Texas Sen. Larry Taylor unveils new school finance bill, adding $5,000 teacher pay raise

After a long wait, the Texas Senate has finally unveiled a thorough proposal for how to tackle school finance and school property tax reform — bringing back several ideas the House already nixed.

State Sen. Larry Taylor, R-Friendswood, explained the proposal in the Senate Education Committee on Thursday but said the committee he chairs would not vote on it until next week, giving lawmakers more time to workshop it. Many items in the bill come from a state school finance panel that met last year to determine recommendations for a public education overhaul this session.

"This bill implements every student-outcomes-oriented transformational reform and almost all the finance reforms offered by the school finance commission," Taylor said. "These changes significantly improve equity in the system."

The House earlier this month nearly unanimously passed House Bill 3, its take on school finance legislation, after months of public hearings and rewrites. Taylor released an unfinished version of Senate Bill 4 in early March, which was not revised until this week. Taylor said he plans to put the new language in HB 3.

Like the House's plan, the new Senate version would raise the base funding per student, which hasn't budged in four years, and would provide money for free full-day pre-K for low-income students. The Senate's base increase is smaller than the House's, upping the number by $740 per student — instead of $890 — from $5,140. Any increase would help mitigate the negative financial effects of the unpopular recapture program, known as "Robin Hood," which requires wealthier districts to help subsidize poor districts with lower property values.

It includes a $5,000 teacher pay raise for classroom teachers and librarians, originally passed unanimously on the Senate floor in Senate Bill 3 in early March. This would cost about $4 billion and is accounted for in the Senate's proposed budget.

Teacher pay has been a divisive issue between the House and the Senate, with the Senate prioritizing directed raises and the House giving districts more flexibility to spend additional money as they choose. The House passed a version of its school finance bill that would give all school employees across-the-board raises of about $1,388 on average statewide and designate additional money for raises to be given at districts' discretion.

The new Senate version includes a few items the House has since removed from its school finance legislation, mainly tying a portion of school district funding to test scores. Proponents of so-called "outcomes-based funding" argue it will incentivize districts to better prepare students academically; opponents say it would attach higher stakes to standardized tests.

School districts could get between $1,000 and $4,000 per student based on the number of third graders who do well either on the state's standardized test or an alternative test chosen by the state. They also could get between $3,000 and $5,000 per student based on the number of students who graduated ready for college, a career or the military. In both cases, districts with more high-achieving low-income students would get more money.

The chambers have also differed on merit pay for teachers. The House removed a portion that would provide money for districts that wanted to rate their teachers and provide the top-rated ones with more money.

Teachers unions and associations have argued the provision would open the door to districts rating teachers based on state standardized test scores, attaching higher stakes to flawed tests.

The Senate's version appears to require school districts to use metrics beyond just standardized test scores to rate their teachers. And it would pay districts more to recruit high-rated teachers to struggling schools as a way to turn them around — modeled on a Dallas ISD program that Abbott has touted.

It would address some of the problems with the STAAR standardized test, which has lately come under renewed scrutiny, with researchers and advocates arguing it doesn't adequately measure students' reading abilities. The bill proposes breaking the STAAR up into smaller tests and developing a new alternative pilot assessment.

"In the next three to five years, we'll be moving to an online version, a shorter version that doesn't have to disrupt the day, and we're not going to allow tests on Mondays," Taylor said. He said that students would be more ready to take a test on other days during the week, especially if teachers have the opportunity to prepare them the day before.

The Senate's bill also includes a controversial proposal to calculate school funding using property values from the current year — instead of the prior year, as the school finance system now works. Although this idea was originally pitched by a panel of educators and lawmakers studying changes to the school finance system, many education advocates and superintendents have since lobbied against it. They argue that using property values from the previous year to calculate school funding allows the state to certify those numbers, giving school districts more predictability in their budgets.

Taylor said Thursday that the bill includes more money for fast-growing districts, which are more likely to be negatively impacted by the switch to current-year values.

The bill includes a few mechanisms for reining in school district taxes, dependent after the first year on a long-shot proposal to increase the sales tax 1 percentage point to raise money long term.

Those mechanisms include expanding an exemption homeowners are entitled to receive on the value of their homes for school district taxes from $25,000 to $40,000.

Starting in 2023, the bill would also limit the growth in school districts’ revenue due to rising property values, a proposal pitched before session began by Gov. Greg Abbott and since renewed by Sen. Paul Bettencourt, R-Houston. School districts that see their property values significantly increase would have their tax rates automatically reduced to keep tax revenue growth in line. The state would be on the hook for the extra money the districts are entitled to.

The Senate proposal would lower school district taxes by 8 cents per $100 valuation in the first year and 15 cents total every year after that, bringing the minimum tax rate for most school districts from $1 to 85 cents per $100 valuation. This would save the owner of a $250,000 home $200 in the first year and $375 in future years. School districts would be limited in how they could raise taxes in the first couple of years.

State Sen. Paul Bettencourt, R-Houston, said he had "great concerns" about the sales tax swap as a way to raise money for future years. Raising the sales tax by 1 percentage point, as pitched by top state leaders, would raise about $5 billion in additional money to help provide school district property tax relief.

He instead listed a few ideas that he said could raise twice as much combined, including diverting severance taxes from oil production and collecting money from an online sales tax.

"We've never had a swap that's worked," he said.

Lt. Gov. Dan Patrick, the Senate's president, later distanced himself from Bettencourt's position.

"The Senate is looking at all revenues sources to reduce property taxes, including a sales tax swap. [Bettencourt's] comments in opposition to a sales tax are his own," Patrick said on Twitter.

Taylor also later said he disagreed with Bettencourt about the sales tax swap.

"I don’t have a problem with it,” Taylor said. “People can control their purchases. They can’t control their property taxes.”

Though hailed by top Republican leaders as key to this session's school finance and property tax reform, the sales tax swap faces steep odds in both chambers, with some conservatives and Democrats in opposition.