A Guide To Texas School Finance

Module #2

Sources of RevenueFunding for Texas public

school district budgets comes from 3 sources: local funds, primarily local property tax revenues; state funds from a variety of revenue sources, and federal funds.

For the 1999-2000 school year

$24.9 billion was used for public education.$12.6 billion or 50.5% came from local sources

For the 1999-2000 school year:

$11.5 billion or 46.1% came from state funds$850 million or 0.3% came from federal sources.

Biennial Appropriation2002-2003 $32.16 Billion

Foundation School Fund: $17.89 billionAvailable School Fund: $2.37 billionState Textbook Fund: $806 million

Biennial appropriations (cont’d)

Lottery Proceeds: $1.61 billionAppropriated Receipts: $1.47 billionAdditional State Funds:

$2.08 billion

Biennial Appropriations (cont’d)

TIF: $37.80 millionGeneral Revenue: $424 millionFederal Funds: $5.40 billionTotal:$32.16 billion

Determination of School District Funding

Structure of the Foundation School Program (FSP): State and local funds for public ed. In Texas are distributed through a system of formulas known as the FSP.

(cont’d)

TEA uses FSP formulas to calculate the foundation program allotment for each of the 1,041 school districts that levy a property tax.

cont’d

The school funding system consists of two tiers to fund M & O, including a number of adjustments and weights designed to distribute funding according to the characteristics of the school district and its students.

Tier 1Tier 1 is the base or “foundation” funding level in the Texas FSP. This funding begins with the Basis Allotment, (The base level of funding for each student in average daily attendance (ADA).

Tier 1The lower the district property values, the greater the amount of state aid in Tier 1. The combination of state and local funds provides access to the same level of educational resources at the same tax rate.

Tier 1Adjusting the Basic Allotment by the district adjustments results in the Adjusted Allotment. Instructional program weights are applied to the Adjusted Allotment, based on the numbers of students enrolled in or served by various special programs.

Tier 1Instructional Program Weights in FSP

Regular Education: no weightSpecial Ed.: weight ranges from 1.1 for mainstreaming to 5.0 for certain restrictive settings.Comp. Ed.: 0.20 and 2.41 for pregnant students

Tier 1Weights (cont’d)

Career and Technology: 0.37Bilingual: 0.10Gifted and Talented: 0.12PEG: 0.10

Tier 2Tier 2 provides additional funds to school districts beyond the base funding level in Tier 1. Districts may levy a tax rate up to $0.64 in Tier 2, but they are not required by law to do so.

Tier 2Tier 2 tax rate generates resources for education in the form of a guaranteed yield.

Tier 2

Tier 2 provides substantially equal access to resources at substantially equal tax rates. In other words, the state provides additional funding to school districts with low property values to equalize the revenue per WADA available at a given tax rate.

Chapter 41 Wealth SharingDistricts with wealth above $300,000 per WADA in 2002 and $305,000 per WADA in 2003 are subject to wealth reduction provisions of Chapter 41 of the Texas Education Code.

Options for Wealth Equalization(Chapter 41)

To equalize district ability to generate revenue, the FSP requires Chapter 41 districts to reduce their wealth by choosing one of the five wealth-sharing options. The options are as follows and are laid out in Chapter 41 of the TEC.

Option 1:Consolidation by Agreement: The school boards of two or more districts may agree to consolidate in order to create a new district with wealth per pupil of less than the statutory wealth threshold.

Option 2Detachment and Annexation by Agreement: The school boards of two or more districts may agree to detach property from one school district and attach it to one or more school districts

Option 3Purchase of Attendance Credits: A district with wealth per WADA above the statutory threshold may purchase attendance credits from the state. One attendance credit is equal to one student in WADA. In effect, the district sends a check to the state.

Option 4Contract for Education of Non-resident Students: A district with wealth above the equalized level may enter into an agreement with a qualifying district to pay the cost of educating students in that district.

Option 5Tax Base Consolidation: The school boards if two or more districts may agree to conduct an election to create a consolidated taxing district for the Maintenance and Operations of the two school districts.

Chapter 41Option 3, the purchase of attendance credits and Option 4, education of non-resident students are the options chosen by the 101 school districts that are identified as Chapter 41 districts. Some people refer to this as the “Robin Hood Plan.”

Facilities FundingSince 1997-1998, districts have been able to receive funds from a guaranteed yield program for facilities.

Cont’d

Funds may be used either for construction or lease-purchase of new instructional facilities under the Instructional Facilities Allotment (IFA).

Cont’d

For the 2002-2003 biennium, $1.09 billion has been appropriated for this program.

School Property TaxesDistricts must collect maintenance taxes at an M & O tax rate of $0.86 per $100 valuation in Tier 1.

School Property TaxesDistricts may levy M & O taxes up to an additional %0.64 (For a tax rate not exceeding $1.50 for M & O) in Tier 2.

School Property Taxes School districts may also adopt a debt service fund tax rate (the I & S rate). These taxes must be used only to pay for debt service.

Lagged Tax RatesA confusing aspect of tax rates used in FSP calculations of state aid is the use of tax rates from a prior year (also called “lagged” tax rates).

Lagged Tax RatesFSP calculations for each state fiscal biennium are based on the district tax rate in the second year of the preceding biennium.

Property Tax RollbackRollback is a taxpayer relief mechanism that permits local voters within each school district to overrule the decision of the school board in setting the tax rate.

Property Tax RollbackIf the board adopts a tax rate that exceeds the rollback tax rate, the district must call an election so that voters can determine whether or not to ratify the adopted tax rate.