Earlier this year, Judge Dietz found the Texas school finance system to be inadequate and inequitable. The inadequacy finding was undoubtedly exasperated by the $4 billion cut in formula funding and more than $1 billion cut from educational grant programs during the 2011 legislative session. As the Legislature works to restore funding to public schools it is important that the issue of equity is not overlooked.
HB 2756, heard in House Public Education on Tuesday, aims to bring more funding to public schools by increasing the number of “golden pennies” districts can collect in M&O taxes. There are two tiers in the school finance system, the second tier or enrichment tier is made up of “golden” and “copper” pennies. The first six cents of the M&O tax rate above $1 per $100 of taxable property value are referred to as “golden pennies” because the state guarantees a yield of $59.97 per penny per weighted student, but property-wealthy districts can collect as much as their tax base will allow without the funds being subject to recapture. The final 11 allowable pennies or “copper pennies” provide a guaranteed yield of $31.95 and funds generated above that amount are subject to recapture.
HB 2756 would increase the number of “golden pennies” to eight from six. A property-poor district would benefit from a couple additional “golden pennies,” but a property-wealthy district would benefit much more—making the system more inequitable. For example, the property-wealthy district of Alamo Heights was able to generate $95.37 per “golden penny” per weighted student during the 2010-11 school year—$35.40 more than a “golden penny” for a property-poor district does.
A more equitable approach would be to increase the basic allotment, which also increases the wealth equalization level for tier one of formula funding. Increasing the basic allotment is a tide that raises all ships—every district would benefit from additional funding and recapture would be decreased for property-wealthy districts because of the increase to the wealth equalization level.