The School Finance Battle: A Step-By-Step Guide

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For two days, the House and Senate have been locked in negotiations about just how they’ll distribute $4 billion-worth of cuts to school districts. The issue of school financing has become central to the legislative session—without a solution, lawmakers almost undoubtedly will have to come back for a special. The lawmakers are faced with two plans—one from the House, one from the Senate. One plan takes the simplest approach possible and cuts all districts by the same percentage. The other begins to tackle some of the long-standing structural problems with the system. 

Lawmakers must find a way to distribute drastic and unprecedented cuts over an already unequal system. The state uses two methods to determine how much each school district should receive. Right now, most school districts get funded using a “target revenue system” that’s based on, among other things, past property tax collections. The formula system, which passes out funds based on cost rather than past tax collections, has been left woefully underfunded, and only the poorest districts subsist on the formula system. Everyone else uses “target revenue”—where the rates of pay per student vary from less than $5,000 to over $12,000.  The vast inequalities between districts leave the system in desperate need of reform. 

The clock is ticking and lawmakers are meeting feverishly behind closed to doors to come up wtih a solution. Here’s our guide to following along.

The Shapiro Plan

Sen. Florence Shapiro, R-Plano, has been working on her school finance plan all session. In fact, she even chaired a subcommittee specifically on public school funding. The plan she decided on took $4 billion out of the system—one billion as a pro-rated cut to everyone and the other $3 billion from the 80 or so percent of school districts getting the funding through target revenue. While her plan passed the Senate Finance Committee as a stand-alone bill, Senate Bill 22, it did not have the votes to come up on the Senate floor.

As I wrote when Shapiro’s plan passed out of committee:

The Senate committee called it a “share the pain model.” 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. But districts only get cut until they’re receiving the amount they would get under the formulas. The wealthiest districts can get cut up to 8 or 9 percent under the plan—but they’ll still be getting more than everyone else. Thanks to an amendment from Sen. Robert Duncan, R-Lubbock, the bill does require that the target revenue system end by 2017.

Because the plan cuts so heavily into target revenues, it simultaneously pushes more districts on “formula funding”—the fairest funding mechanism. Districts under formula funding get the same amount per kid, and why the formulas are currently woefully outdated, many advocates have long pushed for the formulas. Only 120 districts out of over 1000 actually get their funding that way right now however, and those districts are the poorest of the poor in terms of target revenue. Under Shapiro’s plan another 650 districts currently using their target revenues would move onto formulas. 

At the time she introduced it, many of the poorest districts were upset they were getting cut at all. After all, districts on formula funding barely have enough money as it is. Then they saw the Eissler plan…

 

The Eissler Plan

If you don’t have a lot of familiarity with Rep. Rob Eissler’s school finance plan, it may be because his plan has never been publicly debated. It was never even filed as a bill. Most of us only began to learn about it in the last week, as Eissler prepared to attach the plan as an amendments to other bills on the House floor. While those efforts failed, the plan lives on in the minds of House leaders.

On its face, there’s not a whole lot to his plan: it simply cuts six percent of funding from each school district each year. Sounds fair, right?

The problem is, thanks to a seriously flawed system, school districts are currently receiving vastly unequal amounts of funding. While some are barely scraping by, others do quite well for themselves. Taking six percent of funds away will mean very different things to different districts. It’s like telling a family surviving on $40,000 a year and a family with $120,000 that they’ll both lose six percent of their income. The family with $40,000 will struggle dramatically, while the richer family will not. While the plan cuts the same percentage from all districts, it inflicts unequal amounts of pain.

To sell his approach, Eissler also rankled senators when he included one-time federal money from the Edujobs program in his projections of school losses. The Edujobs money—over $800 million—has already been gone out to districts. The Legislature had no say over it. But Eissler nonethless added in the extra funds in his projections showing the impact of his plan on districts. He included a column that showed what percent of funding school districts would lose under his plan—including the federal funds. Not surprisingly, it made his numbers look a lot better than Shapiro’s.  (Shapiro soon got new runs that also included the Edujobs money as well, so there could at least be an apples-to-apples comparison.)

Furthermore, the plan does nothing to actually address the structural flaws in the school finance system. By taking the same percentage from everyone, Eissler’s plan maintains wide funding disparities between districts. Some might argue they make them worse by taking the some level of cut from haves and the have-nots.

 

Must-Pass Scenario

As negotiators try to settle on some sort of compromise between the two plans, they have to be extremely careful. Once a decision gets made, the plan must be attached as an amendment to Senate Bill 1811, a fiscal matters bill that’s already passed both chambers. SB 1811 is in the final stages of the process, in a conference committee with representatives from both the Senate and the House. The conference committee will have to vote to go “outside the bounds”—adding a new amendment that wasn’t in the versions that either the House or Senate passed.

After that, there can be no negotiating. The bill will go to both chambers for an up or down vote—and if either chamber votes down SB 1811, then the entire budget agreement is shot. In addition to being a vehicle for school finance legislation, SB 1811 also a crucial to the budget agreement.  Largely using accounting tricks and delayed payments, it frees up billions of dollars that budget negotiators are assuming they have. If they don’t have those dollars, the budget won’t balance.

Of course school finance legislation may be equally necessary in avoiding a summer special session. The state’s current system isn’t built for cuts—and under current system, we just can’t take away $4 billion. While there’s a caveat in the law that allows the commissioner to deal with cuts if need be, we’d still owe school districts that amount, to be paid at a later date. Chief Senate budget writer Steve Ogden, R-Bryan, has been adamant that that’s not an option at all. “To the extent that we’re just kicking the can down the road on education,” he said Wednesday, “I’m not for it.”

The House in particular seems eager to get this whole thing wrapped up. House members pushing for the Eissler plan have argued that its simplicity is a key. “When it’s this late like this school finance can be a Pandora’s box,” said Rep. Dan Branch, R-Highland Park. Rather than opening up a whole conversation on school finance and reforms to the system, several House members have said they want to wait until session’s over to come up with a plan for reform. Right now, says Branch, “something that can be easily communicated and easily understood is important.”

For negotiators, there’s little room for error. A false move on school finance could bring down the entire session and the budget—and guarantee that everyone would have to come back this summer. Shapiro, who has repeatedly told reporters that progress is getting made, said Tuesday, “The issue is do you wanna be here for special session?”

 

Dissention in the Ranks

But alas, finding common ground is no easy task.

In the Senate, members like Bob Deuell and Robert Duncan pushed very hard to produce a plan that ends target revenue. In a letter Wednesday to his colleagues, Deuell put it bluntly: “We have an opportunity to set into statute a plan to phase-out target revenue and I will continue to advocate for a fair and responsible means of achieving the end of target revenue.” Deuell told me he didn’t think he could support a pro-rated cut like Eissler’s. 

They’re not the only ones. In the House, with its unprecedented number of first-time representatives, many are looking to Rep. Dan Huberty, R-Humble, a freshmen with a deep understanding of school finance thanks to years as a school board president. Huberty isn’t a fan of Eissler’s straight six percent cut.  ”I have a philosophical problem with it to be honest with you,” he said. Huberty nonetheless remained optimistic that tweaks to Eissler’s plan would make it more palatable.

House leadership seems committed to delaying major reforms to school finance until the session is over. In fact, the House never really got active on school finance until recently—Eissler never even filed a bill. Only Reps. James White, R-Lufkin, and Scott Hochberg, D-Houston, actually offered up school finance bills for debate. Hochberg, who’s generally seen as the go-to school finance expert in the House, offered a plan that put all districts back on formula and capped losses at 10 percent—meaning rich districts lost significantly more under his plan than under Eissler’s. But Hochberg’s plan never even made it to the House calendar to get debated on the floor. When I asked him Tuesday night if he’d been part of any negotiations, he smiled wryly, and said “my invitation must have gotten lost in the mail.”

 

Possible Deals

With time ticking, negotiators continue to meet behind closed doors. While this is one of the most important decisions of the session, the decisions will be made away from public view. But speculation runs rampant on the deals. Among the most prominent rumors: 

- Paul Burka reported Tuesday night that the compromise would cut $2 billion from all districts and $2 billion from just target revenue districts. 

- Lawmakers could decide to implement the six percent cuts for two years, while putting in provisions to reduce target revenue over time.

While initially the gossip was that negotiators would choose between the plans, it seems likely now that the final plan will be a combination of both Eissler’s and Shapiro’s offers.

The lawmakers don’t have much time to make a decision—senators will soon be within the range to filibuster bills they don’t like. But whatever decision they do make, the public won’t see it until it’s a done deal. In the meantime, we can all sit around and discuss the wisdom of cutting $4 billion from our schools, no matter how it gets sliced.