Article III appropriations support public schools and state colleges and universities.
For this analysis, GRR funding for Article III is combined with revenue from the Property Tax Relief Fund (PTRF), created in 2006 to boost state aid for public education and ease the burden on property taxpayers. This led to the growth in appropriations seen in Exhibit 8 during fiscal 2008 and 2009. Then, during the 2009 session, the Legislature used federal funds from the American Recovery and Reinvestment Act to fund part of the state’s obligations under the school finance system. This resulted in the declining state appropriations seen in 2010.
In all, the Legislature appropriated $62.9 billion in combined GRR and PTRF revenue for Article III in the 2018-19 biennium; All-Funds appropriations totaled $81.1 billion, including $10.8 billion in federal funds and $7.4 billion in other funds.
Increases in Article III appropriations are driven primarily by the number of Texas children enrolled in school districts and charter schools and the number of credits taken by students enrolled in Texas public colleges and universities. In the last 23 years, the state has supplied a decreasing share of funding for both public and higher education.
Exhibit 8 compares appropriations for Article III against the general cost index and personal income growth. Since 1996, adjusted GRR+PTRF and All-Funds appropriations have risen less than the general cost index and much less than personal income.
|Fiscal Year||General Revenue-Related and Property Tax Relief Fund Index||All Funds Index||General Cost Index||Personal Income Index|
Sources: U.S. Bureau of Labor Statistics, IHS Markit, Legislative Budget Board, Texas Comptroller of Public Accounts and Texas Education Agency
The Texas Education Agency (TEA), which oversees the state’s public education system, is the largest single recipient of Article III funding, at $40.2 billion in GRR and PTRF and $55.4 billion in All Funds for the 2018-19 biennium, or about 63.9 percent and 68.3 percent of the Article III total, respectively.
Due to the nature of the Texas school finance system, the primary cost drivers for state appropriations to TEA are public school enrollment and local property values. As more students enroll in public schools, the need for state appropriations rises; as local property values and tax collections increase, the state’s funding formulas supply less state money. The data indicate that the latter factor has been more important since 1996 (Exhibit 9).
Since 1996, GRR and PTRF appropriations have risen by an annual average 3.5 percent, while All-Funds appropriations have risen by 4.1 percent annually — both considerably less than the growth in personal income and the education cost index. This is primarily because taxable property values have risen by an estimated 6.1 percent annually since 1996.
|Fiscal Year||TEA All-Funds Appropriations Index||TEA GRR+PTRF Appropriations Index||Education Cost Index||Taxable Property Values Index||Personal Income index|
Sources: U.S. Bureau of Labor Statistics, IHS Markit, Legislative Budget Board and Texas Education Agency
Texas public higher education institutions receive a little more than a third of the amount devoted to K-12 education: $20.1 billion in All Funds for the 2018-19 biennium, of which GRR represented about $17.5 billion or 87 percent. The largest share of Texas’ higher education spending goes to “general academic institutions,” or four-year public universities.
Since 1996, state funding for these institutions has risen by an average 3.6 percent annually; in fiscal 2017, they received $4.3 billion (Exhibit 10 is based on data from the Texas Higher Education Coordinating Board and 2018-19 figures are not yet available).
|Fiscal Year||State Appropriations Index||Net Tuition and Fees Index||Higher Education Cost index||Personal Income Index|
* General academic institution credit hours for 1996-2001 are estimated. Estimates of tuition and credit hours for 2018 and 2019 were unavailable.
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, IHS Markit, Legislative Budget Board, Texas Comptroller of Public Accounts and the Texas Higher Education Coordinating Board
The growth of this funding, however, has not kept pace with inflation or the rapid increase in enrollment, leading to a decline in per-student state contributions. Consequently, net tuition and fees rose by an average annual 9.3 percent in the study period. Interestingly, net tuition and fees rose faster before tuition deregulation than after (11.4 percent annually from 1996 to 2003 and 8.2 annually thereafter).