January 24, 2019

Fiscal Notes: Texas School Finance – Doing the Math on the State’s Biggest Expenditure

(AUSTIN) — The Comptroller’s office examines the history and intricacies of the Texas school finance system in a special edition of Fiscal Notes, released today. In 2016, the Texas Supreme Court ruled that the school finance system meets minimum constitutional requirements but needs “transformational, top-to-bottom reforms.”

“One issue that undoubtedly will dominate discussion and debate during the 2019 legislative session is a perennial one for Texas: public education and the way in which we pay for it,” Texas Comptroller Glenn Hegar said. “It’s my hope that this report will give lawmakers and all interested Texans a clearer view of what has proved to be one of the thorniest and most persistent public policy challenges facing our state.”

Texas public schools serve more than 5 million students. In this special edition, the Comptroller’s report highlights several key points about the current school finance system:

• Property tax bills are rising sharply, placing a growing burden on Texas businesses and homeowners.
• Texas' primary vehicle for ensuring equity, recapture, accounts for a growing portion of overall funding.
• Strong economic growth and current funding formulas will ensure that the local share of funding and recapture payments both continue to rise.
• Growing enrollment, especially among low-income and other disadvantaged students, will continue to exert upward pressure on funding needs.
• Any consideration of the sources of school funding should take into account their inherent volatility and their long-term ability to grow with funding needs.
• State policymakers should weigh the establishment of a standard for the relative state and local shares of public school funding.

Hegar noted that most of the problems surrounding school finance are built into the funding formulas of the current system.

“Right now, due to those formulas, rising property tax collections are actually reducing the state’s share of the total bill, forcing schools to rely increasingly on their own taxes despite widespread taxpayer dissatisfaction,” Hegar said. “It’s a situation that could have serious implications for our state’s remarkable economic success.”

This is the third in a series of special editions of Fiscal Notes examining issues the Texas Legislature will face this session. Fiscal Notes is available online and can be received by subscribing via the Comptroller’s website.

Fiscal Notes furthers the Comptroller’s constitutional responsibility to monitor the state’s economy and estimate state government revenues. It has been published since 1975, featuring in-depth analysis concerning state finances and original research by subject-matter experts in the Comptroller’s office.