© 2017 Texas Association of School Boards, Inc. All rights reserved.

School Finance BasicsCatherine Clark, Texas Association of School Boards

© 2017

Foundation Program Basics

• Establish a foundation• An amount of money needed to provide educational services, adjusted for district and student characteristics

• Arrange for property to be valued for tax purposes

• Set a minimum property tax rate for program participation• Permit a range of property tax rates, subject to limits

• Apply the district-adopted tax rate to property value to calculate the tax levy

• Apply state aid if the local property tax does not yield the foundation

• Recapture local property taxes if the local district can reach and exceed the foundation level

© 2017

Two Districts with Different Wealth, Same Tax Rate

Low wealth Mid wealth

$

Foundation

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Three Districts with Different Wealth, Same Tax Rate

Low Wealth Mid Wealth

$

Foundation

High Wealth

© 2017

Guaranteed Yield Formulas

Low Mid

$Tax Yield

HighWealth

$31.95

© 2017

Current School Finance System, 2017–18

M&O tax rateAssumes $1.50 M&O tax rate in 2005Includes $25,000 homestead exemption and fractional funding

Recapture

$31.95

Recapture

Golden Pennies

$99

Tier 1 Tier 2 Tier 3

$1.00 $1.06 $1.17

$5140

Yiel

d/pe

nny/

WAD

A

© 2017

Other Resources

• Grant funds

• Funds for capital outlay and debt repayment

• Federal funds

Foundation School Program: The State Share is FallingHistory 1985‐2016 (2017‐2019 estimated by LBB)

8

0

5

10

15

20

25

30

35

Billi

ons

of D

olla

rs

Fiscal Year

State FSP Spending Local FSP Spending*Data for FY17-FY19 are estimatedSource: Direct from LBB, General Appropriations Act, Texas Education Agency

Ten‐Year Student Funding Trends

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Local Aid per Student 45% 43% 46% 44% 46% 48% 49% 50% 49% 52%State Aid per Student 45% 44% 38% 40% 43% 41% 41% 39% 41% 38%Federal Aid per Student 10% 14% 16% 16% 11% 11% 10% 10% 10% 10%

0%

10%

20%

30%

40%

50%

60%

PERC

ENTAGE SPLIT

FISCAL YEAR

Local Aid per Student State Aid per Student Federal Aid per Student

Prop

erty Tax (1

4th )

Sales T

ax (1

0th )

Income Tax (N/A)

State

Texas relies on property taxes and sales taxes to fund state and local 

government.

The Majority of Property Taxes Fund Public Schools

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Special District

13%

County

17%

City

16%

School District

54%

Source: Texas Comptroller of Public Accounts, 2015 property Tax Levies

2008 2009 2010 2011 2012 2013 2014 2015Special Purpose District Levy 4,952,734,9 5,133,820,4 5,392,511,5 4,926,074,0 5,543,422,3 5,529,434,2 6,370,469,8 6,954,137,4County Levy 6,342,704,9 6,526,724,0 6,567,069,8 6,742,912,7 7,064,659,1 7,537,749,4 8,114,998,1 8,696,387,3City Levy 6,451,012,4 6,593,755,0 6,755,401,4 6,810,049,3 7,054,989,7 7,324,430,8 7,828,571,7 8,380,435,8School Levy 21,233,517, 21,780,056, 21,558,289, 22,001,561, 23,072,781, 24,854,671, 26,792,677, 28,176,465,

-

5

10

15

20

25

30

DO

LLA

RS (I

N B

ILLI

ON

S)

Growth of the Property Tax by Taxing Unit Type

Since 2015, school funding from local property taxes have 

increased

$14.35 Billion

while state funding increased

$2.17 BillionSource: Legislative Budget Board

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Looking at only Operations & 

Maintenance funding, since 2015 local property 

tax revenue has increased by 10% while 

the state has only increased its funding by 

3%.

Source: PEIMS Financial Standard Reports (Author’s Calculation)

General Appropriations Act FY18‐19

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The legislature reduced the State’s share of public education funding. 

The budget that the legislature passed counts on over 14% increase in local property taxes over the FY ‘18‐’19 

tax years.

General Appropriations Act FY18‐19

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Letter from the Texas Education Agency

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If the State of Texas doesn’t assume its share, the problem will only get worse.

Student Enrollment (2015):

4,852,600  

Projected Student Enrollment (2019): 

5,166,298

17Source: General Appropriations Act FY ‘18 –FY ‘19

Cost Rank StateAverage

Funding per Student*

NAEP Performance

Score**

1 New York $20,438 230.603

2 Alaska $18,056 223.146

3 New Jersey $17,667 238.284

4 Connecticut $17,267 235.328

5 Vermont $16,890 237.092

6 Wyoming $15,957 235.871

7 Massachusetts $14,817 243.570

8 Rhode Island $14,619 231.969

9New

Hampshire $14,151 241.377

10 Pennsylvania $14,128 235.548

42 Texas $8,617 230.034

Ranking by NAEP Performance

Perf. Rank StateAverage

Funding per Student*

NAEP Performance

Score**

1 Massachusetts $14,817 243.570

2New

Hampshire $14,151 241.377

3 New Jersey $17,667 238.284

4 Minnesota $11,399 237.479

5 Vermont $16,890 237.092

6 Virginia $10,937 237.005

7 Maryland $13,952 236.260

8 Wyoming $15,957 235.871

9 Indiana $9,625 235.571

10 Pennsylvania $14,128 235.548

31 Texas $8,617 235.328

District M&O Funding perStudent (FY16)

Performance Ranking* (FY16)

Top 30 Performers in Texas $9,184 85.96

Texas Average $8,638 63.58

How do dollars equate to performance in Texas?

More State Investment in Public Education Will Lower Property Taxes

• Surging property taxes are directly linked to the state’s school finance system.

• The state’s dependence on local property taxes is enormous and clear, while school districts costs continue to increase with 60% of students who are economically disadvantaged, and 20% that are English Language Learners.

• Two ways of reducing local property taxes:1. Increase state investment; and2. Pass legislation so that school 

districts are not penalized for lowering tax rates.

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Questions?