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TEXAS SCHOOL FINANCE: WHERE DO WE GO FROM HERE? Presented by: - - PowerPoint PPT Presentation

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TEXAS SCHOOL FINANCE: WHERE DO WE GO FROM HERE? Presented by: David Thompson Thompson & Horton LLP May 19, 2014 CAUSE NO. D-1-GV-11-003130 IN THE DISTRICT COURT OF TEXAS TAXPAYER & STUDENT FAIRNESS COALITION, et al.,

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TEXAS SCHOOL FINANCE: WHERE DO WE GO FROM HERE?

Presented by: David Thompson Thompson & Horton LLP May 19, 2014

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TEXAS TAXPAYER & STUDENT FAIRNESS COALITION, et al., Plaintiffs, VS. MICHAEL WILLIAMS, et al., Defendants. Consolidated Case FORT BEND INDEPENDENT SCHOOL DISTRICT, et al., Plaintiffs, VS. MICHAEL WILLIAMS, et al., Defendants. § § § § § § § § § § § § § § § § § § § CAUSE NO. D-1-GV-11-003130 IN THE DISTRICT COURT OF TRAVIS COUNTY, TEXAS 250th JUDICIAL DISTRICT

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OVERVIEW OF TEXAS SCHOOL FINANCE LITIGATION

Court Decision Legislative Response

San Antonio ISD v. Rodriguez, 411 U.S. 1 (1973) House Bill 1126 (1975) House Bill 72 (1984) Edgewood I, 777 S.W.2d 391 (Tex. 1989) Senate Bill 1 (1990) Edgewood II, 804 S.W.2d 491 (Tex. 1991) Senate Bill 351 (1991) Edgewood III, 826 S.W.2d 489 (Tex. 1992) Proposition 1 (1993) – voted down Senate Bill 7 (1993) Edgewood IV, 917 S.W.2d 717 (Tex. 1995) System Found Constitutional West Orange-Cove CISD v. Alanis, 107 S.W.3d 558 (Tex. 2003) (WOC I) None West Orange-Cove CISD v. Neeley, 176 S.W.3d 746 (Tex. 2005) (WOC II) House Bill 1 (2006) House Bill 1 and House Bill 4 (2011) Senate Bill 1 and House Bill 102S (2013)

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Figure 2. Annual Growth in Public School Enrollment: 2007-08 through 2011-12

Source: TEA AEIS database, various years. PEIMS membership counts for 2011-12.

Enrollment 2007-08 2008-09 2009-10 2010-11 2011-12 Total Public School Enrollment 4,651,516 4,728,204 4,824,778 4,912,385 4,978,120 Charter School Enrollment 89,829 102,491 119,137 133,697 154,278 Percent Charter School Enrollment 1.9% 2.2% 2.5% 2.7% 3.10% Low Income/Economically Disadvantaged 2,572,093 2,681,474 2,848,067 2,909,554 3,008,464 Percent Low Income/Ec. Disadvantaged 55.3% 56.7% 59.0 59.2% 60.4% English Language Learners 774,719 799,801 815,998 830,795 837,536 Percent English Language Learners 16.7% 16.9% 16.9% 16.9% 16.8% White 1,619,426 1,608,515 1,607,212 1,531,757 1,520,320 Percent White 34.8% 34.0% 33.3% 31.2% 30.5% Hispanic 2,193,345 2,264,367 2,342,680 2,468,574 2,530,789 Percent Hispanic 47.2% 47.9% 48.6% 50.3% 50.8% African American 663,705 669,371 676,523 635,400 637,934 Percent African American 14.3% 14.2% 14.0% 12.9% 12.8%

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October 2012

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Figure F-2 Pre-K – 12 Public Education Revenue per Student, in 2004 Dollars

$7,128 $7,415 $6,816 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Pre-K through 12 Public Education Revenue per Student

Federal State Local

Source: MCA Analysis of Figure 181 from LBB Fiscal Size-Up and Moak, Casey & Associates estimates for 2014 and 2015. Adjusted for payment delays and enrollment.

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  • Ex. 6618
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82nd Texas Legislature (2011) Cuts in State Spending

HB 1 and HB 4

  • Total - $15.2B
  • Public Education - $5.4B
  • FSP - $4B
  • Other $1.4B
  • HHS - $3.1B
  • Higher Education - $1.3B
  • Medicaid underfunded - $4+B
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SLIDE 7

83rd Texas Legislature (2013) Increased Pub Ed Funding

SB1 and HB1025

  • FSP increase - $3.4B
  • SB1 - $3.2B
  • HB1025 - $201.7M
  • Grants & Allotments - $292M

Growth in Property Values

  • FSP increase - $1.4B
  • Net FSP State increase - $2B
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Figure F-4. Increased Appropriations for Public Education for the 2014-2015 State Fiscal Biennium (Amounts in Billions) Element Legislated Increases General Revenue Impact Other Funds FSP Formula Increase $3.40 $1.63 ISD Property Value Growth $3.77 Enrollment Growth $2.20 Property Tax Relief Fund $0.20 Other Programs (e.g. IMA, SSI, Pre-K) $0.29 $0.09 PSF Payment $0.20 TRS – FY 15 Revenue Offset $0.33 $0.33 Total $6.22 $2.05 $4.17

Source: MCA Analysis of SB 1 and HB 1025 Appropriations for the 2014-15 Biennium

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  • Ex. 6618
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Figure F-12. Comparison of Impact of 2010-11 Formulas to Formulas in Effect in 2013-14 and 2014-15 2013-14 2014-15 Better Off # Districts 533 604 # WADA 3,265,725 3,715,204 % WADA 53.7% 61.1% Worse Off # Districts 488 417 # WADA 2,813,410 2,363,976 % WADA 46.3% 38.9%

Source: Moak, Casey & Associates litigation model

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  • Ex. 6618
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TEXAS CONSTITUTIONAL PROVISIONS

  • ARTICLE VII, SECTION 1
  • 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 VIII, SECTION 1-e
  • No State ad valorem taxes shall be levied upon any

property within this State

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  • MUST provide an adequate and equalized funding

system that provides for a general diffusion of knowledge and allows districts to meet State curriculum, assessment, and other legal requirements

  • MAY rely, in part, upon local property taxes to fund

the system

  • MAY NOT rely so heavily upon local property taxes

that system operates as a State property tax

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Supreme Court

  • n State Property Tax

Meaningful Discretion “An ad valorem tax is a state tax … when the State so completely controls the levy, assessment and disbursement of revenue, either directly or indirectly, that the authority employed is without meaningful discretion.” Need for Local Supplementation

  • Local Districts must be able to provide local supplementation to

fund programming beyond state educational requirements.

  • “The State cannot provide for local supplementation, pressure most
  • f the districts by increasing accreditation standards in an

environment of increasing costs to tax at maximum rates in order to afford any supplementation at all, and then argue that it is not controlling tax rates.”

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Supreme Court

  • n Efficiency
  • “Constitutional efficiency under article VII,

section 1 requires only that districts must have substantially equal access to funding up to the legislatively defined level that achieves the constitutional mandate of a general diffusion of

  • knowledge. ”
  • “The effect of [holding otherwise] is to ‘level

down’ the quality of our public school system, a consequence which is universally regarded as undesirable from an educational perspective.”

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Supreme Court

  • n Adequacy
  • There is “substantial evidence . . . that the public

education system has reached a point where continued improvement will not be possible absent significant change.”

  • Characterized the situation as “an impending

constitutional violation.”

  • Warned that it remains to be seen whether

Legislature will reverse the “predicted drift toward constitutional inadequacy.”

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Supreme Court

  • n Arbitrariness
  • “It would be arbitrary, for example, for the

Legislature to define the goals for accomplishing the constitutionally required general diffusion of knowledge, and then to provide insufficient means for achieving those goals.”

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Supreme Court

  • n Suitability
  • “[T]he Legislature may [not] define what

constitutes a general diffusion of knowledge so low as to avoid its obligation to make suitable provision imposed by article VII, section 1.”

  • “‘[S]uitable provision’ requires that the public

school system be structured, operated, and funded so that it can accomplish its purpose for all Texas children.”

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Figure 58. Scatter Plots of the Relationship between

Performance and Percent Economically Disadvantaged

R² = 0.5736

20 40 60 80 100 120 20 40 60 80 % Economic Disadvatnaged % Commended - Math

2010-11 % Economic Disadvantaged vs. % Commended - Math Districts > 1,000 ADA

R² = 0.6097

20 40 60 80 100 120 20 40 60 80 100 % Economic Disadvatnaged % At or Above Criterion - SAT/ACT

2010-11 % Economic Disadvantaged vs. % At or Above Criterion - SAT/ACT Districts > 1,000 ADA R² = 0.6291

20 40 60 80 100 120 20 40 60 % Economic Disadvatnaged % Commended - All

2010-11 % Economic Disadvantaged vs. % Commended - ALL Districts > 1,000 ADA R² = 0.7567

50 100 150 20 40 60 80 % Economic Disadvatnaged % Commended - Reading

2010-11 % Economic Disadvantaged vs. % Commended - Reading Districts > 1,000 ADA

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October 2012

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Moak, Casey & Associates

Exhibit 6620

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19

  • Ex. 5797
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20

  • Ex. 5797
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Figure 59. WADA Index and Revenue per WADA under

the 2010-11 Current Law Definition of WADA, Districts > 1,000 ADA

Source: Moak, Casey litigation model. Districts with less than 1,000 ADA were excluded from this formula.

Performance Measure Current Law # Districts # ADA # WADA WADA Ratio Revenue per WADA District Rating Unacceptable

15 35,360 51,067 1.4442 $5,495

Acceptable

271 2,509,239 3,367,847 1.3422 $5,645

Recognized

182 1,582,587 2,050,021 1.2954 $5,801

Exemplary

10 78,823 91,488 1.1607 $6,474

% Commended - Math < 20%

97 353,153 500,365 1.4169 $5,596

20% to < 30%

257 2,296,522 3,111,911 1.3551 $5,593

30% to < 40%

83 966,646 1,229,553 1.2720 $5,835

40% and Greater

41 589,687 718,594 1.2186 $6,115

% Satisfactory on 2012 STAAR five tests <= 40%

198 1,740,074 2,399,798 1.3791 $5,592

41% to 52%

133 1,023,584 1,361,689 1.3303 $5,693

53% to 64%

102 988,226 1,250,037 1.2649 $5,757

65% and Greater

45 454,125 548,898 1.2087 $6,207

STATE TOTALS

478 4,206,008 5,560,423 1.3220 $5,714

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October 2012

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Figure 57. Relationship Between Percent Economically Disadvantaged and 2011 Revenue per WADA

Source: Calculated by MCA from TEA files.

% Economically Disadvantaged ADA WADA FSP Revenue Revenue per ADA Revenue per WADA Under 10% 30,219 34,415 $225,853,345 $7,474 $6,563 10% to under 30% 570,856 697,294 $4,244,405,813 $7,435 $6,087 30% to under 50% 808,325 1,020,791 $5,892,091,212 $7,289 $5,772 50% to under 70% 1,276,001 1,698,012 $9,635,063,254 $7,551 $5,674 70% to under 90% 1,298,873 1,793,660 $10,022,020,91 $7,716 $5,587 90% and over 221,735 316,250 $1,755,071,075 $7,915 $5,550 Grand Total 4,206,008 5,560,423 $31,774,505,60 9 $7,555 $5,714

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Figure 5. Percent of Total ADA Enrolled in Districts with Property Wealth less than $350,000

Source: Moak, Casey & Associates calculations using Texas Education Agency data.

January 2014 Moak, Casey & Associates

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50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% % of Total ADA

Districts With Wealth per ADA < $350,000

  • Ex. 6621
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Figure 6. Total Existing Debt Allotment (EDA) Funding by Year

Source: Modified from Texas Education Agency, EDA One-Pager , July 2011; 2010-11 through 2012-13 from TEA data extract received on 10-4-13.

January 2014 Moak, Casey & Associates

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School Year # of EDA Eligible LEAs # of EDA Funded LEAs Total EDA State Share Total EDA Local Share Total EDA State and Local Share EDA State Share as % of Total 2000-01 600 534 $480,242,769 $ 897,603,315 $ 1,377,846,084 34.9% 2001-02 644 551 539,788,446 1,183,376,201 1,723,164,647 31.3% 2002-03 702 521 455,155,033 1,226,556,913 1,681,711,946 27.1% 2003-04 717 537 486,959,078 1,560,216,354 2,047,175,432 23.8% 2004-05 713 525 430,222,458 1,594,438,586 2,024,661,036 21.2% 2005-06 736 525 497,898,307 1,882,626,803 2,380,525,110 20.9% 2006-07 728 488 438,309,519 2,017,823,390 2,456,132,909 17.8% 2007-08 779 471 446,922,771 2,509,588,056 2,956,510,827 15.1% 2008-09 778 446 345,011,861 2,746,052,878 3,091,064,739 11.2% 2009-10 801 431 305,043,562 3,300,006,723 3,605,050,285 8.5% 2010-11 728 403 295,899,668 2,530,290,449 2,826,190,117 10.5% 2011-12 754 408 346,180,773 2,613,123,840 2,959,304,613 11.7% 2012-13 (est.) 742 402 320,992,828 2,604,288,112 2,925,280,940 11.0%

  • Ex. 6621
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I&S Tax Rate Changes

  • Enrollment growth and slippage in state funds have put

increased pressure on I&S tax rates

  • Current school district count of 1,021 districts levying property

taxes held constant for 1999-2000 through 2012-13

  • 1999-2000
  • 665 districts levied I&S taxes
  • 34 districts: $0.30 or above
  • 7 districts: $0.40 or above
  • 2012-13
  • 821 districts levied I&S taxes
  • 225 districts: $0.30 or above
  • 94 districts: $0.40 or above
  • Based on Comptroller’s Office self-report tax-rate data

January 2014 Moak, Casey & Associates

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  • Ex. 6621
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Table 1.3

7

  • Ex. 6622
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Table 1.6

13

  • Ex. 6622
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Figure F-17. M&O Tax Rates for Texas School Districts 2007-08 and 2012-13 M&O Tax Rate # Districts 2007-08 % Districts 2007-08 ADA % ADA # Districts 2012-13 % Districts 2012-13 ADA % ADA <$1.00 98 9.55 165,709 3.92 54 5.29 80,452 1.78 $1.00 to <$1.04 108 10.53 994,860 23.52 39 3.82 292,556 6.46 $1.04 699 68.13 2,680,939 63.38 607 59.45 3,046,938 67.29 $1.04 to <$1.17 24 2.34 217,130 5.13 74 7.25 505,855 11.17 $1.17 and Above 97 9.49 171,294 4.05 247 24.19 602,429 13.30 Total 1,026 100 4,229,933 100 1,021 100 4,528,231 100

Source: Moak, Casey & Associates data files (original source data from the State Comptroller of Public Accounts Self-Report Property Value File and TEA reports of student counts by district)

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  • Ex. 6618
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Table 2.4

20

  • Ex. 6622
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STATUS OF LAWSUIT

February 4, 2013 – Judge Dietz orally rules that system violates Texas Constitution June 19, 2013 – Judge Dietz grants Motion to Re- Open Evidence January 21, 2014 – Trial resumed for 3 weeks June 2014 – Expect Final Written Decision?