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• by Albert Cortez, Ph.D., and Anna Alicia Romero  • IDRA Newsletter • August 2005

The January 2005 Texas legislative session opened with an air of anticipation as state policymakers ventured back the Capitol to tackle the many challenging issues left unresolved in the 2003 regular session and the failed 2004 special session. Despite the early enthusiasm, a shortage of new state revenue, opposition from powerful forces to proposed changes in business taxes, and a continuing lack of effective leadership for education led to very little policy change.

Given some of the regressive and dysfunctional initiatives proposed in the measures considered, many groups, including most of the state’s major newspapers, concurred that having no new school finance and tax reform plan was better than the hodge podge proposals by the state’s political “leaders.”

The Fair Funding Debate

As was the case in the 2003 regular session and 2004 special session, the Texas legislature committed this year to revamp the school funding plan. An Austin state district court ruling in June 2004 added a new sense of urgency by finding that the Texas school funding plan was unconstitutional and mandating that the state adopt a new approach by October 1, 2005.

System Ruled Unconstitutional

The court ruling in West Orange-Cove vs. Neeley found that the Texas system of funding its public schools violated various provisions of the state constitution. One major point of the ruling was that the state’s maintenance and operations tax cap (excluding taxes for local school facilities) of $1.50, taken in tandem with the finding that Texas school districts needed to tax at the maximum rate to just meet the state’s minimum accreditation requirements, constituted a state property tax – a tax currently prohibited in the Texas constitution.

A second major finding of the court was that the state level of funding provided for its basic educational program was “inadequate,” resulting in the state’s failure to make “suitable provisions for the establishment and maintenance of free public schools” as required under Article III of the state constitution.

A third court ruling was that Texas fails to provide adequate funding for programs serving students with special needs, particularly those students who are from low-income families and students who are identified as limited-English-proficient (LEP).

Finally, the court ruled that the state’s system for funding facilities was both inadequate and inequitable, putting additional pressure on the state legislature to address the facilities funding issue that it has been avoiding for several sessions.

Initial Proposals

Against this backdrop, the state’s leadership in the House of Representatives proved itself once again as not up to the challenge. Rather than directly addressing the issues raised in the West Orange-Cove case, the House drafted a plan to please major contributors. It was adopted after fierce opposition from all major education groups (teachers, school board members, principals and administrators, and parent and teacher organizations). The plan did not include input from key stakeholders and did include the following major features:

• A shift from funding on the basis of per pupil allotment to an emphasis on funding based on minimum accreditation standards;
• Elimination of funding weights for special programs (which are calculated as a stated percentage of funding provided for the regular education program) to an approach that would provide a fixed amount of funding for special needs pupils;
• Tying teacher salary increases to “incentives,” which reward increased student performance without considering whether the resources needed to support improved student outcomes are available to all teachers;
• Revisions to the cost of education index used to deliver extra funding to schools impacted by factors such as local job markets and cost of living differences;
• Reductions in the amount of funding that the state’s wealthiest districts are required to share;
• Replacing the state high school Texas Assessment of Academic Skills (TAKS) with 13 high-stakes end-of-course exams;
• Requiring that all public schools delay opening until after Labor Day;
• Moving school board elections to November to include them in partisan election schedules;
• Turning over of low-performing schools to private institutions or universities; and
• Creating alternative certification for school principals and superintendents.

The Senate opened the session with a commitment to substantially increase state funding for schools, by over $5 billion, to be funded with an expansion of state business taxes as a major new revenue foundation. However, the Senate plan eventually adopted fell well short of that mark, providing over $200 million less in state funding than was incorporated into the House plan, which was already too little. Though spending less, the Senate plan did contain several features that made it better than the House proposal, including the following major differences:

• Continuing the use of a basic allotment as the foundation for funding the regular program (though a reference to accreditation was eventually added in the final Senate plan);
• Continuing use of weights for funding compensatory and bilingual/English as a second language (ESL) education; and
• Across-the-board increases for teachers and restoration of cuts in health insurance funding.

The fact that both chambers did not adopt their respective plans until the last weeks of the regular session put additional pressure on members of conference committees charged with trying to work out a compromise plan. Because the House and Senate funding packages were notably different, no easy compromises were available for either side.

Both plans imposed more high-stakes standards without additional funds to cover their costs. Addressing the array of controversial issues outlined above would have been difficult in any legislative session. But doing so in an environment in which limited state funding was available proved deadly. Research (and conventional wisdom) on adopting major education reforms has noted that it is always easier to attempt major reform efforts when there is sufficient funding to increase the overall spending level for all schools. Though legislative “leaders” made feeble attempts to raise just enough money to get by, in the end, schools had little or no incentive to support the major plans being proposed in either the House or Senate.

Preoccupation with Tax Cuts

Perhaps the factor that most contributed to the legislature’s grand failure was the obstinance of state political leaders to connect any increases in school funding to simultaneous reductions in local property taxes. Many legislative members and leaders had campaigned on a platform that promised cuts in local property taxes. The steady increases in local property taxes however had been created by a persistent decline in the percentage of overall school funding being paid by the state.

Dating back to 1993, the state share of overall public education costs had decreased from a high of 50 percent to an estimated 37 percent in 2004. The failure of the state to pay its fair share of the cost, in turn, created pressure for local school systems to raise their property taxes to make up for the shortfall in funding. (See box.)

State Share of Texas Public School Funding The school funding system and fairness depend on state, as well as local, support. But state funding has dropped, not risen. During the last two decades, the state has reduced its contribution from 52 percent to 38 percent. Each percentage point represents millions of dollars. As the state defaults in its responsibility to fund education, most school districts in Texas, and especially property-poor districts, are stressed to raise taxes and are unable to deliver the quality education that all students deserve.

Sources: Legislative Budge Board. “Trends in Texas Government Finance 1984-2009 (Austin, Texas: LBB, January 2001)”. Legislative Budget Board. “Fiscal Size-up 2004-05 Biennium (Austin, Texas: LBB, 2005)”.

The state leadership figured that it could address the issue by promising local property tax cuts coupled with increased state funding. Unfortunately, they underestimated the amount of political courage it would take to simultaneously deliver on their promises.
For school systems, the idea of increasing state funding and cutting local property tax revenue by similar amounts was quickly recognized as creating a “wash” for most schools. This meant that if districts lost local revenue in the proposed tax cuts, simply replacing it with state monies would not provide any increases in funding for most districts. Adding insult to injury was the observation that the way those property tax cuts were proposed would result in a major windfall to the state’s wealthiest school systems, masking reductions in local recapture funding as across-the-board property tax cuts.

Working closely with the new House leadership, many wealthy school districts once again targeted the elimination of the state’s recapture of monies as their top priority. Their efforts were supported by some of the new state political leaders, who campaigned on a platform to do away with the one of the key equalization features of the Texas school funding system. Proponents of the current system’s structure, including IDRA, the Mexican American Legal Defense and Educational Fund (MALDEF), and the Equity Center, continued to explain to policymakers that the elimination of the recapture portion of the current system would benefit only the very few districts that already have more resources than all other Texas school districts.

Cutting Taxes Not Enough

After examining the cost of various alternatives, some state leaders realized that the cost of totally eliminating recapture would require an increase of $1.2 billion per year in new taxes. This tax increase for most Texans would convert to no new funding for public schools as the state would simply be reducing taxes for a privileged few while increasing other state taxes for everyone else. An “equity analysis” by the Legislative Budget Board noted that the reductions in overall taxes paid would accrue only to those with incomes over $100,000.

After encountering resistance to the wholesale elimination of recapture (including new reluctance from some moderates who came to recognize that reducing the amount collected in recapture required the adoption of new taxes or increases in existing taxes) proponents moved to scale back, rather than totally eliminate, recapture. Even at reduced levels, reductions in recapture were found to substantially benefit wealthy school districts – at the expense of the more than 900 school districts that would lose revenue by that reduction.

Clashing Tax Plans

Compounding the 2005 legislature’s challenge was the desire by some leaders to simultaneously propose reductions in school property taxes for all districts while attempting to respond to the West Orange-Cove court’s decision mandating that the state provide substantial increases in funding for public schools. The House plan that was adopted proposed to cut property taxes by one third, leaving less than $1.2 billion to provide new funding for Texas schools. The initial Senate plan had proposed smaller property tax reductions and more substantive increases in state aid but eventually also was scaled back to reflect the limited new money available to increase funding if one first cut property taxes.

Major problems encountered in passing either a Senate tax package or a House tax package delayed serious consideration of any school finance plan until the last weeks of the 2005 session. Despite opposition from most major education groups, the House adopted HB2, a variation of the plan originally introduced in February.

A major alternative proposal introduced by Representative Hochberg of Houston that provided less property tax reductions and significantly more equitably distributed state funding, was defeated by fewer than 10 votes.

As previously noted, the final Senate plan backed off its original level of funding, winding up with less total state funding than the House plan. To its credit the Senate plan also kept the existing funding structure with its accreditation allotment, adjustment for district factors, and pupil weights for special populations students.

With three weeks left in the regular session the House-Senate conference committee began to try to work out differences between the two plans. Though closer in total levels of funding than originally envisioned, the House and Senate negotiations stalled as the senators – recognizing the weaknesses in the alternative plan – refused to accept many of the provisions included in the House proposal. A major factor was that negotiators did not know how much new state funding might have been available because the two chambers could not achieve consensus on the components or amounts to be included in the state’s new major tax plan. Hamstrung with no bottom line figure, conferees worked until the last hours of the regular session and were unable to adopt a conference committee plan that could be sent to their respective chambers. The 2005 regular session ended with no new school funding program.

Concerned with providing some support for the upcoming school year, the legislature adopted a budget keeping school funding at prior year’s levels.

Fair Funding: The First Not-So Special Session

Though many school groups argued that no proposal was better than adoption of a bad proposal, the governor announced that he was re-considering his position to avoid calling a special session in the summer of 2005 specifically to deal with the school funding and tax reduction issues. Speculation was that he required some success on resolving the school funding issue to avoid a serious challenge for re-election.

Meanwhile, bipartisan support for an equitable alternative intensified. With what seemed to observers to be minimal or no consultation with the House Speaker or Texas Lieutenant Governor, the governor announced that he was re-convening the Texas legislature for a special session beginning June 22, 2005.

Putting even more pressure on the legislature, the governor vetoed funding for public education contained in the recently adopted state appropriations bill.

As members returned, the House education committee chairperson and Senate education committee chairperson introduced proposals that tracked the plans that they had initially drafted, with the Senate incorporating some minor changes adopted in the conference committee negotiations. Disagreements with the House leadership led the Senate to revert to its original (regular session) school finance proposal.

After having initial token hearings in the first week, both the House and Senate adjourned until the last week of June. School funding plans similar to those passed by each chamber during the regular session were passed and a conference committee was named in early July. With potential vote counts getting closer, policymakers worked until almost the final hour of the session without reaching an agreement.

Fair Funding: The Second Not-So Special Session

The governor immediately called another special session. The House and Senate began by reconsidering their original plans. But the Senate leadership delayed taking the measure to the Senate floor due to the lack of potential votes.

Meanwhile, bipartisan support for an equitable alternative intensified. In a surprising development, the House plan fell apart. During a dramatic day of floor debate, the plan was replaced by the Hochberg measure, which was then killed by the leadership. Members expressed their frustration over attempts to limit debate and the lack of time for them to review the plans before voting on them.

Neither side has been willing to change its stance on the companion tax proposal needed to fund any new plan. Increasingly frustrated with the process, some members expressed an interest in waiting for the Texas Supreme Court decision before considering any major new plan.

IDRA Principles

Regarding any school finance changes, IDRA recommends the following.

• The state must not adopt formula changes that will dilute the level of equity that is found in the current funding system either in the level of taxing that is equalized or the number of students and districts included within the equalized system.
• If the tax cap is increased, the state should maintain the same level of equalized return for every penny of tax effort provided in the current funding system.
• If recapture of local excess revenue is eliminated, local district ability to use excess taxing capacity should be effectively neutralized.

“Public” Kept in “Public Education”

Due to the gains made by political conservatives in both the Texas House and Senate, an aggressive pro-voucher policy agenda was expected in the last regular session. These concerns proved to be well founded as several major voucher plans were introduced in the Texas House of Representatives.

One plan would have required that selected school districts in the state’s five largest counties participate in a state-funded voucher effort. A competing voucher plan was proposed that would have allowed any child to transfer out of any Texas public school with a voucher to fund private school enrollment. Other variations called for creation of “pilot” voucher programs in selected schools and school systems.

A coalition of voucher opponents that included the Texas Freedom Network, Coalition for Public Schools, most major school organizations and IDRA, among others successfully fended off voucher efforts until the voucher proponents managed to introduce the pilot program variation in the final days of the regular session.

As expected, one of the voucher plans was introduced as an amendment to the senate school funding measure for the Texas Education Agency and adopted in the House education committee plan passed for consideration by the full House. In an unprecedented move, the Speaker of the House decided to cast key votes to either create vote ties or in some cases to provide the winning margin for key amendments to portions of the voucher plan.

Public Education Homicide Not Good for Anyone

In a contentious four-hour debate, a small cadre of moderates led the fight against the voucher proposals. The most vociferous of the voucher supporters included key members of the House Public Education Committee, none of whom really expected their own districts to be affected. But, two critical amendments were offered spelling the doom of the forceful pro-voucher maneuvering.

One removed two targeted school districts and replaced them with the school districts of two vocal pro-voucher legislators who backed voucher plans. Neither pro-voucher legislator approved the move, but it passed anyway.

The second amendment passed, assuring that vouchers would be used to transfer and enroll students in Texas public schools only, eliminating the private school eligibility for the program.

In a rare defeat for the House Speaker, the voucher plan failed by a slim two-vote margin, despite extremely heavy-handed lobbying by voucher proponents. Disappointed but defiant, voucher proponents vowed to return in the 2007 session or even in a special session. But no voucher package has been considered so far in the 2005 special sessions.

Once again, the carefully-coordinated efforts of the many groups working to support public education led to the defeat of all major voucher-related proposals in the last regular session. What an impressive achievement considering the host of powerful monied interests that championed the pro-voucher policy agenda. Anti-voucher advocates recognize that they will need to mount continuous activities to counter ongoing pro-voucher efforts.

IDRA Principles

IDRA continues to advocate the following.

• The state should limit the appropriation of public funding to private schools.
• The state should reject the concept of public funding for private schooling, even if the proposal is to implement pilot programs.

Access to College

The most notable development related to college access in the 2005 session was the defeat of proposals to limit the percent of students admitted to Texas’ two largest universities and eliminate the 10 Percent Plan. The University of Texas at Austin mounted the charge to end or limit the 10 Percent Plan. The effort to defend the expanded opportunities provided to Texas students who were historically excluded from admission to UT Austin and Texas A&M University was led by Senator Royce West who chairs the Senate sub-committee on higher education with support from Senator Gonzalo Barrientos and other members.

One of the limiting proposals called for elimination of the 10 Percent Plan (introduced by Senator Jeff Wentworth of San Antonio).

Another would have modified the 10 Percent Plan by placing a limit on the number of students who could be admitted under the plan’s automatic admission provisions. Under this proposal, once 10 Percent Plan students equaled 70 percent of the state’s major university freshman class, 10 Percent Plan admissions would be limited to a cap of 65 percent of the subsequent year’s freshman admissions, with provisions for referrals of non-admitted pupils who would have otherwise been eligible for automatic admission under original 10 Percent Plan guidelines, to other state universities.

A third proposal would have limited automatic admission to graduates in the top 5 percent of their graduating class.

Banding Together for Access

Efforts to kill the 10 Percent Plan were thwarted by coalitions of rural and urban legislators who had become aware of the expanded access provided by the plan for their constituents. Attempting to at least reduce the number of students provided automatic admissions or to counter expected full-fledged attacks, some legislators introduced alternative proposals to limit automatic admissions to the top 7 percent of graduates. This change would have reduced the number of students admitted under the 10 Percent Plan provisions and eliminated the argument that students admitted under the automatic admissions provisions left “little discretion” to university officials.

One competing proposal moved to reduce automatic admission to only the top 5 percent, or the next percentage needed to bring automatic admission to no more than 50 percent of major university enrollments. This proposal originated in the Texas House and sought to offset public opposition to eliminating the 10 Percent Plan, while responding to constituents from Texas suburban communities who had historically been over-represented in UT Austin and Texas A&M freshman admissions.

As legislators considered options, two major factors seemed to influence policymakers. One dealt with the claim by 10 Percent Plan opponents that students from “certain” high schools (i.e., urban, minority, rural and/or low-income) were under-prepared for the rigor of Texas’ elite universities. These claims were proven inaccurate as research revealed that 10 Percent Plan freshmen actually performed as well, and often better, on overall grade point averages than non-10 Percent Plan admits.

This finding reinforced doubts about using SAT or ACT scores as the prime criteria for determining college admissions and reinforced findings that proposed that high school GPA was a more effective predictor of future college success.

A second factor impacting legislative action was new data reflecting that many high schools that had never had a single senior admitted into the state’s two major universities were now enrolling a small but noteworthy number of graduates at these institutions. Growing recognition that the 10 Percent Plan enjoyed broad public support and benefited a cross-section of schools in all parts of Texas contributed to a reluctance to change what was deemed to be working. Ironically advocates for modifying the 10 Percent Plan argued that eliminating the automatic provision features would provide opportunities to achieve greater student diversity.

All variations proposed to the current 10 Percent Plan were defeated, due in great degree to 10 Percent Plan critics’ refusal to compromise on key provisions of any alternative proposal. As was the case with vouchers, 10 Percent Plan opponents vowed to push for elimination or major modifications in future Texas legislative sessions.

IDRA Principles

IDRA recommends that state policy be considered as follows.

• The state should increase the automatic admissions level from the top 10 percent to the top 15 percent.
• The state should continue and refine its support services programs to include all students identified as requiring additional academic assistance, financial aid or other support programs.

Increasing School Holding Power

Legislators’ competing focus on school funding reform and tax measures provided very limited opportunity to address school holding power concerns in the 2005 session. The House school finance proposal did include a new process for tracking students in Texas schools. Unfortunately, the plan did not require the state education agency to use these new data to calculate dropout rates. It is expected that the eventual resolution of the school finance issue will provide greater opportunity to focus selected members on school holding power in the 2007 session.

In a related development, the National Governor’s Association unveiled a new agreement signed by 45 states that will standardize the way dropouts are calculated. This approach is based on the number of students enrolled in ninth grade, compared to 12th grade students who earn a high school diploma four years later, after adjusting for transfers. This approach is a variation of the attrition method that has been used by IDRA since 1986 in its annual attrition study of Texas schools. It was noteworthy that Texas was one of five states that decided not to sign on to the agreement, along with California, Florida, Maryland and Wyoming.

IDRA Principles

IDRA continues to insist the following.

• Texas must change state agency dropout counting and reporting procedures by eliminating the use of extensive leaver codes.
• The state must include non-verified transfers, General Education Development (GED) and other unverified leavers in state and local school dropout counts.
• Texas must incorporate longitudinal rates, in addition to dropout rates, in the state’s school accountability system.

Bilingual Education: Access to Instruction

A sub-issue in ongoing school finance discussions involved changes in funding related to programs serving students identified as LEP. In the House school funding plan, the authors sought to convert the weighted student approach currently in place, with a fixed amount per LEP student served. For 2005 and thereafter that amount was set at $500 per student for kindergarten through eighth grades and $1,000 per LEP student served in high school.

Critics of the plan noted however that the per pupil amount provided a meager $23 over the average amount produced in the current formula at the kindergarten through eighth grades. Moreover, though there was increased funding proposed for high school LEP students, data clearly indicate that more than 80 percent of LEP students served in Texas are enrolled in kindergarten through eighth grades.

In the Senate plan, LEP students served in bilingual or ESL programs were assigned a weight as in current law, however the weights differed by grade level. In the Senate plan that was sent to conference committee, LEP students who had been served more than three years were assigned a weight of 0.10 (10 percent times the adjusted basic allotment), which is the same as current law.

LEP students enrolled and served in grades pre-kindergarten through two were assigned a new weight of 0.12; students in grades three through five a weight of 0.18; students served in grades six through eight a new weight of 0.24; and grades nine through 12 a new weight of 0.30. All of these weights would have been valid for a maximum of three years, after which the weights for these students would be reduced to the 0.10 level.

Some bilingual advocates had major reservations with the funding levels being proposed in both the House and Senate. To its credit, the Senate maintained the weighted pupil formula. This was important because it allowed the level of funding for services provided to LEP students to rise as the funding levels for the basic program increases over time – in essence connecting special programs funding to the allocations provided to the state’s regular program for all students.

Funding Lags Behind Growing Needs

Prior to the adoption of HB72 in 1984 which created the current funding scheme, funding for bilingual and ESL programs had been based on a fixed amount per pupil, starting at $25 per LEP student in 1973 and increasing to $50 per LEP student in 1981 with the passage of SB477, the basis for the current state program. In that period, lawmakers provided no money increases for programs serving LEP students. During that same time period, corresponding funding levels for regular programs was increased by hundreds of dollars per student.

This happened in part because many legislators were hostile to bilingual and ESL programs or did not see their own districts benefiting from such increases. Connecting the LEP funding levels to the regular program allotment was recognized as providing a mechanism for automatic increases without isolating the program.

Though having some positive features, the Senate plan’s fatal bilingual/ESL funding flaw was its tendency to concentrate the increased funding in the grades with the fewest LEP students: the high school level. At these levels LEP students are either students ill-served or not served by special programs. A large number however are new immigrants from non-English speaking countries, some with limited schooling. In such cases it seems advisable to provide specialized immigrant student funding in that these students may require more extensive services than those provided to non-immigrant LEP students.

A second shortcoming in the Senate’s plan was its insistence that all the newly proposed LEP student weights be reduced after three years of being served by these special programs. This three-year, arbitrary time period is inconsistent with research showing that development of second-language proficiency generally takes five to seven years. Reducing levels of support prior to that timeframe was considered to be dysfunctional and provided opponents to specialized services an excuse for early exiting, a tendency already recognized as all too present in many school systems in Texas.

The House proposal was even less adequate, arbitrarily setting LEP funding at levels that were a fraction of what bilingual/ESL cost studies say is needed, including studies conducted by state-funded “experts” who noted that meeting accreditation requirements necessitated an LEP funding level of more than $1,200 per pupil.

A second flaw was the provision in the plan that only required districts to spend at levels equal to the amounts spent prior to the increase in funding, in essence converting the increased funding generated by LEP students into free money that could be used for any purpose other than support for the students who had earned it for the district.

Because of concerns with the three-year limit, the inadequate funding levels, and the mistargeting of grades with the lowest number of pupils needing specialized services, many bilingual proponents were troubled by the major funding plans. Funding concerns were also coupled with concerns over current weaknesses in ensuring compliance with existing requirements related to bilingual and ESL programs, already weakened by a new “performance based” approach to monitoring that fails to pinpoint under-identification or premature exiting.

IDRA Principles

IDRA recommends the following.

• The state should make no changes to existing bilingual education and ESL policies.
• To the extent possible, a separate allocation should be considered for non-LEP students participating in a school district’s optional dual language programs.

The Prospects

After four failed efforts to address the long-simmering issue of school funding and largely shutting out education stakeholder concerns, some media outlets and many Texas citizens have begun to question the ability of current state leaders to lead major reforms. With elections not set until November 2006, the prospects for Texas are dim, unless the long-awaited court decision begins to provide new direction and sparks new urgency to address these decades-long challenges.

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