Texas Needs Real School Finance Remodel, Not Vouchers

This post was updated on July 31st, 2017.

House Bill 253 has emerged as the latest voucher bill of the 85th legislative session, a near duplicate of Senate Bill 2. Both bills are riddled with problems in addition to the vouchers for students in special education. The bills take millions of dollars from the Health and Human Service Commission (HHSC) and do not make any meaningful improvements to the school finance system. Instead, HB 253/SB 2 expand inequities while ensuring future budget holes.

Vouchers are still the wrong solution for students with special needs

CPPP strongly supports policy solutions that ensure students with special needs obtain the quality education, services and support they need to reach their full potential. Unfortunately, the vouchers established in HB 253/SB 2 are the wrong solution for Texas children.

Vouchers for special education students:

  • Do not guarantee the same rights, quality educational opportunities, and accountability provided to students and parents in public education.
  • Provide little choice for most families. Private schools specializing in special education, or that are able to take on high-needs children, are not available in many parts of the state. When options are available, low-income families face barriers to participation when tuition and related fees are greater than the voucher amount.
  • Have a negligible impact on student achievement given the lack of evidence that private schools teach special education better.

Under this voucher scheme, insurance companies would make donations to “education assistance organizations” in exchange for a credit against their tax bill to the state. Then the “education assistance organizations” would grant “tax credit scholarships” and “educational expense assistance” to eligible special education students. The scholarships would be capped at $10,000 for those students switching from public to private schools, and educational expense assistance would be awarded to students staying in public schools. The educational expense assistance is capped at $500 for the first year and would grow by five percent each year.

Voucher proposal creates a budget hole

Capped at $75 million a year, funding for the voucher comes from giving a tax credit to insurance companies that pay the insurance premium tax. Because this is revenue that otherwise would go into the General Revenue (75 percent) and education fund (25 percent), HB 253/SB 2 will create a budget hole of up to $75 million each year.

Since the budget passed in May did not anticipate a General Revenue loss in 2019 due to the voucher, HB 253/SB 2 add a potential $75 million shortfall to the current budget.

The Center envisions a school finance system that meets the needs of all students—no matter their background or abilities. Instead of using taxpayer dollars to pay for private schools and vendors through vouchers, the best solution for all Texas students – including students with special needs – is to remodel Texas’ outdated school finance system to ensure that there is sufficient financial support for all children to get a quality public education.

HB 253 and SB 2 do not make meaningful improvements to the school finance system

HB 253 and SB 2 create a two-year $150 million transitional grant for districts experiencing a hardship due to the expiration of ASATR (Additional State Aid for Tax Reduction) funding.

ASATR is a funding mechanism for school districts, created by the Legislature in 2006, to ensure that no district would lose funding as a result of the school finance reforms that compressed the Maintenance and Operation (M&O) tax rates by one-third. Phase-out of ASATR began in 2011, with the program set to expire at the end of fiscal year 2017.

Districts that receive ASATR are considered “off-formula,” meaning that funding levels are set to match a historical point in time and are not based on the various funding adjustments in the school finance formulas. The Legislative Budget Board reports that only 161 districts, out of over 1,200, would continue to receive ASATR funding in 2018 if the program did not expire. On average, these districts receive $400 more per student than districts not on ASATR funding.

If being on formula funding is a hardship, then the formulas should be addressed. Extending funding for a handful of districts based on historical funding levels is inefficient, and exposes the arbitrary features needing repair within the system. It’s time to let ASATR expire and design a cost-based school finance system that meets the unique needs of all districts and is equally supported by state and local tax sources.

HB 253/SB 2 also direct $120 million in additional funding to the Existing Debt Allotment, a program that provides debt payment assistance, through tax rate equalization, to school districts with low property wealth. Half of the funding, $60 million, will be used to open the program to charter schools for the first time, the other half supports traditional school districts.

Many school districts across Texas are experiencing fast growth, leading to portable classrooms, overcrowding, and high tax rates. Overall the state does very little to support building and acquiring school facilities, instead leaving the responsibility almost exclusively to local property tax payers. While facility funding is a great need for all types of districts, splitting the additional funding evenly between school districts and charters is far from an equitable distribution. There are over 5.3 million students in TX schools – less than 300,000 of them are in charter schools. Also, the bills do not require charter schools to direct this additional funding to facilities – it is just extra funding for charter schools.

HB 253/SB2 divert $270 million from the Health and Human Services Commission

To pay for these band-aides and inequities, HB 253/SB 2 take $270 million in General Revenue from the Health and Human Services Commission (HHSC). This is not the only bill being debated during the special session that pulls funds from HHSC. Senate Bill 19 also diverts $212 million from HHSC for TRS Group Insurance and $193 million for career bonuses for teachers; for a total diversion of $675 million.

Nearly all the General Revenue received by HHSC goes to fund the state’s share of the Medicaid program. The current budget already underfunds Medicaid by $1.2 billion, meaning the state will need to make that funding up next session through the supplemental budget. We simply cannot afford additional cuts in this area.

With both healthcare and education woefully underfunded in this state, CPPP recommends the legislature address both needs separately and comprehensively rather than pitting the two issues against each other to compete for funding. By relying on funds used for Medicaid, HB 253/SB 2 fail to address the financial crisis that Texas’ public schools are facing. The Center supports a remodeled school finance system that provides adequate and equitable funding for all schoolchildren in Texas.

Economic Opportunity Intern, Anna Crockett, co-wrote this post.

Chandra Villanueva joined the Center for Public Policy Priorities in 2010 and focuses on school finance and education policy ranging from early education to higher education access and success. Prior to joining the Center, Chandra was the manager of Advocacy and Public Policy with the Women’s Prison Association (WPA) in New York City. At WPA, she educated formerly incarcerated women on the legislative process and researched options for pregnant women in the criminal justice system. Chandra has also served as a Bill Emerson National Hunger Fellow with the Congressional Hunger Center with placements in Tucson, Arizona and Washington, DC. Chandra earned a Master of Public Administration from New York University's Robert F. Wagner Graduate School of Public Service, and a Bachelor of Arts from The Evergreen State College in Olympia, Washington.

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