Module # 1

Basic Orientation to

Texas School Finance

TEC Chapter 42

It is the policy of this state that the provision of public education is a state responsibility, and that a thorough and efficient system be provided and substantially financed through state revenue sources…

Cont’d

so that each student enrolled in the public school system shall have access to programs and services, …

Cont’d

that are appropriate to the student’s educational needs, and that are substantially equal to those available to any similar student, notwithstanding varying local economic factors.

Three main sources of revenue are:

StateFederalLocal

Local RevenueLocal revenues are derived

from taxation, school organization fund raising, investments, gifts and bequests, extra-curricular gate receipts, and other sources.

State RevenueState: The state public

school finance system is a very complex set of formulas designed by the state to allow equal access to programs and services…

Cont’dthat are appropriate to the

student’s needs, in all school districts throughout the state, despite different taxable values.

Federal RevenueFederal: Districts may apply for funds from the federal government that are categorical in nature and must be spent exclusively for the purposes intended.

Revenue by Source (for Texas)

Billions and PercentState: $11.5 46.1%Federal $ 0.9 3.4%Local $12.6 50.5%Source TEA Snapshot(This data should be taken as

approximations because the data is based on 1999-2000 data.)

RevenueFactors Driving State

FundingAverage Daily Attendance

(ADA)Property WealthTax Effort

(The Texas School Foundation Program state aid is determined by these three major factors)

Federal Revenue

All federal funds are categorical in nature and must be spent for designated programs.

Examples Are:

Title I, II, IV, VICareer and TechnologySpecial Education (IDEA B)School Lunch Program

Local RevenueTaxation

Categories of Taxes include:

Maintenance and Operations (M&O) (TEC Chapter 45)

(TEC Chapter 45) Interest and Sinking (I&S)

Maintenance and Operations

(M & O)According to (TEC Chapter 45)

districts may levy, assess, and collect annual ad valorem taxes for the further maintenance of public schools in the district.

(The limit is $1.50 for M & O taxes)

Interest and Sinking (I & S)

According to (TEC Chapter 45) districts may issue bonds for the construction of school buildings in the districts and the purchase of the necessary sites for the school buildings…

Cont’dand may levy, pledge,

assess, and collect annual ad valorem taxes sufficient to pay principal of and interest on the bonds. (Generally the limit is $.50 for the I & S taxes)

Taxation

Process and legal requirements for taxation:

Publication (Tax Code)Hearing (Tax Code)Rollback (Tax Code)Adoption (TEC Chapter 11)

Budget

In Chapter 44 of the TEC, the requirements of the budget process set forth are:

1. Preparation of budget by the superintendent

2. Hearing of proposed budget by the board

3. Adoption of a budget by the board

Budget

Budget must be balanced

District may not operate a deficit budget

Financing Educational Excellence Budget

The budget is the district’s plan to produce educational excellence expressed in terms of dollars.

The budget addresses three important functions:

1. Planning (present and future operations)

2. Monitoring (expenditures)3. Communicating (to staff

and public about resources)

Budget Expenditure Analysis

Payroll 73.8% Other Operating 14.6% Non-Operating 10.5%

(includes construction and I & S debt payments)

(Please note that the three object expenses and percentages are statewide averages based on data from 1999-2000)

Financial Vital Signs

Declining ADA (Loss of student enrollment)

Declining Fund Balance

Cont’d

Payroll Cost (salaries plus benefits increasing or staying the same while student enrollment is declining)

Tax Effort

Key Terms in Finance

Available School Fund (ASF): created by the Texas Constitution of 1876, the ASF is made up on earnings from the Permanent School Fund and constitutionally dedicated motor fuel taxes and other miscellaneous revenue sources.

Key Terms

ASF cont’d:

The bulk of ASF revenue is distributed on a per capita basis to school districts. The annual amount has ranged between $275 and $300 per student in recent years. A portion provides funding for textbooks and technology.

Key Terms (cont’d)Average Daily Attendance (ADA): ADA is a method of counting students for the purpose of providing state aid to school districts.

Key Terms (cont’d) Basic Allotment: Basic

allotment is the initial or starting number that after adjustment, is used to calculate foundation program costs and state aid to school districts. The basic allotment is currently $2,537.

Key Terms (cont’d)Chapter 41 District: A school

district that has property wealth in excess of $300,000 per weighted student in 2002 and $305,000 per weighted student in 2003 and is subject to recapture provisions.

Key Terms (cont’d)Compensatory Education:

allotment that provides additional financial support to school districts to teach educationally disadvantaged pupils and underachieving students.

Key Terms (cont’d)Comptroller’s Property Tax Division (CPTD): department responsible for conducting an annual property value study that determines the taxable wealth of each Texas school district.

Key Terms (cont’d)Cost of Education Index (CEI) or Adjustment: an index the state uses to adjust the basic allotment to account for geographic or other cost differences beyond local school district control.

Key Terms (cont’d)County Appraisal District (CAD): an appraisal district office responsible for maintaining taxable real and personal property records and placing a value on all property for taxation purposes.

Key Terms (cont’d)Equity: refers to fair or

equal distribution of resources for schooling, taking into account student differences and school district characteristics.

Key Terms (cont’d)Existing Debt Allotment (EDA): provides assistance to school districts in making debt service payments on qualifying debt for which taxes were levied prior to the 2000-2001 school year.

Key Terms (cont’d)Foundation School Fund:

is a dedicated stream of revenue in the state budget used exclusively to fund public education.

Key Terms (cont’d)Foundation School Program (FSP): a program for the support of a basic instructional program for all Texas school children.

Key Terms (cont’d)General Revenue (GR) Fund: is the state’s main funding source.

Key Terms (cont’d)Guaranteed Yield: is a

finance plan in which the state specifies a revenue yield that is will guarantee in terms of revenue per student per penny of local tax effort.

Key Terms (cont’d)Hold Harmless: term used

to describe a provision in new law that is designed to protect a school district from a loss of local revenue or state aid.

Key Terms (cont’d) Instructional Facilities

Allotment (IFA): program that was initially authorized by the 75th legislature in 1997 to provide assistance to districts in making debt service payments on qualifying bonds and lease-purchase agreements.

Key Terms (cont’d)Interest and Sinking Fund (I & S) Tax Rate: Also called the debt service tax rate, I & S taxes pay for bonded indebtedness, facilities, and other capital needs.

Key Terms (cont’d)Local Fund Assignment (LFA): is the tax rate that a district is required to levy in order to participate in the FSP.

Key Terms (cont’d)Maintenance and Operations

(M & O) Tax Rate: is a local school district property tax rate that raises revenue to operate and maintain the district’s schools. (Maximum of $1.50)

Key Terms (cont’d) Permanent School Fund (PSF): a

fund created by the TX. Constitution where earnings go into the ASF, which the state must apportion on a per capita basis to counties for students enrolled in TX public schools after funding state textbook purchases.

Key Terms (cont’d)Public Education Grant (PEG): permits students in low-performing schools to attend a public school in the student’s home district or in another district.

Key Terms (cont’d)Recapture: a feature of

school finance where local districts give the state locally collected property tax revenue for the redistribution through the FSP.

Key Terms (cont’d)Rollback Rate: is a tax rate

that would provide more than the same local taxes and state aid per WADA as was available the previous year, plus debt service taxes, and $0.06.

Key Terms (cont’d)State Board of Education (SBOE): 15 member body elected by general election from various districts statewide to provide leadership and to adopt rules and policies for public education.

Key Terms (cont’d)Telecommunications Infrastructure Fund (TIF): Will fund up to $1.5 billion over 10 years to link Texas schools, hospitals, and libraries for distance learning and information sharing.

Key Terms (cont’d)Wealth: is measured in

taxable value of property per WADA.

Key Terms (cont’d) Weighted Average Daily

Attendance (WADA): In Texas, students with special education needs are weighted for funding purposes to help recognize the additional costs of educating those students.

Yes, Texas School Finance

Will ChangeThere may be major changes

ahead. The keys to success are:

1. Understanding the current finance structure

2. Keeping up with the proposed changes before they become law

3. Knowing that everything will not change

4. Adapt to new legislation from a perspective of experience

It is worth the effort to know what to do and why it is done

from a standpoint of the status of law that creates the systems

used in public schools.

A cookbook for public school finance is a way to learn, not a way to

survive!!