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The Other Big Fight: School Finance Tug-of-War

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When word came out Friday afternoon that House and Senate budget negotiators had reached a compromise, you might have thought the Capitol could relax. After all, for weeks, insiders have speculated that finding middle ground on a budget with a $23 billion shortfall would be tough—especially when the Senate only wanted to make drastic cuts to health care and education while the House seemed intent on making the cuts draconian. So when the House and Senate worked out a deal on the budget, with $4 billion slashed from school funding, it might have seemed like a time for the non-teacher, non-parent and non-student crowds to celebrate.

Instead it prompted a realization: the state is actually going to have to pass a new school finance plan—one that distributes the budget cuts to school districts. Without a school finance plan, the lawmakers will likely have to come back for a special session. But coming up with some agreement on just what that plan should look like is hardly easy. Lawmakers face two distinct problems. First they must introduce unprecedented cuts into a system that’s built to be automatically financed. Secondly, they must decide whether to tackle the structural problems with the current system, created in 2006. Right now, most school districts get funded based on a “target revenue system” that’s based on, among other things, on past property tax collections. The poorest districts subsist on formulas that are woefully underfunded. Vast inequalities between districts leave the system in desperate need of reform.

Then of course, there’s the fact that the school finance bill will ultimately encapsulate the losses facing each district. Despite the widespread Republican support for budgets that slash public education, no one actually wants to see their school districts go without. So Friday afternoon, the entire Capitol swung into school finance mode. The Senate approved one plan—which House Republicans have already vowed won’t make it to the floor. Meanwhile, some Democratic representatives were certain that a plan by House Public Education Committee Chair Rob Eissler, R-The Woodlands, was the plan budget negotiators had agreed to. But that plan—which never had a hearing and was unfamiliar to most—remains at odds with another plan by Democratic Rep. Scott Hochberg, the House’s school finance guru. A budget deal may be in the clear, but nothing’s certain when it comes to school finance.

The senators returned to the floor around 4 p.m. to reconsider Senate Bill 1581, a fiscal matters bill essential to the budget. The bill provides $2 billion to spend by deferring state payments to school districts by one month in 2013. The Senate had the bill because the previous night, while it was getting debated on the House floor, Rep. Mike Villarreal called a point of order. The Senate had to strip out an amendment that allowed concealed handguns on college campuses. But while they were at it, the senators decided it would be a good time to tack on a school finance plan.

The plan is hardly new. Senate Education Committee Chair Florence Shapiro, R-Plano, presented it to the Senate Finance Committee a month ago, where it was favorably voted out. As I reported then: “Every district in the state gets cut somewhat in the plan, but those with more money get cut more. Of the $4 billion in cuts, the first $1 billion comes from about a 1.5 percent cut to all school districts. The other $3 billion comes from districts on target revenue.” Critics of the plan argue that by cutting from all districts, including the poorest of the poor, Shapiro isn’t doing enough to increase funding equity. Furthermore, while the plan sets 2017 as the date to end the target revenue system, many want to see more actions to actually transition to new longterm funding mechanisms.

On the floor, her Republican colleague Sen. Bob Deuell did not mince words. He criticized the body for the $4 billion cut to education—a cut another senator had called a “heroic effort.” Deuell told the senators they should be using more of the state’s $9.4 billion Rainy Day fund instead of cutting schools at all. Then he started lambasting the enormous funding differences between districts, which he said Shapiro’s plan fails to adequately address.

“We knew there were inequities and we were supposed to fix them,” he said. “But we haven’t.” He read a list of highest and lowest funded school districts that each senator represented, highlighting how some districts get almost triple the amount per student that others receive. “Members,” he said, “that’s why we need to get rid of target revenue.” But while he had an amendment to take more school districts off of target revenue, he pulled it down as requested by Senate leadership. 

Shapiro said her bill “set in motion a pathway to a better school finance system with a decrease in target revenue.” But it was hard to think that was her primary goal—earlier she’d told a Democrat that “this was never a budget for public education that was based on equity.” Ultimately, the plan was successfully tacked on to the fiscal matters bill, before the Senate voted the bill back to the House.  

But all that effort may well have been for naught. Later, at a midnight meeting of the House Public Education Committee, members were all dismissive of Shapiro’s plan. 

“I’m not for the Senate’s school finance bill,” pronounced Democratic Rep. Scott Hochberg, whose word on school finance often carries weight despite his party affiliation. 

“I’m not either,” Eissler, the committee’s chairman, agreed. “Wanna take it out?” he asked Hochberg, “or wanna just do it on the floor?” 

Rep. Jimmie Don Aycock, R-Killeen, who will carry the Senate bill when it reaches the House floor, told members his “intention is to heavily change” the bill. In other words, don’t expect the Shapiro plan to have much support in the House.

But what will take its place?

There are two primary alternatives in the House—one from Eissler and one from Hochberg. Hochberg’s plan deals directly with the systemic problems of school finance and target revenue. It puts almost all districts onto the same formula for funding, drastically decreasing inequality. But that equity relies on cutting the richest districts down, and while there’s a 10 percent cap on the amount a district can lose in funding, the plan isn’t exactly popular with wealthy districts like Austin.

But Hochberg was disheartened throughout Friday’s session. At the Public Education Committee meeting, he openly said that the budget deal was based on Eissler’s school finance plan.

“I was told the Senate was agreed to Mr. Eissler’s plan,” he said. “We were told the deal was pro-ration.”

By Saturday, however, Eissler was hardly sure of that, saying he had no idea whether his plan was “the” plan. Of course, most of his colleagues had only just learned about his school finance measure.

Eissler’s plan is perhaps the most straightforward of all—simply cut around six percent of funding for every district in the state. But on Friday, he was still reworking language and adjusting the projections of just what impact the measure would have on districts. The first set of projections he sent out to members wasn’t accurate; instead of cutting districts by the same percentage, it cut each district by around $300 per student. As members finally got accurate projections, they began to flood his desk with questions, even as he was still trying to make sure the language in the measure was correct.

Eissler initially planned to debate the across the board cut Friday night, as an amendment to a different fiscal matters bill. But the devil’s in the details, and he couldn’t finess the language in time. It wasn’t until late in the evening that he gave up on passing school finance Friday night. 

Senate Bill 1581 remains the bill to watch for school finance. It’s expected to hit the House floor Monday, where Eissler and Hochberg may well wind up going toe-to-toe. The Eissler plan is popular with wealthy school districts because it cuts them the least. But it does nothing to deal with the long term problems of school finance; inequalities remain largely the same as each district takes the same percent cut. Hochberg’s plan brings equity to the system, but it cuts wealthy districts by large percentages while leaving the poorest districts to keep more of what they have. 

With the clock ticking down, this will be a key battle for members hoping to avoid a special session. Few members actually understand the school finance system, and most will vote based simply on which plan cuts the least from the school districts they represent.

As members spent much of Saturday trying to understand the differences between the plans, a diverse group of protestors, white, black and Latino, young and old, stood outside the chamber. “Teachers Don’t Forget,” read one sign. “Cuts Hurt Kids,” proclaimed another. Many of the attendees had gathered two months earlier for the giant “Save Texas Schools” rally. The protestors kept up one loud chant: “Use the Rainy Day Fund!”

“We’re making a difference,” organizer Allen Weeks told the crowd.

But at this point, a $4 billion cut to public schools looks like a foregone conclusion. The only thing left to decide is which districts will be hurt the most.