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Comparing School District Expenses Has Challenges

Because of the complexity of school finance, it’s tempting to turn to per-student spending to understand how well — or how poorly — a district is spending its money. But that approach has its perils.

Because of the complexity of school finance, it’s tempting to turn to per-student spending to understand how well — or how poorly — a district is spending its money. But that approach has its perils.

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Canyon Independent School District did not set out to be one of the thriftiest in the state.

The district, just outside Amarillo, spends about $6,500 for each of its 8,700 students in state and local money. That figure is one of the state’s lowest, according to a Texas Tribune analysis of 2010-11 financial data from districts with an enrollment of 5,000 students or more.

Likewise, Sheldon ISD, in the Houston area, was not aiming for any records as a big spender when it shelled out about $9,000 for each of its 6,500 students — though that figure makes it the district with the state’s highest per-student operating costs. The statewide per-student spending average is $7,200 for districts of at least 5,000 students.

Combining the districts’ spending levels with the academic performance of their students — most of the Canyon district’s students beat the state averages for standardized test scores and college readiness, while the opposite is true for the Sheldon district’s students — it would seem logical to label Canyon a success and Sheldon a failure.

But there are other figures to consider. About 30 percent of Canyon’s students come from low-income households, compared with about 80 percent in Sheldon. Almost 30 percent of Sheldon’s students have limited proficiency in English, compared with fewer than 1 percent of those in the Panhandle. And because of how Texas finances its public schools, in the same year Canyon received less per student from the state than Sheldon — a difference of more than $1,000 in state money alone.

The way the state distributes money to school districts, and how much, will be center stage when a trial begins this fall involving more than half of the state’s districts serving the majority of its students, along with Texas charter schools and a group of parents and business leaders asking for a more efficient system. Because of the complexity of school finance, it’s tempting to turn to per-student spending to understand how well — or how poorly — a district is spending its money. But the circumstances of the two districts above illustrate the potential perils of that approach.

“A straight-up comparison of the dollars spent per student in District A and dollars spent per student in District B can be grossly misleading,” said Lori Taylor, a government professor and education researcher at Texas A&M University who has helped the state analyze school district efficiency. Such a comparison, she said, could give people the idea that their district is “wasting their money when it is actually enormously frugal but facing enormous challenges.” 

After the state changed the way it finances schools in 2006, most Texas districts do not receive money based on what it costs to educate a student there. Instead, the state bases what districts receive largely on how much they raised through property taxes that year. Intended to help districts transition after the Legislature reduced property taxes, the “target revenue” system has become permanent, though schools are also financed based on a formula that takes into account factors like regional cost-of-living expenses and a district’s number of bilingual, low-income and special-education students. But because of the same political pressures that have already landed school finance in the courts several times since the 1970s — even before target revenue came around — the formula is based on estimates that in many cases have not been updated in almost three decades.

Because of the pending litigation, a spokeswoman with the Texas Education Agency declined to comment on the school financing system.

Under the current financing system, a district like Sheldon is naturally poised to have a high cost per student. It has high property wealth because of the industry there, which includes a LyondellBasell chemical plant, so it receives more money than most districts from the state. But at the same time, it is also educating students from largely economically disadvantaged households, which the state also takes into account when financing schools.

On the other hand, Canyon is among the bottom half of districts financed by the target revenue system. Although its students perform better than average on state tests, the district still cannot offer the smaller classes and academic intervention programs for struggling students it would like to raise its accountability ratings, said Randy McDowell, the district’s assistant superintendent of business and operations.

“Our goal isn’t to be the lowest-spending district in the state,” he said. “We are conservative, but we are really not cheap.”

Last year, the state comptroller’s office released a study analyzing districts’ spending compared with their academic performance, attempting to control for factors like demographics, size and regional costs. Although some education finance experts have questioned whether it adequately did that, it does rank Canyon as more efficient than Sheldon — but neither of them are the outliers they would be based on their per-student spending.

Cypress-Fairbanks, a district in the Houston suburbs that the study regarded as one of the state’s most efficient, achieved that distinction not by design but because of a confluence of circumstances, said Stuart Snow, the district’s associate superintendent of business and financial services.

The district — the third-largest in the state with nearly 104,000 — like Canyon, is among those that receive the least in target revenue financing. That happened because of various factors, said Snow, including the rapid influx of students which he said outpaced property tax values when target revenue levels were set in 2006.

Since then, the district has shaved almost $107 million from its budget to make ends meet, largely through increasing class sizes because it could not hire the staff to keep up with the yearly increase in students. It also saved about $20 million in last year’s  budget by reducing the district’s share of employees’ health benefit premiums by about 25 percent.

“It’s been hard, and it’s been a big sacrifice,” Snow said. “It’s hard to measure the impact of that on student learning. Our student performance hasn’t suffered yet, but when you get larger classrooms, at some point in time you expect to see student performance to decline.”

Meanwhile, Sheldon ISD’s high target revenue has allowed it to keep programs that others have had to cut after lawmakers reduced financing to public education by about $5.4 billion during the last legislative session, Superintendent Vickey Giles said.

“I won’t apologize for the fact that I have a higher target revenue because of the population I serve,” she said. While they care about their children’s education, she said, parents in the district don’t have the money to “provide lots of books in their home, or give them experiences that many children from higher income homes have available to them from birth.” That means many of Sheldon’s students come to school without the same advantages that help students from other backgrounds succeed academically.

Sheldon has joined the lawsuit challenging the state’s financing system, though Giles says that the case will probably result in the district’s receiving less money.

“We are all going to educate our students to the best of our ability, but is it fair that one district has $4,000 per student from the state while I have $6,700?” Giles said. “No, it’s not fair.”

Other stories in our Beyond the Data series have looked at how many Texas students are dropping out of high school, whether they are prepared for college, and trends in school district staffing.

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