Texas Legislature 2019

Texas' school finance system is unpopular and complex. Here's how it works.

Average Texans and lawmakers alike are going back to the basics on school finance, as the state Legislature prepares to tackle a longstanding challenge.

Tatum Roberts, left, and Olivia Mah work on toothpick cubes in Melanie Martin's kindergarten class at Johnston-McQueen Elementary.
Tatum Roberts, left, and Olivia Mah work on toothpick cubes in Melanie Martin's kindergarten class at Johnston-McQueen Elementary.  Callie Richmond for The Texas Tribune

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

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Despite their political rifts, Republicans and Democrats, House and Senate lawmakers, and rural and urban Texans all agree the state needs to change the way it funds public schools. That consensus is the culmination of decades of lawsuits against the state claiming Texas schools are not adequately or equitably funded.

The political machine is in the process of churning out a number of proposals to overhaul the way schools get money and how they are required to use it. But the average person — and even many lawmakers — can easily get tangled up in the formulas and numbers that pump dollars into public education. In 2018, $52.3 billion in state and local money went to 5.4 million students in 1,019 traditional school districts and 171 charter districts.

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So how does school finance work?

Texas guarantees every school district a certain amount of funding for each student. State lawmakers determine the base number per student, which is currently $5,140. Many educators argue that the state should regularly increase that base number, at least with inflation, to get all schools the money they need. But the amount has not changed in four years.

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School districts get money from two main sources: their local property taxes and the state. (The exception is charter schools, privately managed and publicly funded, which get all their money from the state and cannot levy taxes.)

To cover their base budgets, districts first use local property tax revenue, and the state pays the balance. And as local property values have grown, the state’s share of public education has shrunk. Currently, local property owners foot about 64 percent of the bill, according to the Texas Comptroller. Some education advocates argue that the state should cover half the cost of public education. But doing that would be extremely expensive and could cost more than $7 billion dollars per year going forward.

On top of the base funding per student, school districts can get more money based on geographic factors, like whether the local cost of living necessitates higher teacher salaries. Although many school districts have seen their rural communities turn into bustling suburbs and their costs of living skyrocket, these calculations have not been adjusted in decades.

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Texas also guarantees school districts extra money for students considered more expensive to educate, including low-income students and those with disabilities. For example, districts receive an additional 20 percent for each low-income student. Many of these calculations haven’t been adjusted in decades, either.

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School boards set school districts’ tax rates, within state regulations, on how much they can increase those rates and when to ask approval from voters. Most school districts are required to set a tax rate of at least $1 per $100 of property value — meaning a house with a taxable value of $250,000 would pay at least $2,500 in school district taxes.

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School boards may tax at a slightly higher rate without community input, a policy intended to let them fund extra programs and extracurricular activities as they choose. They must ask voters for permission to tax above $1.04 per $100 of property value, and they hit a maximum rate at $1.17 per $100 of property value. That means the maximum school property tax bill for a house with a taxable value of $250,000 would be $2,925.

Tax rates haven’t changed very much over the last decade; the median school district tax rate has hovered around $1.04 since at least 2006. But Texas’ economy is thriving, property values have skyrocketed and local property tax revenue has risen with them, meaning the state hasn’t had to chip in as much money. And state lawmakers have chosen not to adjust many of the measures — including the cost of educating a low-income student — that could provide schools with more.

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As schools see their budgets increasingly strapped, more are using the money from higher tax rates for basic operations instead of for special programs.

Wealthier school districts, which have homes and businesses within their boundaries that are more valuable, generally tax at lower rates. Poorer school districts often tax at much higher rates. Around 400 school districts, the vast majority of them poor, cannot raise their tax rates any higher under state law.

Since 1993, the state has given poorer school districts a financial boost through a controversial program called “Robin Hood” or recapture, which takes excess funding from wealthier school districts — that is, from districts that raised more than required for their full student allotments from local taxes — and redistributes it to poorer districts and charters. In recent years, more urban and suburban school districts with large populations of low-income students have been required to pay recapture as their local property values grow.

So what has people so upset?

The state has changed over time: Wealthier and poorer districts alike are enrolling more students with more educational needs — but not feeling they have the requisite funding. Public education is primarily funded by local property tax revenue, and lawmakers can't decide on any other source of money to replace it. Homeowners see their tax bills ballooning, with the majority going to schools, but can’t be sure their public schools are improving.

Most agree that the patchwork set of calculations for how to distribute money to Texas’ schools is ready for a major facelift.