accountability for student achievement. This legislation enables states and local school districts to transfer categorical funds to areas of highest need, while attempting to reduce associated bureaucratic processes. The NCLB Act emphasizes the use of evidence-based strategies that have been scientifically proven to be effective in achieving the desired outcomes, especially in reading and teacher training. The NCLB Act seeks to direct resources to the highest needs students. The majority of available resources will target campuses/school districts that are low performing or have a high number (40% or greater) of economically disadvantaged students. Using the Title I formula, Texas will be eligible for a higher percentage of resources than in past years, with no more than 5% allocated for administration costs for the Texas Education Agency.
In some areas, this new legislation has been met with some trepidation. In particular, stipulations regarding student assessment and teacher quality could be problematic. In some states, the requirement for annual statewide assessments is forcing major policy changes and substantial new investments in standardized assessment tests. However, the statewide testing and assessment system already in place in Texas meets the new federal guidelines so little change will be required.
In the area of teacher quality, however, Texas shares the same challenge as the rest of the nation. Under the new legislation, every public school teacher must be “highly qualified” by the end of 2005-2006. While all share this goal, making it happen may prove to be difficult. In a statement that could easily apply to Texas, the California state superintendent of schools said “You can’t just wave a magic wand and say we need to have more teachers, it’s a resource issue” (Education Week, Jan 16, 2002).
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III. Higher Education
Economic challenges are not limited to elementary and secondary education. Local higher education institutions must function within very real funding constraints. For public institutions these may include:
- Decreases in state funding (State funds accounted for 60% of ACC’s budget in 1984; today that figure is 39%.)
- A drop in the rate of local tax revenue growth from 15% in FY 01 to 9% in FY 03
- A decline in the rate of total revenue growth from 8.44% in FY 01 to 3.24% in FY 03
For private institutions these may include:
- Loss of investment income resulting from the economic downturn
- Declines in alumni giving also resulting form the economic downturn.
Additionally, the large projected increases in enrollments present further costs to institutions in services, facilities and staff. The combination of these factors may be a barrier to institutional ability to reach out to underserved populations. These challenges suggest that in addition to current initiatives, it will take additional local public investment in order to supplement state and federal funding to public institutions to reduce the impact on students themselves, an impact that will increase the already significant barriers to affordability.
A thorough assessment of funding for higher education in our community is highly problematic due to the diversity of funding that goes into these institutions. Where public elementary and secondary schools are funded almost wholly by public tax dollars (local, state and federal), higher education institutions run on a much more diverse mix. For example, Southwest Texas State University lists nearly 30 different revenue sources. These include state appropriations, tuition, a dozen or more different fees, revenue producing services (ex. Book store), state and federal research grants and financial aid, private gifts and endowment income.
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IV. The Basics
Although there is no comprehensive assessment of the community’s investment in the formal education system, this section does offer the basic expenditures for the institutions covered in this assessment. As Table 2 shows, expenditures by independent school districts in Travis County totaled more than $1.16 billion in School Year (SY) 2000 - 2001.
Budget snapshots for each of the nine districts in the CAN assessment area are included in Appendix K. Each contains a breakdown of expenditures by function, and some basic revenue information.
A thorough assessment of funding for higher education in our community is highly problematic due to the incredible diversity of funding that goes into these institutions, particularly among the four-year institutions. Where public elementary and secondary schools are funded almost wholly by public tax dollars (local, state, and federal levels), higher education institutions run on a diverse mix of public funds, private contributions, and tuition and fees paid by students. Endowments, endowed chairs, dedicated gifts and capital campaigns further complicate the picture. The basic expenditure information on the six area institutions are presented below.
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Next Section
1. TEC Section 42.302 (a): "WADA" is the number of students in weighted average daily attendance, which is calculated by dividing the sum of the school district's allotments under Subchapters B and C, less any allotment to the district for transportation, any allotment under Section 42.158, and 50 percent of the adjustment under Section 42.102, by the basic allotment for the applicable year.
