• Texas Family Project

School Finance or Tax Reform? Maybe Both but Probably Not Much of Either

by Texas Family Project

On Thursday, Gov. Abbott, Lt. Gov Patrick, and Speaker of the House Dennis Bonnen announced an agreement on school finance reform with legislation expected to pass early next week.

The deal includes over $4.5 billion in increased classroom spending plus an additional $2 billion for teacher and staff pay raises. Overall, this deal will increase the states portion of K-12 school spending from the current 35% to roughly 45% over the next two years. In addition to the teacher pay raise, the legislation will extend pre-k from half day to full day for low income students.

These items are definitely a win for Texas schools. However, like all things the Texas legislature touts, the devil is in the details. What this deal does not provide is a method for funding the proposed budget increases. In fact, when asked by multiple news outlets, including the Dallas Morning News and the Texas Tribune, where they were getting the funds for this deal neither Speaker Bonnen nor Lt. Gov. Patrick would answer.

The lack of a funding source in this deal is particularly puzzling considering it comes with roughly $5 billion in tax breaks. The impetus behind this legislation is the desire among Texans for both an increase to school funding and a reduction in property taxes. Under current law these two issues are inextricably connected as property taxes make up a majority of school finance. In the past both the state and local property taxes each provided 45% of school funding, the additional 10% coming from federal grant monies. However, over the years the state has reduced its portion of school funds in proportion to the increase in property values. This has led us to a system where the state is only funding 35% of school budgets while leaving property tax payers to pick up the rest.

So, increasing school funding while giving property tax reductions should be a great thing, right? The problem is the legislature isn’t really doing either of those things. Not only is the legislature not providing a funding source for the increases to school spending, they are not providing a long term fix for rising property taxes. First, by reducing the property tax rate they will be reducing the amount of local funds that would otherwise be going towards those schools in the first place.

Second, the reduction in property tax is a simple rate reduction from the state, but there is nothing in the legislation to reign in the valuation of property. In other words, a property owner may get a reduction in their rate over the next two years but there is nothing stopping the appraisal district from washing away that reduction the next time they appraise your home.

While this deal has some good ideas for education it feels like the legislature is feeding us a tax break and calling it education reform. It may work out great in the end, and we hope it does, we just shouldn’t be popping the champagne quite yet.

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