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House Committee Tackles School Finance

On the heels of a newly approved House budget that leaves public schools $7.8 billion short of what they're entitled to under current funding formulas, the House Public Education Committee today considered a round of school finance bills.

State Rep. Scott Hochberg, D-Houston, at the 2010 Texas Democratic Convention in Corpus Christi.

On the heels of a newly approved House budget that leaves public schools $7.8 billion short of what they're entitled to under current funding formulas, the House Public Education Committee today considered a round of school finance bills.

Two of the bills came from the lower chamber's veteran school finance wonk, state Rep. Scott Hochberg, D-Houston. One came from freshman state Rep. James White, R-Woodville, who made his first appearance before the committee.

During seven hours of testimony — and in sometimes tense exchanges that revealed the frayed nerves of committee members and witnesses alike — representatives from districts across the state spoke repeatedly about the dire consequences of the House's budget cuts. At one point, as Alamo Heights Superintendent Kevin Brown urged the Legislature to provide its fair share of funding, state Rep. Dan Huberty, R-Houston, emphasized the strain lawmakers have felt attempting to fund essential programs and meet voters' demands for no new taxes.

"We've seen HB1; we don't have the money ... We're trying to create a system that is reasonable and equitable under some parameters," he said. "Obviously, as you can tell, the past couple of weeks have been very frustrating for us, and we're getting a little short on temper."

As he laid out HB2444, White said he was focused on reforming a system that was likely "unconstitutional and definitely immoral." His bill would eliminate so-called "hold harmless" provisions. Those provisions reflect a guarantee that the Legislature made to districts that it would maintain the per student funding they received in 2006 when it compressed the property tax rate by a third. It distributes that money across all districts under the current cost-based formula. According to White, who touted the simplicity of his proposal, that would leave 61 percent of districts with increased revenue; 447 would have an average of about 8 percent less. 

"Let's just fix it, not nix it, and get it done," he said.

(Feeling perplexed? Give our school finance primer a read.)

The first bill from Hochberg, D-Houston, envisions a scenario in which the Legislature leaves the current funding system intact. HB2484 essentially undoes the property tax compression the Legislature enacted in 2006, allowing local revenue to make up for reduced state funding. That would allow districts to "slide-up" to the rates they were taxing in 2006 before the compression — and permit schools boards to do that without holding a local election, which state law currently requires for tax increases above a certain level. In some instances, that would mean property taxes increasing up to 40 cents per $100 of property value. To ensure homeowners don't bear the brunt of the burden, Hochberg said, the bill also includes a provision that would raise homestead exemptions from $15,000 to $45,000.

"Maybe we don't have to increase class sizes or lay off teachers," he said.

Taking to a whiteboard, Hochberg explained his second proposal, HB2485, which significantly remodels the current system. It eliminates the state's "hold harmless" guarantee and "golden pennies," making all of the additional taxes a district levies above its compressed tax rate subject to recapture, or Robin Hood. It increases the Tier 2 yield — supplemental money the state provides to equalize property values across districts — from $31.95 to $45.30. In choosing what to cut, Hochberg said he "tried to take out things that fenced money into particular categories" — like funds marked for gifted-and-talented and career-and-technology programs as well as the basic allotment districts get for having a high school. It also removes a funding boost for small districts if they are located in a major metropolitan area — categorizing them instead as midsized districts —  a measure that would affect about 80 of the state's 1,030 traditional districts. (Take a look at what the cuts would look like under HB1 and HB2485 in this spreadsheet from Hochberg's website.)

School finance experts Dan Casey, Lynn Moak and David Thompson each testified in favor of HB2484 — taking the opportunity to urge lawmakers to examine whether the 2006 property tax compression should take priority over education funding — and in opposition of HB2485, which Casey said had "the bones ... of a good structure" but still needed tweaking. All three emphasized the importance of addressing inadequacies in the current system. 

"Given the angst level you've heard tonight, I think the current structure is not going to work," Casey said.

HB2485 also drew criticism from superintendents across the state, many of whom objected to the increases it would bring to recapture and the modification to the small district adjustment. Hochberg said the legislation represented his best efforts to work with the deep reductions in HB1, which he gave a 'no' vote.

"Given the level of funding, this or something close to this, is the fairest way I can come up with to distribute the pain," he said. 

All three bills were left pending — and this is only the beginning of the committee's school finance discussions. Committee chairman Rep. Rob Eissler, R-Woodlands, has his own proposal in the works, which has yet to be scheduled for a hearing. 

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