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• by Albert Cortez, Ph.D. and Anna Alicia Romero • IDRA Newsletter • August 1997

The Texas legislative session that ended in the first week of June may well be remembered more for what it did not do for education than for the limited amount of progress it did make. It started as an optimistic session buoyed by the state’s first $1.3 billion budget surplus in more than a decade. It ended as a major disappointment for many people when House and Senate conferees failed to reach a compromise on a major education bill.

IDRA has been focusing on five major policy issues. These are

• school finance equity,
• public funding for private schooling,
• immigrant education,
• access to higher education, and
• bilingual education and state language policy.

IDRA monitored these issues throughout the five-month legislative session. Staff attended hearings where the issues were deliberated, reviewed texts of proposed policy changes, and provided feedback and technical assistance to policy-makers who requested our assistance. This article outlines the context surrounding these issues, the policy options that were considered and the final actions that were taken.

School Finance Equity and Property Tax Relief

With the news of a large state treasury surplus, Gov. George Bush Jr. proposed a bold plan to reduce local school property taxes. The plan included a corresponding commitment to reimburse local school systems using the projected surplus.

The House Select Committee on Revenue and Public Education Funding eventually adopted a version of the plan calling for new taxes, including the creation of a new statewide property tax on businesses, expansion of the state franchise tax, and broadening of the sales tax base to include more goods and services. The plan also called for increases in state education funding through the following:

• Dollar-per-dollar reimbursement of any state-mandated reductions in local property taxes.
• Significant increases in the levels of guaranteed yield.
• Creation of a new guaranteed yield tier that would provide limited state equalized funding for program enrichment or funding for existing facilities.
• Provision of a new funding tier to help local districts pay for the cost of new facilities.
• Extension of hold harmless clauses allowing the state’s wealthiest school districts to continue to spend at their 1992-1993 revenue per pupil levels (the last year before the Edgewood litigation reforms took effect).

The House plan called for property tax relief by requiring local school districts to reduce property tax rates by an amount equal to whatever increase in state funding was being provided to them. The relief would also be achieved by taking out statutory language that required wealthy districts (those districts generating more than $280,000) to select one of five ways that monies raised over the $280,000 threshold could be made available to the state to help equalize the funding disparities in the overall system.

The controversial statewide property tax on businesses (and the corresponding removal of this business property from local school tax rolls) was a key building block in the House plan. Specifically, the House plan proposed to create a new statewide property tax on businesses by removing all business property from the local tax base and subsequent taxing of property at the state level at a maximum rate of $1.05 per $100 of value;

• expanding the state franchise taxes on businesses, including the taxation of non-corporate business entities other than sole proprietors;
• expanding significantly the sales tax base to include many previously exempted good and services;
• increasing insurance premium taxes by eliminating certain existing premium tax credits and exemptions;
• increasing portions of state lottery proceeds retained by decreasing the lottery prize percentages; and
• increasing excise taxes on alcohol and tobacco products.

As a result, the House tax package added an estimated 700,000 new taxpayers and generated well over $1 billion in increased revenues.

The Senate was forced to wait since all proposed state tax bills must originate in the House of Representatives. The House did not adopt its proposal until the last week in April, which left the Senate very little time to either develop its own proposal or to modify the House plan.

No major action on a Senate school finance plan was initiated because the Senate members recognized that major education finance plans are inextricably tied to the state appropriations process, which in turn is tied to the proposed tax reform plan.

Nonetheless, the Senate attempted to craft its own proposal over a two-week period. After hearing extensive testimony critical of the House plan and receiving many alternatives by business and education interest groups, the education committee adopted its own proposal in mid-May.

The Senate plan was a much more modest tax reform proposal, but it contained school finance reform provisions comparable to those contained in the House plan. The Senate plan called for new taxes by broadening the state franchise tax to include more service sectors, including limited partnerships, and by broadening the state sales tax base by including more goods and services. It called for an increase in state education funding through the following:

• Dollar-per-dollar reimbursement of any state-mandated reductions in local property taxes.
• Increase in the levels of guaranteed yield.
• Provision of a new funding tier to help local districts pay for facilities.
• Extension of hold harmless clauses allowing the state’s wealthiest school districts to continue to spend at their 1992-93 revenue per pupil levels.

The plan also called for property tax relief through increases in state-mandated homestead exemptions on residential property and requirements that local school districts reduce their local property taxes by an amount equal to any increases in state funding after adjustments for enrollment.

Although the Senate proposal did not include the state-level business property tax, it did provide for

• expanding the franchise tax to non-corporate businesses in Texas by adding general partnerships, limited partnerships, business trusts and professional associations;
• adding a limited expansion of the sales tax;
• increasing taxes on alcohol and tobacco products;
• continuing the motor carrier tax that was scheduled for repeal in September 1997;
• increasing the state share of lottery revenues; and
• creating new taxes on certain coin-operated and cash-dispensing machines.

The differences in revenue levels between the House and Senate plans, in turn, created significant differences in their extent of new state education funding and property tax “relief” levels.

Major Differences Between the House and Senate Proposals

The major differences between the House and Senate packages involved their tax package provisions and the school finance formulas. Many observers anticipated that the chambers could work out their differences concerning the school finance portions, but the tax proposals, however, were recognized as posing a serious challenge.

During conference committee deliberations, the chambers repeatedly clashed on the issue of the House proposed plan for a state-level property tax on businesses. Failure of the chambers to reconcile their differences led to weeks of delays as one side waited for the other to give in. So, the conference committee designated a subgroup to reconcile the differences in the House and Senate school finance provisions.

Disagreements on tax relief centered on the manner and extent to which each chamber proposed to provide for local school property tax relief. The House plan sought to remove local business property from school tax rolls and to reimburse districts for each dollar of revenue it lost by this action. It also provided for an increase in the state-mandated homestead exemption with similar reimbursement to local districts for lost tax revenues. The Senate plan did not change local school district taxation of business property, but it did have a version of an increase in the state homestead exemption.

Both the House and Senate plans called for some significant changes in the state school finance structure. The House plan called for totally eliminating the state recapture of revenue from the state’s wealthiest school districts (those that generated more money than the state had chosen to equalize). It also called for changing from the current foundation school program to a two-tier guaranteed yield system, with a new third tier for new facilities.

Under the House plan, the first tier would have provided approximately $49.60 per each penny of tax effort up to 75 cents. The second tier would have allowed districts to levy an additional 10 cents to cover the cost for funding existing programs or to enrich the basic program. Enrichment guaranteed yield would be equalized up to $9 per penny of tax effort. (That is, the state would provide revenue for each district whose local tax base yielded less than the guaranteed level of $9 per penny of tax effort.)

A new subportion of the second tier would allow districts to tax up to 10 cents in order to cover the cost of existing facilities. The total tax effort equalized for a combination of enrichment of existing facilities, however, would not exceed 10 cents. The third tier in the House plan called for the creation of a new mechanism for state participation in the funding of new facilities. This tier would provide guaranteed yield monies to school districts so that each district would acquire $36.40 for each cent of new debt service tax effort for up to 50 cents of local tax effort.

Under the Senate proposal, the structure of the state funding system was modified, calling for the following:

• Increasing the state’s “equalized wealth level” (the maximum tax wealth that local districts are allowed to retain) from the existing $280,000 per weighted average daily attendance to $330,000 per weighted average daily attendance in order to reduce the number of local school districts subjected to the state recapture provisions.
• Increasing the second tier guaranteed yield portion of the system from $21 per cent of tax effort to $29.60.
• Creating a new third tier of funding to provide guaranteed yield monies to districts to help cover the cost of new facilities and setting the guaranteed yield level at $33 per average daily attendance.

What Was Finally Adopted

The media in Texas provided extensive coverage of the House-Senate conflicts over the proposed tax package and reported that the failure of the tax measure was fueled in part by the actions of many business lobbyists who fought to have certain businesses left off proposed tax measures or, at least, to have them be given exemptions or other dispensations that would reduce their state tax liabilities.

In the face of fierce opposition from many facets of the business sector (specifically those not currently subjected to state franchise or sales taxes), the property tax relief school funding plan as proposed by either chamber went down in bitter defeat.

In the waning days of the session, legislators attempted to “deliver” on the property tax relief promised by some of the state’s political leadership (primarily the governor). So, they adopted a proposal that turned out to be a mere shadow of the substantive reforms that were trumpeted at the beginning of the session. The final property tax school finance plan as adopted by the legislature calls for the following:

• Increasing the state-mandated homestead exemption (that portion of a homestead’s [residence’s] market value that may be excluded from local property taxes) from the current $5,000 to $15,000. This portion requires passage of an accompanying state constitutional amendment by voters in a forthcoming election.
• Increasing the state share of lottery revenues and dedicating lottery monies to the foundation school fund that is used to fund public education.
• Continuing the current funding system that includes a Tier 1 basic program requiring a minimum local tax effort of 86 cents and a Tier 2 guaranteed yield component.
• Adding a facilities funding level (Tier 3) that will provide guaranteed yield revenue to help districts pay for the costs related to new local school facilities.

A Final Analysis – A Lost Opportunity

In early June, the headline of Texas Education News Reports reported, “Public Education Spending to Increase by $1.7 Billion in New Biennium” (1997). While it is true that the state portion of public school funding will increase by that amount, local school districts will not see any substantial increase in the level of total funding available. This sad reality is the result of state-mandated cutbacks in local revenues (through reductions in local property tax rates) in amounts equal to any increases in state revenues received by districts to offset the cost of the new state-mandated increases in homestead exemptions. So while local property taxpayers will see an average reduction in local tax bills of approximately $140, local schools are left watching a $1 billion opportunity to improve the quality of schools fly away on the wings of “property tax relief.”

This fiasco experienced by the legislature serves as a reminder of the complexity of a property tax structure that is totally intertwined with the state school funding scheme. While not opposed to tax relief, many local school officials quietly opposed the legislature’s attempt to remove local businesses from the tax rolls, fearing that their local communities would never see the state business tax revenue that had been touted to replace the local school district’s taxation of that same property.

Targeting $1 billion of surplus revenue on tax relief proposals through homestead exemptions also creates a contingent liability to forthcoming legislative sessions. Because the homestead exemptions will become permanent if adopted by the voters, legislators in future sessions can only hope that revenue growth provides the additional money needed to cover those exemptions. Otherwise, they face the prospect of creating a $1 billion tax increase to maintain current levels of state services.

Although the legislature provided a very modest increase in the state minimum salary requirements for teachers, it failed to upgrade teacher salaries to compensation levels befitting the profession. Other areas remain under funded as well, such as the education of students with differing characteristics, including students from low-income households, students with limited proficiency in English, students who are gifted and talented, and students with special education needs.

Some might argue that increasing the level of education funding does not guarantee improved outcomes for students, but we know that we are unlikely to see improvement without some increased state investment in support of equalized public education. At the time of the last Edgewood ruling, the state acknowledged that even under its best case projections, the existing funding system would provide for continuation of a $600 gap in spending per pupil ($24,000 per class of 20) between the state’s richest and poorest school districts. A legislature committed to equity would have attempted to reduce that level of inequality.

On the other hand, things may have been worse if certain proposals entertained during the last session had become law. If opponents of state recapture had succeeded in eliminating that equalizing feature from existing law and no mechanism for offsetting that action had been adopted, the level of equity in the state school funding system might have declined. In the same vein, disequalizing proposals, such as eliminating pupil funding weights that generate extra state monies for students with special needs, were also rejected.

Writing in 1994, Dr. José A. Cárdenas, IDRA director emeritus, observed that a review of the “continuing saga of Texas school finance reform provides half a dozen lessons that could help in addressing…future efforts in the financing of Texas public schools.”

One of the lessons he cites is:

Failure to resolve the problem can be attributed to the failure of the legislature to bite the bullet and do what decency, justice, common sense and the best interests of the state demand be done (Cárdenas, 1997).

Despite the efforts of a small group of minority and other legislators, the majority remained unable, or unwilling, to continue the funding reform efforts begun in 1993 with the passage of Senate Bill 7, which was the last state response to the series of Edgewood challenges.

The most significant positive development for public school education in this session may turn out to be the creation of a facilities funding tier to help finance new construction. While recognizing it was modestly funded (thus, not all school districts in the state will benefit), the plan to have the state assume part of the cost is an action that we at IDRA have advocated since IDRA’s inception in 1973. Let us hope it does not take the Texas Legislature 24 years to come up with a substantial improvement to the current funding plan. While being “more equitable” than many of its predecessors, the funding system still has plenty of room for improvement.

Public Funding for Private Schools and Charter Schools

Early in this Texas legislative session, a group of proponents, who support the development of alternatives to conventional public schools, announced their intention to push for policy changes that would increase the numbers of charter schools allowed to operate in the state of Texas. In 1995, the legislature adopted a policy allowing for the creation of 20 state-approved charter schools. Although numerous public school advocates expressed concern with the proposed charters, their initial fears were allayed by the inclusion of flexible student admissions procedures and accountability requirements based on student outcomes.

Despite the absence of convincing data on whether or not the 20 existing charter schools were effective, legislators supported the expansion to 100 charter schools. They did so by granting the authority to approve 100 open enrollment charter schools specifically created to serve students who are eligible for public education grants. In addition, legislators authorized the creation and funding of additional charter schools in which 75 percent of the prospective students are considered at risk of dropping out.

These proposals sought to provide alternative educational options for students attending low performing schools and were, in part, an outgrowth of public school refusals to accept students who seek to transfer to other non-district schools under legislation adopted in 1995. According to data compiled by the Texas Education Agency, only a handful of students who applied for transfers out of low performing campuses were accepted by the schools to which they applied, with most schools citing a number of excuses for refusing their admission.

Eligibility for public education grant funding was also modified by legislators, with students deemed eligible for participation if the campus had been designated as low performing for two consecutive years (rather than the three-year stipulation in previous legislation). Districts eligible for public education grant funding would be allocated an additional weight of 10 cents, generating an average of $267 per pupil and thus increasing the funds that would be transferred to the charter school receiving public education grant students.

Some disturbing public policy questions are presented by this merging of the public education grant concept of providing students with alternatives to attending low performing schools with the need to more effectively serve students who are at risk of dropping out of school. The first and most obvious concern is the rush to expand Texas charter schools in the absence of data that the existing charter schools are meeting either their own objectives or the performance outcomes of regular public schools.

A second concern surrounds the creation of specialized charter schools to serve at-risk students and those who may have already dropped out. Does the creation of charter schools for at-risk students absolve regular public schools from serving their at-risk students? Will these at-risk charter schools be seen as the logical referral place for schools reluctant to adapt to address the needs of changing student populations?

While some proponents may have no such intentions, the policy is not currently crafted in ways that will protect against students being tracked into alternatives that absolve sending-schools from adequately addressing the needs of all pupils, including those identified as at-risk of dropping out of school. Other efforts by some charter school proponents to liberalize the eligibility provisions and dilute the equal student access and accountability provisions were thwarted.

Attempts by some state legislators to create a Texas school voucher plan that would use state funding to finance public education were defeated by a narrow margin in the latter days of the session (see box on Page 12). According to the Legislative Study Group (LSG) – a loose coalition of moderates in the House of Representatives?- voucher proponents succeeded in adding voucher language to the plan through an amendment to the public education grant bill described above (1997). However, a subsequent amendment that would have prohibited private schools from discriminating against public school students was adopted but found unacceptable to the Texas Conservative Coalition of legislators (which was the chief proponent for the voucher plan). Thus, the whole voucher amendment was withdrawn.

Though rejected in this session, legislative observers noted that the pro-voucher effort demonstrated creativity and persistence as it attempted to move its agenda. A return of the same factions in the 1999 Texas session is again anticipated.

Texas Legislature Considers Much for Education

With the scrutiny and criticism that bilingual education programs have been receiving in the past couple of years in some circles, it is not surprising that Texas policy-makers would take a second look at educational policies set forth to transition immigrant children into the classroom, as other public policy measures seek to remove them and their families from the country.

Interestingly, in developing public policy, many of the same groups who advocate legislation of such teaching methods as English language immersion (although it has been proven ineffective) are the same people who are simultaneously vigorously defending the notion of local control.

To date, the state of Texas has been able to fend off any attempts to ostracize immigrants in the area of education, primarily because Gov. Bush has spoken out about the fact that the economic viability of the state, especially in relation to trade, is contingent upon a population that is literate and adequately educated. In Texas, neither major political party made any serious efforts to mandate the exclusion of immigrant children from the classroom.

A strong concern, though, is the persistent threat of exclusionary policies being implemented, if not under the current gubernatorial administration, then under another’s leadership.

Fueled by the anti-immigrant sentiments set ablaze by California’s previous initiatives, a third initiative, the English Language Education for Immigrant Children (Initiative Number 743), would eliminate bilingual education in public schools and instead implement a system of English language immersion to teach this country’s dominant language to LEP students “as rapidly and effectively as possible.” The initiative’s authors denounce the language acquisition programs as “wasting financial resources on costly experimental programs whose failure over the past two decades is demonstrated by the high number of dropouts and low literacy levels of many immigrant children” (Unz, 1997).

National leaders took a cue from the California’s regressive measures and reacted to the ethnic tensions by introducing several bills to declare English the official language of the United States. Some bills even proposed eliminating bilingual education and English as a second language (ESL) and allowing states the option of not educating children of undocumented workers. The attack on bilingual education programs were founded on misguided claims that they are ineffective and costly, and are run by teachers with inadequate training.

While proponents of such restrictive measures argue that costs involved in educating children “who are not even supposed to be in this country” are unacceptably high, it can indeed be argued that the costs involved in creating an uneducated underclass would exceed the perceived benefits. U.S. public schools are not the motivating force behind immigrant families’ choice to come to this country; it is the hope of a promising economic future. It is our duty and function as a democratic society to provide optimal living conditions for all of our contributing members, including its immigrants.

Texas Legislature Considers Much for Education

When the Fifth Circuit Court of Appeals ruled in favor of the plaintiffs in the Hopwood vs. State of Texas case in 1995 regarding affirmative action practices at the University of Texas Law School, the decision sent shockwaves to colleges and universities, and in workplaces throughout the country. These shockwaves continue to reverberate today.

Within the three-state jurisdiction of the Fifth Circuit Court – encompassing Louisiana, Mississippi and Texas – the ruling applies only to Texas due to the other states’ federal civil rights obligations. In response, several key legislators in Texas introduced bills to either reinstate affirmative action practices or to create alternative criteria for college admission that would still result in diverse student bodies, including proposals by Rep. Irma Rangel (D-Kingsville), chair of the Committee of Higher Education, and Sen. Gonzalo Barrientos (D-Austin).

State lawmakers were faced with the Texas attorney general’s ever-expanding interpretation of the court’s decision that, in his opinion, denounced the use of race-based criteria for admissions or scholarships. Disregarding his role as chief defender of the state, the attorney general, Dan Morales, quickly became a spokesperson in favor of abolishing race-based admissions procedures and scholarships. Colleges and universities, Morales advised, should instead adopt race-neutral policies; otherwise, they would be vulnerable to lawsuits.

Three proposals by Rangel were related to the issue of minority access to higher education. Two of them provided public colleges and universities with a safety net to continue minority recruitment and admission, but the bills lost their momentum.

One measure would protect college administrators and staff members from legal persecution if they admit minority students as allowed by the attorney general’s opinion. Another proposal was to give the green light on the use of race and ethnicity as a consideration for admissions or scholarship awards.

After some changes, Rangel’s HB 588 was passed. Instead of permitting the use of race and ethnicity as a factor in admissions, it would allow schools to accept students if

• they are in the top 10 percent of their graduating class,
• alternatively, applicants graduated in the top quarter of their graduating class, or
• they meet a set of criteria, which includes the applicant’s bilingual proficiency, socio-economic background, and SAT and ACT test scores and whether the applicant would be the first in his or her family to attend college.

This measure received greater acceptance than the other two proposals because of the absence of race or ethnicity as even a remote consideration for access to college. While minority students can no longer be admitted by virtue of their ethnicity, they can still be recruited by institutions of higher education.

Sen. Royce West (D-Dallas) introduced legislation using several criteria that would increase the chances of minorities being admitted to institutions of higher education, but without including race as one of those factors. A revision was passed to ensure that scholarships are not provided to incoming students based on their athletic performance or other abilities.

The impact of the Hopwood decision and the attorney general’s opinion is being felt by public institutions of higher learning as they are experiencing a decrease in minority applicants. A survey conducted by the Texas Higher Education Coordinating Board of three university systems – University of Texas, Texas A&M and University of Houston – indicates a drop in the number of applicants to those institutions of higher education.

On the federal level, several anti-affirmative action bills were filed during the current session by legislators including Sen. Jesse Helms (R-NC) and Reps. Brian Bilbray (R-Calif.) and Charles Canady (R-Fla.). While these bills primarily focus on affirmative action practices in the workplace, their prohibitive nature will undoubtedly set the tone for national policy on minority admissions criteria for higher education.

Texas Legislature Considers Much for Education

The issue of measures for bilingual education in Texas received some attention by legislators this session.

The first attempt was by state Rep. Charlie Howard (R-Sugarland) whose bill would have given districts the option of implementing an English language immersion method of teaching English to limited-English-proficient (LEP) students. Two other bills were related to the state’s weighted system of funding programs for special populations, such as gifted and talented programs, compensatory programs and bilingual education programs. Freshman Rep. Domingo Garcia (D-Dallas) nobly introduced a bill that would have increased the weight allotted for bilingual education thereby increasing funding for the programs. Meanwhile, Rep. Harold Dutton, Jr. (D-Houston) introduced another measure to do away with the current weighted system, which could have meant serious de-funding of programs for special populations.

None of the three proposals was passed by the legislature. So bilingual education in Texas remains intact.

In the February 1997 issue of the IDRA Newsletter, we outlined the education-related policy issues that would be dealt with by the state legislature. We also restated our belief that no issue is more critical to the well-being of Texas than public education. The Texas legislature, overall, however did not demonstrate that it had the same priority. IDRA will continue to monitor state policy efforts as well as community-led actions to achieve equity and excellence in education for the children of Texas.

Resources

Cárdenas, J.A. Texas School Finance Reform: An IDRA Perspective (San Antonio, Texas: Intercultural Development Research Association, 1997).

Cortez, A. “Immigrant Education Policy: Why Attempt to Fix What’s Not Broken?” IDRA Newsletter (San Antonio, Texas: Intercultural Development Research Association, May 1996).

Legislative Study Group, Progress Report (Austin, Texas: Legislative Study Group, 1997).

Texas Education News Reports, “Public Education Spending to Increase by $1.7 Billion in New Biennium” (June 9, 1997).

Texas Higher Education Coordinating Board Survey (May 27, 1997).

Unz, Ron. “English Language Education for Immigrant Children” (Initiative Number 743, 1997).

Albert Cortez, Ph.D., is the director of the IDRA Institute for Policy and Leadership. Anna Alicia Romero is an education assistant in the IDRA Institute for Policy and Leadership. Comments and questions may be sent to them via E-mail at feedback@idra.org.

[©1997, IDRA. This article originally appeared in the August 1997 IDRA Newsletter by the Intercultural Development Research Association. Permission to reproduce this article is granted provided the article is reprinted in its entirety and proper credit is given to IDRA and the author.]