PAYING FOR TEXAS PUBLIC EDUCATION: A PRIMER

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As elsewhere, public school finance in Texas is Hatfield & McCoy territory, which feud we note began with Randolph McCoy accusing Floyd Hatfield of stealing his pig. Similarly, the past three and a half decades of litigation here have had to do with poor districts wanting more pig at the expense of richer districts, all the
while singing the "Mo' Money Mantra." Long gone are the days of struggling folks taking a hard look at their circumstances and saying, "Golly, gee, I want better for my kids. Guess I'll work harder and move across town to that better school district." Now, they find a special interest group whose lawyers will litigate on their behalf over constitutional nuances, aided and abetted in this enterprise by liberal legislators and professionals running the education establishment variously named the Texas Education Agency, the
Texas Association of School Boards, the Texas Association of School Administrators, and their ilk.

But first--
Let's go back in history to March 2, 1836, the cold, dank and stormy day our Declaration of Independence from Mexico was signed. Even though this document had been written on the fly the night before as the siege at the Alamo entered its second week, the framers still took time to point out Mexico's failure to produce a "public system of education" despite "almost boundless resources," thus making it clear that from the beginning public education and paying for it has been a major issue even when under duress: The same day our declaration was being signed at Washington-on-the-Brazos some of our bravest men--Davy Crockett, Jim Bowie, William Travis, 186 others--were 57 hours by hard riding and only four days away from their deaths at the hands of Santa Anna's army in San Antonio.

Paying for public education
From the get-go, paying for our public schools has been a responsibility assumed by the legislature starting with our first constitution, a hastily thrown together pastiche which expeditiously incorporated bits of the U.S., Mexico's and various states' constitutions; only later did local property taxes become a vehicle.
Texas has no state income tax, I like to think because we are the only state in the nation to have been our own country before we were a state and our citizens therefore prone to clear and independent thinking. But long-time public policy researcher and publisher of the New Katy News George Scott has his own take. "No political party will guarantee that government will not spend as much next year as this year," he says. "The bottom line is no one who is in a position of actual authority wants to control spending on public education. Consequently, those who believe that public education is systemically corrupt and past the tipping point of academic integrity are not going to be willing to create a new revenue source of an industry that has become the new Tammany Hall of American governance. From a practical standpoint, Texas Democrats know that calling for a state income tax will not bring them majority status and Texas Republicans know that advocating for a state income tax will cost them majority status."

For almost a century after the Civil War public schools were funded by a state poll tax "on all male inhabitants between the ages of twenty-one and sixty," originally a dollar a head then increasing in price and including women after suffrage passed.

Our litigious ways
Two pivotal lawsuits both occurred in 1931: Love v. City of Dallas which said that the state could not force local school districts to use local taxes to pay for education of non-local students, and Mumme v. Marrs, the first attempt by the Texas judiciary to impose so-called wealth equalization or socialism, depending on your political stance, on school finance.

The Gilmer-Aikin laws in 1949 created the Foundation School Program for sending state funds to local schools, further laying the groundwork for state senator Bill Ratliff's Robin Hood system of state edu-funding in 1993 which introduced socialism to state public school finance and in the bargain "destroyed about $81 billion of property wealth in Texas," according to a report published in 2004 by Harvard's Caroline Hoxby and Ilyana Kuziemko, who noted that "good intentions about redistribution are not enough in school finance." Robin Hood was a multi-tiered system which forced property-rich districts to
send their "excess" funds to property-poor districts via a complicated formula talked about by educrats in terms of "pennies" (really). Two years later Ratliff introduced SB 1 which at the local level stripped elected school boards of their authority, giving it to their hired superintendents, and at the state level similarly robbed the State Board of Education of its authority, giving its power instead to a governor-appointed Texas education commissioner.

So here's the bind: While as we have noted paying for public education has been a constitutionally mandated duty of the state from the beginning, in actual practice parents by their own efforts through property taxes have paid for the bulk of their children's educations at the local level. Where current annual distributions to local schools from the Texas Permanent School Fund only run about $765 million, $18.6 billion will be generated this year by local taxes for public education.

Enter two decades of legislation and lawsuits by rich and poor districts alike--although the poor ones started it--resulting in judges making decisions our elected representatives wouldn't.

What the current (1876) Texas Constitution says
"A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools" (Article VII, Section 1). It's the words "general diffusion of knowledge" and "efficient" that have proven troublesome to the point of litigation, especially with the stretching of the latter to include "equity."

Edgewood and its spawn
Regarding the first Edgewood lawsuit (of an eventual five) filed in 1984, "The Supreme Court said that efficient means producing results with little waste--but that under the current system some were being taxed at higher rates to achieve lower student expenditures," says Charles Rhodes, constitutional and state constitution law specialist and associate professor of law at Houston's South Texas College of Law,
pointing out that because school funding is the responsibility of the Lege, efficiency has to be looked at statewide, not on a district-by-district basis.

"Local school district supplementation still doesn't change the fact that the system must be efficient statewide," Rhodes says. "The problem was you had places like Edgewood taxing at over $1.00 per $100 valuation while Alamo Heights (both San Antonio suburbs) taxing at less than half that rate. But now Robin Hood's created its own inequities."

After a decade-plus of Robin Hood, many districts are fast approaching the maximum property tax rate allowed under the scheme--$1.50 per $100 for M&O and $0.50 for I&S--while others such as Katy ISD in suburban Houston are already there. As one example of the inequities to which Rhodes refers, when Llano ISD (a Hill Country school district now ranked 63rd wealthiest among the state's 1,031) sent a $2 million Robin Hood payment to Panther Creek CISD during the 2001-02 school year, the monies generated for the hefty check came from Llano ISD's taxing its residents at $1.62 while Panther Creek residents were enjoying a much lower $1.33 tax rate.

Edgewood HS

The mo' money mantra
For a variety of reasons, including inequities such as these and also because wealthier districts were chomping at the $2.00-max bit, the most recent Robin Hood lawsuit was filed, West Orange-Cove, with a mix of plaintiffs: 47 rich, 260 middle-income, and 24 poor districts. This was the suit heard before Judge John Dietz in Austin during August-September 2004 in which Bill Ratliff testified that Texas would
not be able to get away from Robin Hood without a statewide property tax--or income tax--and Dietz found that mo' money needed to be found for educating children--despite massive evidence presented to him that more money does not equate better education. And, oh, he also found that Texas' school finance system was unconstitutional because it didn't allow districts “meaningful discretion” in setting
their local property tax rates. According to West Orange Cove plaintiff Austin ISD, "The scope and detail of Judge Dietz’s written orders is unprecedented in the history of Texas’s school finance litigation–Judge Dietz’s findings consisted of 655 fact findings and 24 conclusions of law, and totaled 125 single-spaced pages."

Judge John Dietz
Robin Hood trial, Austin
Last November the Texas Supremes found Robin Hood unconstitutional as it amounted to a state property tax, and that “the public education system has reached the point where continued improvement will not be possible absent significant change,” giving the Lege a June 1, 2006 deadline for repairs.

What the 79th/3rd did
Appropriations by FY 2009 $ 10.3 billion
Revenues by FY 2009 $ 4.2 billion
Shortfall $ 6.1 billion



The 79th Lege's 3rd called
So the current Legislature in its third special session, called specifically to resolve school finance, has just
passed a series of bills which will lower the maximum property tax to $1.00 in two years for districts already at $1.50 M&O, and make up the difference with a revised business franchise tax meant to cure the Delaware Sub loophole, with an additional $1.00 cigarette tax along with a new used car tax, all projected to yield $4.2 billion** by fiscal year 2009. At the same time, Lege appropriations, projected at $10.3 billion** by FY 2009, include a $2.4 billion across-the-board teacher pay increase over the next three years, $600 million in teacher awards, and $275 per high schooler for reducing dropout rates and college prep. Texans are torn between taking bets as to how much difference this $1 billion commitment over the next three years will actually make as throwing money at education problems has never worked before, as with the example of Kansas City and others, and conjecturing as to just how many more consultants will now be employed in our schools.

Robbing Peter to pay the piper
Because it's difficult to put Governor Perry's announcement that "homeowners and businesses will save $15.7 billion on school property taxes" together in the same sentence with the projected $6.1 billion shortfall, we queried the governor, whose spokesman Kathy Walt responded yesterday, "The revenue sources you cite (above) represent only those bills passed during the special session. They do not reflect the surplus, nor do they take into account new revenue estimates that will be generated prior to the start of the 2007 regular session. The tax measures passed by the legislature will go into a property tax reduction fund to pay for future reductions of property taxes. Should additional revenues be needed beyond what these taxes generate and is available from surplus, general revenue (GR) funds could be used. The new tax measures represent only a small portion of revenue that flows into GR."

Public education to be funded by a $23 billion 'hot check'?
Comptroller Carole Keeton Strayhorn, who is running as an independent against Perry in this November's gubernatorial election, said in certifying HB 1, the largest single piece of legislation this session, "Perry's entire plan is a massive increase in business taxes that will increase the state's budget by $6 billion a year, leave a $23 billion hot check, increase the number of businesses that will have to pay or file taxes by 200,000, increase business taxes by 200 percent, and give the average homeowner a $52
property tax cut in school taxes only, this year."

In her press release Strayhorn says, "Were it not for the state's historic $8.2 billion surplus, I would not be able to certify the bill and abide by the state's Constitutional pay-as-you-go, no-deficit-spending mandate. Because of the huge surplus I would have enough revenue to certify this bill through 2008, but not 2009 and 2010. I am certifying this bill, but that does not mean it is good public policy--far from it. And the Governor is not telling the people of Texas the truth. He is exaggerating, inflating and misstating
what the average homeowner is going to see cut on his or her tax bill by more than 300 percent."

Another state official, speaking on condition of anonymity, said yesterday, "All of this money, this surplus the governor's talking about, is already dedicated. And a $6.1 billion income spike is unrealistic, unless it comes from a combination of further cutting state government expenses and increasing the sales tax. The problem there is that you only get $2 billion per penny of tax, and our sales tax is already one of the highest in the nation. So the ten per cent budget cut the governor announced yesterday afternoon
represents the first element of what we knew had to come in order to fund this boondoggle, and the next will be an increased sales tax. Even though right now we're awash in fuels tax money, how long will this boom continue? You can only sustain a run like this on the economy for a short time, twelve to eighteen months, before the cycle's over. But the governor's saying we've got to boom like this for the next ten years."

War of the Worlds
Put simply, while a major conservative premise is that cutting taxes will boost the economy, the corresponding liberal premise is that more money needs to be spent on governmental services. Perry's 79th Legislature's third special called session delivered both a tax cut and increased spending.

In a move considered by many to be not a reform but a power grab, the Lege has agreed to a P-16 curriculum alignment to replace the previous K-12, and in the process neatly discarded what SBOE member Terri Leo calls "parents' last firewall" by shifting the little power the elected SBOE has left to commissioners Shirley Neeley and Raymund Paredes, both gubernatorial appointees. As Leo points out, while the SBOE has been granted "veto power over the end result, the bill language still has 'the
commissioners evaluating, reviewing, recommending, developing, aligning, establishing, coordinating and approving the curriculum.' In other words, the two unelected commissioners control the whole process."

TASA 1, parents and taxpayers zip
Alas, the open records "open checkbook" originally discussed--and opposed (is "violently" too strong a word?) by the supe's union, the Texas Association of School Administrators--in which districts would be required to post all checks written on their districts' websites, was diluted down to a requirement that instead districts simply post summaries of their proposed annual budgets.

But is it constitutional?
While according to Governor Perry's press "this is one of the most significant legislative
accomplishments for Texas in a generation, because it is one of the most significant
steps we have ever taken to improve opportunity for the next generation," the jury's still out
on whether "because of House Bill 1, school finance is now out of the courthouse, and
back on constitutional footing.”

"I have questions as to how long the new financing scheme is going to be considered to
be constitutional," says Charles Rhodes. "I think it's another short-term fix. The school
finance litigation is far from over. There will be challenges to this new system--essentially
they've come in and added dollars, but down the road in five to ten years there's going to
be a problem with funding levels creating efficient results. The legislature has dealt with
the question of the statewide property tax by increasing the state's percentage of
contribution and reducing the burden of property tax, but they've not done anything with
system-wide concerns regarding educational outputs. Nationwide school finance has
gone through waves; first is funding and financing, then the second and third are
concerned more with the adequacy and suitability of the education that's being provided.
House Bill 1 does very little to change educational quality--it's predominately a different
method of funding rather than dealing with some of the structural concerns."

Local newspaper headlines are taking a similarly cautious note: "‘Average’ tax break
depends on who you are" (Athens Daily Review) and "Don't spend it yet--property tax cut
is not quite what Perry promised" (Abilene Reporter-News).

Oink, oink.

Ending on a note of drama
TASA notes: "Due to the passage of recent legislation by the Texas Legislature, Travis County District Court Judge John Dietz has lifted the injunction that threatened the closure of public schools on June 1."