2004 Special Session on School Finance

The following two reports were posted by Plano ISD to inform and update the community regarding the Texas Legislature's Special Session on School Finance.

Special Legislative Session Underway

April 22, 2004

Governor Perry has proposed a remedy to the current Robin Hood plan that is called the Educational Excellence and Equity Plan. Highlights of the plan include 

• Splitting the property tax base into residential and commercial property, with a statewide commercial rate of $1.40;
• Reducing residential property taxes by $.25, establishing a $1.25 cap;
• Allowing for up to 15 cents local enrichment for school districts;
• Eliminating recapture;
• Placing a 3 percent cap on annual appraised value increases of residential properties; 
• An Education Incentive Program, including additional dollars for high school advancement and teacher excellence;
• Truth in Spending Initiative calling on the Texas Education Agency to implement and improved financial accountability system;
• Additional revenue options including video lottery, cigarette/tobacco tax increase, adult entertainment admission fee and closing the franchise tax loophole, among others.

How does this plan affect Plano ISD?

The district is monitoring and analyzing this plan and will do so as additional plans surface from the legislators. We plan to report to you on the impact of various measures. Unfortunately, it is difficult to fully judge the impact because the proposals are not usually accompanied by details regarding implementation and costs.

Our preliminary review indicates that under the Governor’s plan, each school district will give up the revenue from its commercial and business property. The plan amounts to a loss to the district of approximately $35 - 50 million. Even though the plan protects us for a period of time from a direct loss (in a “hold harmless” position), there will be no infusion of new money to the district. We face increased costs for growth and operational expenses including utilities and no way to raise additional revenue. Under the Governor’s plan, we foresee that Plano ISD’s financial outlook will not improve resulting in more budget reductions. 

While the Governor’s plan states that more money is being put into school districts by the state, initially it appears that this is simply a shifting of monies from local control to state control. 

Dr. Doug Otto, superintendent of schools, says, “We strongly support the concept of equity and adequacy, but it is incumbent upon me and the board of trustees to work for what is best for the families of the students in the Plano Independent School District. Our families demand quality schools and quality teachers.  So far we do not see a plan that will meet those demands.” 

Do we have any specific recommendations?

1. We request that the legislature update the CEI (Cost of Education Index -  which is a variable based on where we live) and ensure that it is funded outside the hold harmless provisions.  We should get additional dollars based on how much it costs to live in this area in comparison to other areas of the state.
2. We request that the legislature ensure that the opportunity for local enrichment be enacted prior to 2006.
3. We request an infusion of new dollars that will actually affect the district’s ability to operate and its ability to provide consistent and quality educational programs for children. The shifting of local property taxes from businesses and corporations to state control does not add new money to the district. 
4. We request that the legislature ensure that the “hold harmless” provisions are based on actual expenditures per pupil rather than revenues per pupil. This is a better measure of Plano ISD’s costs. 

Talking Points from Texas Schools Coalition

May 7, 2004

This week has seen the passage by a slim majority of a House Bill on property tax relief and school finance (in priority order). This bill has been sent to the Senate where another bill will be presented early next week (according to reports). As you have no doubt read in the news, there is little consensus in Austin - under the plan that passed the House, PISD sees no relief to its budgetary problems.

Following is information prepared by the Texas Schools Coalition, the group of "high-wealth" districts that has been working for the elimination of Robin Hood. It clarifies Plano ISD’s position on many issues under discussion in Austin by the Texas Legislature.

1. What is your stance on a statewide property tax?

We adamantly oppose for the following reasons:

• The current local tax system encourages a more efficient system of public education than a largely state-funded system.
• A statewide property tax breaks apart the close relationships between the business community and local schools, to the detriment of both.
• State bureaucrats will take control over educational programs away from the people who use the local schools.
• School boards and communities lose the opportunity to be meaningful partners in economic development.
• Disrupts the ability of school districts to control their revenue. 
• A statewide property tax sends the benefit of local property value increases to Austin.
• The state will ultimately control the process of appraising local property.
• Optional homestead exemption will be repealed.
• Tax abatements, Tax Increment Financing (TIF) agreements, redevelopment zones, and other local agreements involving reduction or waiver of property taxes would all be jeopardized if the state becomes the primary taxing entity.
• Forget “Independent” – Texas will have a system of Dependent School Districts. 

2. Should recapture be eliminated?

We believe that the legislature should develop a long-term comprehensive school finance plan that will provide alternative sources of revenue that can adequately provide funds for public education, thus reducing the reliance on local property taxes and thereby eliminating recapture for the majority of school districts. This ideology in no way jeopardizes the balance of equity in the system and in fact would provide greater equity than we see today.  

3. What do you want the legislature to do?

• Develop and implement a long-term school finance plan that includes restructuring the tax system to provide a stable and adequate stream of revenues to fund public education.
• Substantially reduce the state’s reliance on local property taxes, which in turn eliminates recapture on a majority of school districts and greatly mitigates it for the remaining districts.
• Provide enough capacity to the current system to allow all school children to pass state tests at the exemplary level and to meet all other state and federal mandates.  
• Allow districts meaningful local discretion through access to local enrichment. These dollars should not be necessary to support a quality general diffusion of knowledge, they are for local communities to supplement the general diffusion of knowledge with programs they deem desirable. These dollars must not be recaptured, subject to local referendums or limited on a year-to-year basis based on the state’s ability to fund a guaranteed yield. 

4. Why do we need capacity in the current school finance system? Hasn’t the state increased spending for public education by $7 billion dollars since 1999?

Since the 1998-99 school year, state and local maintenance-and-operations (M&O) revenues have increased by slightly more than $6 billion. Of that $6 billion, 90 percent came from local property taxes and only 10 percent from the state revenues. (Source: TEA statewide totals)

The $6 billion in new money represents a 17.62% increase in revenues per enrollment. However, new mandates have eroded that amount as follows:

      Change in minimum salary schedule - 4%
      Mandated insurance increase - 2-3%   
      Step pay raised compounded at 2.5% - 12-13%   
      Total effect of Mandates (estimated) - 18-20%

As you can see, these three mandates alone have wiped out the entire revenue increase since the 1998-99 school year. Beyond that, Texas schools have had to contend with:

• Inflation
• New nutrition mandates
• Changing demographics and student needs      
• Payroll taxes
• Reduction in state money for educators’ insurance supplement
• Rapid enrollment growth
• Increased safety and security concerns
• Individual graduation plans
• New accountability system
• Almost $1 billion in student cuts in the 2004-05 state budget for extended year programs, master reading and math teachers, disciplinary placements, guidance  counselors for bilingual students and technology infrastructure
• New high school graduation requirements-tougher recommended high school program, more math and science classes              
• No Child Left Behind Act of 2001

After including all of these factors, Texas schools are financially worse off then they were six years ago. 
 

5. Do you support reduced appraisal caps?

No, for the following reasons:

• Appraisal caps devastated California’s public education funding.
• Appraisal caps slam the brakes on real estate activity.
• Similar homes will face vastly different tax bills, as people who purchase homes will pay much higher taxes than neighbors who have lived there for several years.
• Appraisal caps put new real estate development at a competitive disadvantage.
• Lower appraisal caps will reduce the re-sale value of homes.
• Caps the resources available for all government services- including schools, cities, and counties.
• Limits the ability of local governments to adjust to boom-and-bust property values.
• Local governments have made commitments on bond debt service to taxpayers based on long-range estimates of appraised values. If appraisal caps are reduced, local governments won’t have the resources to keep those commitments.
• Appraisal caps will result in higher debt tax rates.
• Negatively impact school-based programs currently funded by cities and counties.