Module

1
Module 1

• Basic Orientation to
• Texas School Finance

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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

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Contd

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

4
Contd

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

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Three main sources of revenue are

• State
• Federal
• Local

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Local Revenue

• Local revenues are derived from taxation, school
  organization fund raising, investments, gifts and
  bequests, extra-curricular gate receipts, and
  other sources.

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State Revenue

• State 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

8
Contd

• that are appropriate to the students needs, in
  all school districts throughout the state,
  despite different taxable values.

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Federal Revenue

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

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Revenue by Source (for Texas)

• Billions and Percent
• State 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.)

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RevenueFactors Driving State Funding

• Average Daily Attendance (ADA)
• Property Wealth
• Tax Effort
• (The Texas School Foundation Program state aid is
  determined by these three major factors)

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Federal Revenue

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

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Examples Are

• Title I, II, IV, VI
• Career and Technology
• Special Education (IDEA B)
• School Lunch Program

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Local RevenueTaxation

• Categories of Taxes include
• Maintenance and Operations (MO) (TEC Chapter 45)
• (TEC Chapter 45) Interest and Sinking (IS)

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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)

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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

17
Contd

• and 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)

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Taxation

• Process and legal requirements for taxation
• Publication (Tax Code)
• Hearing (Tax Code)
• Rollback (Tax Code)
• Adoption (TEC Chapter 11)

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Budget

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

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• Preparation of budget by the superintendent
• Hearing of proposed budget by the board
• Adoption of a budget by the board

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Budget

• Budget must be balanced
• District may not operate a deficit budget

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Financing Educational Excellence Budget

• The budget is the districts plan to produce
  educational excellence expressed in terms of
  dollars.

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The budget addresses three important functions

• Planning (present and future operations)
• Monitoring (expenditures)
• Communicating (to staff and public about
  resources)

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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)

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Financial Vital Signs

• Declining ADA (Loss of student enrollment)
• Declining Fund Balance

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Contd

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

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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.

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Key Terms

• ASF contd
• 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.

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Key Terms (contd)

• Average Daily Attendance (ADA) ADA is a method
  of counting students for the purpose of providing
  state aid to school districts.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

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Key Terms (contd)

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

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Key Terms (contd)

• Comptrollers Property Tax Division (CPTD)
  department responsible for conducting an annual
  property value study that determines the taxable
  wealth of each Texas school district.

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Key Terms (contd)

• 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.

35
Key Terms (contd)

• 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.

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Key Terms (contd)

• Equity refers to fair or equal distribution of
  resources for schooling, taking into account
  student differences and school district
  characteristics.

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Key Terms (contd)

• 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.

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Key Terms (contd)

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

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Key Terms (contd)

• Foundation School Program (FSP) a program for
  the support of a basic instructional program for
  all Texas school children.

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Key Terms (contd)

• General Revenue (GR) Fund is the states main
  funding source.

41
Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

45
Key Terms (contd)

• Local Fund Assignment (LFA) is the tax rate that
  a district is required to levy in order to
  participate in the FSP.

46
Key Terms (contd)

• Maintenance and Operations (M O) Tax Rate is
  a local school district property tax rate that
  raises revenue to operate and maintain the
  districts schools. (Maximum of 1.50)

47
Key Terms (contd)

• 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.

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Key Terms (contd)

• Public Education Grant (PEG) permits students in
  low-performing schools to attend a public school
  in the students home district or in another
  district.

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Key Terms (contd)

• Recapture a feature of school finance where
  local districts give the state locally collected
  property tax revenue for the redistribution
  through the FSP.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• 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.

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Key Terms (contd)

• Wealth is measured in taxable value of property
  per WADA.

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Key Terms (contd)

• 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.

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Yes, Texas School Finance Will Change

• There may be major changes ahead. The keys to
  success are

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• Understanding the current finance structure
• Keeping up with the proposed changes before they
  become law

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• 3. Knowing that everything will not change
• 4. Adapt to new legislation from a perspective
  of experience

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