Putting the Student First: School Finance for Texas

8/11/2019 Putting the Student First: School Finance for Texas

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school financePutting th Studen Frs

James GolsanJuly 2014

Texas Public Policy Fo undation

for Texas


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Executive Summary ...................................................... .............. 3

History ...................................................... ........................................... 4

2011-2013: New Lawsuits ................................................... ..... 5

Standing Inefficiencies, Few Changes ............................. 6

School Spending on the Rise .............................................. 8

A Growing Monopoly: Public Educationin Texas ..................................................... .........................................10

Looking to Other States on Student FirstFunding ................................................................................ ............12

Florida: A Long Time Leader in Putting theStudent First .................................................... ...............................14

Making Texas #1: Going Forward ......................................16

Conclusion ....................................................... ...............................19

Endnotes ................................................. .........................................20

Table of ContentsJuly 2014

Texas Public Policy Foundationby James Golsan


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July 2014 Putting the Student First: School Finance for Texa

www.texaspolicy.com 5

FORT BEND ISD

ET AL

TEXAS TAXPAYER

AND STUDENT

FAIRNESS

COALITION

MEXICAN

AMERICAN LEGAL

DEFENSE AND

EDUCATIONAL

FUND

TEXAS SCHOOL

COALITION

TEXANS FOR REAL

EFFICIENCY AND

EQUITY IN

EDUCATION

TEXAS CHARTER

SCHOOLS

ASSOCIATION

WHO THEY ARE81 school districts

ranging from rural to

suburban to inner city,

including the states

eight largest districts.

Organized by the

Equity Center, the

group represents more

than 400 primarily mid-

to low-property wealth

school districts

accounting for an

estimated 1.3 million

students.

Districts with large

portions of low-income

and English-language-

learning (ELL) students.

Roughly 60 property-

wealthy districts,

known as Chapter 41

districts, that give back

to the state under the

Robin Hood Law.

Six parents and a newly

formed coalition that

includes the Texas

Association of

Business, school choice

advocates and former

House Public Education

Chair Kent Grusendorf.

Along with TCSA, the

parents of five charter

school students in

Austin, Dallas,

Houston, and San

Antonio.

WHAT THEY SAYBy underfunding

schools the state has

not given local districtsenough choice in

whether to raise

property taxes or how

to spend existing

revenue in effect,

instituting an

unconstitutional

statewide property tax.

Schools also dont have

adequate resources to

meet increasingly

rigorous accountability

standards.

Inequities in the school

finance system in

which neighboringschool districts can

have as much as a

$7,000 difference in

annual per-student

state funding hurts

the districts with the

least property wealth

the most, leaving them

with higher taxes and

fewer funds.

Children who dont

speak English at home

are more expensive toeducate. The state

provides per-student

allotments to districts

that enroll them but

those havent been

updated since 1984.

This group is involved

primarily as a

defensive measure.Property wealthy

districts benefited the

most from state

property tax cuts in

2006, because Texas

lawmakers agreed to

make up the difference

in lost school revenue.

But these districts say

they still arent

adequately funded.

No one knows how

much it costs to

educate a Texasstudent, so how can

the school finance

system be efficient?

Efficiency doesnt

necessarily mean more

funding. The state

should lift the charter

school cap and lessen

regulations on public

schools.

Charter schools dont

receive funding for

facilities like traditionalschool districts. The

state also caps its

charter contracts at

215. Both the lack of

facilities funding and

the cap are unfair and

arbitrary, hurting

charter school

students.

LEGAL ARGUMENTThe system is

unconstitutional

because it forces a de

facto statewideproperty tax and

because the state has

failed to adequately

fund its public schools

and because it

arbitrarily and unfairly

allocates funding to

schools (i.e.

inefficiently) without

any real connection to

the actual costs of

educating students.

A school finance

system that is so

inequitable is also

wildly inefficient thusunconstitutional. This

group also makes the

adequacy and property

tax arguments.

By underfunding ELL

and economically

disadvantaged

students, the state hasfailed to adequately

provide for their

education and

because of this,

property poor school

districts do not have

discretion in whether

to raise their taxes.

This group also makes

the efficiency

argument.

The system is

unconstitutional

because it forces a de

facto statewideproperty tax and

because the state has

failed to adequately

fund its public schools.

The current system is

unconstitutional

because it is inefficient.

The court should ordera study on the true

costs of educating a

child whether that

means more or less

money for schools. This

group also makes the

property tax argument.

Denying charters the

facilities funding

available to traditional

school districts andlimiting their growth by

way of the charter cap

creates an inefficient

finance system.

Gov. Rick Perry called the Legislature back into special

session in 2006 to fix school finance so that it would pass

muster with the courts. Te result was a relatively complex

system o revenue targets or school districts. ax compres-

sion likewise figured in the plan. Te simple $1.50 limit on

property tax rates was reduced to $1.00, with an option or

school districts to tax up to our cents more on the dollar.

With voter approval, districts may add up to 13 cents be-

yond that level bringing the total to $1.17 per $100 dollars

valuation. A new business tax was put in place to finance

that change. Tereore most home owners saw no substan-

tial increase in their property tax bills rom 2006-08.13

Tis system remained largely unchanged until 2011. Te

82nd exas Legislature aced a substantial budget short-

all o about $15 billion,14and was orced to make numer-

ous budget adjustments across all branches o state gov-

ernment, including public education.

2011-2013: New LawsuitsIn October o 2011, it was announced that our separate

groups o school districts were suing the state o exas again

over its school finance system. Additionally, the exas As-

sociation o Business and a new group, exans or Real Eq-

uity and Efficiency [REE], intervened into the lawsuit on

the basis o real efficiency. Te exas Charter School Asso-

ciation filed a separate lawsuit which was later olded into

this case. By the time the trial was set to ormally kick off in

the all o 2012, the total number o plaintiffs had grown to

six. Per the exas ribune, the involved partiesand their

respective issuesare outlined in the graphic below:

Source: The Texas Tribune


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Putting the Student First: School Finance for Texas July 2014

6 Texas Public Policy Foundation

Judge John Dietz o exas 250th District Court condensed

the lawsuits into one trial, which took place rom October

2012 to early February 2013. At that juncture, Judge Dietz

issued an initial verbal ruling declaring the exas school

finance system unconstitutional on the basis that it was

not adequately unding the states public schools.15

However, as 2013and the 83rd exas Legislature

stretched on, no official ruling rom the 250th District

court was ever published. Te 83rd Legislature, or its part,

retroactively restored some o the ormula adjustments

made in 2011.16 In June 2013, ollowing the completion

o the 83rd Regular Session, Judge Dietz announced that

he would re-open the trial in January o 2014 to consider

only new legislation passed during the 83rd.17Tat mini-

trial, which has been concluded, is awaiting a ormal rul-

ing rom Judge Dietz. Te final ruling rom that trial willdetermine when the case will be sent to the exas Supreme

Court and i, in turn, the exas Legislature must redraw

the states school finance ormula once again.

Standing Inefficiencies, Few ChangesTrough exas long history o school finance litigation,

a ew actors, to be outlined in greater detail below, are

constant:

Academic perormance is static.

Education spending increases. Lawsuits are constant.

All past litigation ocused on more money or schools.

Tis despite the act that the court consistently remind-

ed us that money was not the only issue. As the Supreme

Court said back in the 1990s: In the rough and tumble

o another attempt to resolve this crisis, it is undamen-

tally important that the legislature be mindul o all o

the elements o the efficiency standard we announced in

Edgewood I. Tat standard deals with more than money, it

mandates educational results.18

In short, we suffer many o the same problems now as we

have or several decades. Every redraw o exas school

finance system has ocused on bringing equity to the or-

mula. History has borne out, however, that finding a sat-

isactorily equitable system is impossible and urther, that

efforts to find such an equitable system have yielded ew

benefits or exas students.

Robin Hood and the Continuing Difficulty

of EquityAs previously mentioned, exas public schools are und-

ed largely by local property tax collection. Because it is

unconstitutional or exas to have a statewide property

tax, the state orces districts to act as tax collectors and

then redistributes that money through a complex set o

ormulas. So, the effect is as i we did have a state property

tax. Te nickname o this system is, as previously men-

tioned, Robin Hood.19

Put as simply as possible: school districts receive their

money based on how many students are attending their

school on a day-to-day basis multiplied by various

weights or different students. Te technical term or thatis WADA, or weighted average daily attendance. A dis-

tricts WADA is calculated by counting the number o

students who attend school each day o the school year,

divided by the total number o instructional days within

a school year. However, actually calculating a schools Av-

erage Daily Attendance (ADA) is slightly more complex

than that. Students are summed through six week peri-

ods. Te total student count o all six o the six weeks are

added together, then divided by six. Te resulting number,

rounded to three decimal places, is a schools average daily

attendance. Te figure is then adjusted. How much it coststo educate students in a given region is also actored into

the equation. Small and mid-sized population districts

(small districts have ewer than 1,600 students in ADA,

mid-districts ewer than 5,000) have their allotments ad-

justed or diseconomies o scale, i.e. insufficient per stu-

dent unds. A district in a lightly populated region also

sees upward allotment adjustments.20

Texas public schools are funded largelyby local property tax collection. Becauseit is unconstitutional for Texas to have

a statewide property tax, the state

forces districts to act as tax collectorsand then redistributes that money

through a complex set of formulas.


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I a school district generates more that its WADA calculat-

ed revenue, based on these complex state ormulas, then

the excess is subject to recapture. Per EA, recapture is

defined as ollows:

Recapture is a mechanism in state unding ormulas

that ensures that a districts property wealth per stu-

dent does not exceed certain levels, known as equal-

ized wealth levels. A district that is subject to recapture

is ofen reerred to as a Chapter 41 district because the

provisions governing recapture are ound in the EC,

Chapter 41.21

Recapture is a significant source o riction in past and

current school finance litigation. Property wealthy school

districts believe they carry too heavy a burden in the Rob-

in Hood unding structure. Property poor school districts

believe that Robin Hood does not do enough to equalize

unding. In short, its a school finance system that satisfies

no one.

The Cost of Education IndexAnother equalization actor built into the school finance

ormula is the Cost o Education Index, or CEI. Per the

exas Education Agency, the history o the CEI is as ol-

lows:

Te concept o adjusting education unding or varia-tions in cost began in a 1984 special session with the

creation o the Price Differential Index. Te State

Board o Education (SBOE) was directed to create a

replacement or this temporary index and undertook

this in 1987, but the study was moved to the Legisla-

tive Education Board (LEB) and the Legislative Bud-

get Board (LBB) in 1989. Te Foundation School Fund

Budget Committee adopted rules based on research by

LEB and LBB in 1991.

Te current CEI attempts to adjust or varying eco-nomic conditions across the state, based mainly on the

size o the district, the teacher salaries o neighboring

districts, and the percentage o low-income students in

the district in 19891990. Te index has not been up-

dated since that time. (emphasis added)22

Stated most simply, the CEI is a ormula adjustment which

adds greater revenue to every school district. However,

some receive a greater share based on whether they meet

certain population and economic metrics. Te level o ac-

cess to the CEI a school district has is based on a calcula-

tion more than two decades out o date. Tis renders the

CEI almost useless per its original intent, as exas has ex-

perienced drastic demographic shifs since 1989.23

What we do know is that the CEI increases the amount

o money spent on education in exas. According to the

exas Education Agency, the CEI added $1,453,964,712

or school districts during the 2009-2010 school year.24

Another way to look at the impact o the CEI is in terms o

per pupil spending. A 2000 report by the Dana Center at

the University o exas at Austin illustrated the problems

with the Cost o Education Index as ollows:

A popular misunderstanding about the CEI is that it

is simply a mechanism or increasing state aid to large

urban school districts. Every exas school district has

a CEI value greater than 1.0, however, which means

that every school district receives some adjustment to

its oundation program calculations to compensate or

uncontrollable variations in the costs o education.

School districts with 50,000 students or more receive,

on average, $397 out o $1,666 in state aid per averagedaily attendance as a result o the CEI. School districts

with 500 to 999 students receive $295 out o $3,761 in

state aid per average daily attendance.25

In short, we have an outdated mechanism that increases

revenue to virtually every school district in the state. As

originally intended, the CEI had a legitimate unction and

value, but today it is almost as i the state flies over exas

dumping out $1.5 billion to districts irrespective o need.

Over the years the courts have implied a desire to reflecton the broader issue o inefficiencies in the system. For

example, in 2005, they said: We are constrained by the

arguments raised by the parties to address only issues o

school finance. We have not been called upon to consider,

or example, the improvements in education which could

be realized by eliminating gross wastes in the bureaucratic

administration o the system.26


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Sparsity AdjustmentsAnother actor to look at as a potential cost driver in exas

school finance is the volume o small school districts that

are potentially subject to the sparsity adjustment in the

school finance ormula. Te sparsity adjustment is de-

signed to und schools that simply do not have enough

students to leverage significant enough tax wealth to ad-

equately und their schools, and comes into play when a

schools ADA or the previous year was 130 or less.27Te

sparsity adjustment works as ollows:

Te sparsity adjustment allows or an inflated ADA in

districts that in all likelihood would not otherwise have

enough students to generate sufficient moneys to sus-

tain their school. Te unortunate reality here is that this

approach creates a situation in which students in small,

mostly rural, school districts, cost more to educate than

students in larger ISDs.

School Spending on the RiseWhat is not debatable about exas history o school fi-

nance litigation is that no matter what adjustments have

been made to the ormula through the years, costs in ex-

as education have continued to rise. Some o this is the

natural result o inflation and population growth. Some

o it is not. exas has demonstrated a propensity to spend

at a significantly higher rate than the population is grow-

ing over the last several decades. Te graph below demon-

strates the severity o this trend rom 1998 to 2009:

As this chart indicates, spending has increased dramati-

cally. In the last round o school finance litigation the

An ADA figure of: If the District offers:The prior or currentyear ADA is at least:

Orthe number of miles tothe nearest district with a

high school is at least:

130 ADA is used Grades K-12 90 30



Source: The Texas Education Agency

Sparsity Adjustments Formula

Percent Increases in Spending & Enrollment

(1998-99 through 2008-09)

Source: Texas Office of the Comptroller

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Expenditures

Enrollment


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Supreme Court said: Te principal cause o continued

litigation, as we see it, is the difficulty the Legislature has

in designing and unding public education in the ace o

strong and divergent political pressures.28Te only thing

on which most school districts and stakeholders agree is

that they need more money. Te Legislature has consis-

tently taken the easy route and provided additional und-

ing along with minor tweaks to the system.

In politics, at all levels, passing out the pork is always the

easiest way to find consensus among stakeholders. How-

ever, a constitutionally efficient system must comply with

the courts mandate: A ocus on results is required by this

courts opinions in Edgewood I and Edgewood IIand re-

quires the legislature to articulate the requirements o an

efficient school system in terms o educational results, not

just in terms o unding.29Tat is much more difficult to

achieve politically, yet there is a clear constitutional re-

quirement or better results.

Compression o any kind only occurs in exas education

unding when it is absolutely necessary, as it was when

there was a general budget shortall during the 82nd Leg-

islature in 2011.30I you go back arther, looking at educa-

tion spending growth in the 80s and 90s, youll find simi-

lar rising trajectories in the realm o per-pupil spending,

as well as over-all spending. Tese increases have histori-

cally out-paced the inflation rate significantly. Considerthe ollowing:

otal exas public school expenditures increased 334.5

percent rom 1987 to 2007, an increase o 142 percent

when adjusted or inflation.

exas per-pupil costs increased rom $3,659 in 1987 to

$11,024 in 2007, a 66 percent increase when adjusted

or inflation.

Even with an inflation adjustment, exas per-pupil

spending during that two decade run out-paced the

national average (66 percent against 54 percent).31

Te point here is not that we are necessarily spending too

much or too little on exas students. One o the difficulties

o unding education is determining what, exactly, one

should spend per-pupil (this was noted in the 2011 exans

or Real Efficiency and Equity law-suit outlined above).

Te cost varies greatly rom student to student. What has

been established through research, however, is that simply

spending more money does not equate to better outcomes

or students. Consider, or example, that not only has ex-

as been drastically increasing its per-pupil spending over

the last several decades, but that the United States collec-

tively has as well, at the aorementioned 54 percent rate.

Te graph below shows, by ethnicity, the progress Ameri-

can students have made on the National Assessment or

Education Progress (NAEP) rom 1975 to 2008:

Source: Center for Public Education

NAEP Long-term Trends: Reading

17-year-olds by Race and Ethnicity (1975-2008)


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A quick glance will show that what youre looking at is not

a 54 percent improvement in perormance, or a 66 percent

one. exas academic outcomes have remained as static as

the national trends outlined above. Te point is that de-

spite the so ar endless series o lawsuits exas has aced

over the structure o its school finance system, the result

at the end o the day is that more money gets pumped into

a system with ew academic results to show or the dollars

spent.

A Growing Monopoly: Public Educationin Texas

exas low regulation, business-riendly environment is

pushing it to the national oreront o industry and job

creation. Consider a September 2013 article in Forbes,

which declared the ollowing regarding exas and the

Gul Coast region:

Once a sleepy, semitropical backwater, the Tird Coast,

which stretches along the Gul o Mexico rom south

exas to western Florida, has come out o the recession

stronger than virtually any other region. Since 2001, its

job base has expanded 7 percent, and it is projected to

grow another 18 percent the coming decade.

Te energy industry and burgeoning trade with Latin

America are powering the Tird Coast, combined witha relatively low cost, business-riendly climate. By 2023

its capitalHoustonwill be widely acknowledged

as Americas next great global city. Many other cities

across the Gul, including New Orleans and Corpus

Christi, are also major energy hubs. Te Tird Coast

has a concentration o energy jobs five times the na-

tional rate, and those jobs have an average annual sal-

ary o $100,000, according to EMSI.32

exas obligation is to prepare its studentsall o its

students, each with their own unique set o educationalneedsor participation in that work orce. Our current

education structure is not designed to provide flexibility

or students not best suited or participation in the states

public education system. Rather, in contrast to reedom

that characterizes and drives innovation in exas business

and job sector, exas education is a monopoly.

What should also be taken into account is the degree to

which exas public schools are growing. In 24 years, weve

increased the size o our public school system drastical-

ly. Tis paper previously mentions the degree to which

spending has out-paced our enrollment growth, but the

latter should not be ignored.

Tats a 10-year growth rate o 20 percent, and a 24-year

growth rate o 55 percent. Put another way, exas averag-ing around 80 thousand new students entering its schools

per year. Tats approximately the entire student popula-

tion o Wyoming.

While exas student body has certainly grown substan-

tially over the last several decades, administrative and

staffing numbers have grown at an even higher rate. For

example, rom 1987 to 2007, exas student body in-

creased by 44.5 percent. Staff in exas public schools in-

creased by 71.5 percent during that same time rame, with

the numbers o support staff and administrators growingat a aster rate than teachers (around 76 percent against 68

percent).33

Tese sorts o staffing numbers can in part be attributed

to state level mandates that drive inefficiency. In exas, no

single mandate does so more than the K-4 class size cap,

which requires a 22:1 student/teacher ratio. Tis mandate

Source: Texas Education Agency

2

3

4

5

6

1987-88 1993-94 1999-00 2005-06 2011

Enrollment Growth, Texas Public Schools

(1987-2012)

InMillions


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orces districts (unless they are granted a waiver by the

exas Education Agency) to hire more staff instead o

allowing or flexibility in class size. According to 2010s

exas F.A.S.. (Financial Allocation Study For exas), the

financial impact o this mandate is substantial:

Using the average state salary or K-4 teachers ($46,904)

[we estimated] a range o savings based on the share o

classrooms that participate and the average number o

students per teacher. For instance, i all exas public

schools had an average K-4 classroom size o 20 stu-

dents, the state would save $159 million annually. I all

exas K-4 classrooms averaged 22 per class, total sav-

ings would reach $557.5 million. Tese estimates do

not include savings on employee benefits.34

And these numbers account only or growth in the teach-

ing ranks, not administrative. I exas student body con-

tinues to grow at its current rate, exas will be orced to

add education staff correspondingly. Tis is a significant

cost driver in a one-size-fits-all model, as low- and mid-

dle-income students flowing into exas have ew alterna-

tives but to attend their local public school.

Tere is no way that a one-size-fits-all classroom and

spending model is going to meet the needs o all exas

students. Tis, in all o exas long history o finance litiga-

tion and re-design, has never been addressed by our law-makers or courts. Fortunately, this is the ocus o one o

the current litigants listed earlier in the paper, namely, the

one brought by exans or Real Efficiency and Equity in

Education. Tey make the case that unding our schools,

and specifically finding efficiency therein, is not simply a

question o numbers, but rather a question o greater pa-

rental reedom to maximize the impact o those dollars, as

well as maximal reedom or school districts to use their

unds to best suit their needs.

Although the creation o a private school choice programis essential to any exas solution, exans should look be-

yond and take the lead. Other states, particularly Arizona,

Utah and Florida, have taken steps toward creating back

pack unding within their public education systems,

which is to say, flexible unding programs that allow par-

ents and students to make choices as to how their educa-

tion is received.

Enrollment Growth, Texas Public Schools

(1987-2012)

Year Enrollment % Increase

1987-88 3,224,916

1988-89 3,271,590 1.4

1989-90 3,316,785 1.4

1990-91 3,378,318 1.9

1991-92 3,460,378 2.4

1992-93 3,541,771 2.4

1993-94 3,672,198 3.7

1994-95 3,730,544 1.6

1995-96 3,799,032 1.8

1996-97 3,837,096 1

1997-98 3,900,488 1.7

1998-99 3,954,434 1.4

1999-00 4,002,227 1.2

2000-01 4,071,433 1.7

2001-02 4,160,968 2.2

2002-03 4,255,821 2.3

2003-04 4,328,028 1.7

2004-05 4,400,644 1.7

2005-06 4,521,043 2.7

2006-07 4,594,942 1.6

2007-08 4,671,493 1.7

2008-09 4,749,571 1.7

2009-10 4,847,844 2.1

2010-11 4,933,617 1.8

2011-12 4,998,579 1.3

Source: Texas Education Agency

There is no way that a one-size-fits-all classroom and spending model isgoing to meet the needs of all Texas

students. This, in all of Texas long

history of finance litigation and re-design, has never been addressed

by our lawmakers or courts.


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students experiencing Developmental Delays comprised

the largest portion (34 percent).39

Fiscally speaking, the ESA program is a push or Arizona.

Given that the Arizona department o education grants

parents 90 percent o what they would be paying to edu-

cate that child in a traditional public school setting, the

programs design is not to generate significant savings at

the state level. Rather, the idea behind the ESA is to gen-

erate efficiency via maximizing the dollars that are being

spent by letting parents have a maximal say in what their

childs education should look like. It is an innovative and

thus ar unique approach, and one exas should examine

closely as it looks or ways to get more out o its education

dollars.

Utah and Digital Ed: Funding Students for theFutureNo state has taken bigger strides to make themselves a

ront runner in the arena o digital and blended learning

in recent years than Utah. While not as comprehensive

as the student-first model in Arizona, Utah has taken

the idea o back-pack unding and injected it into their

digital learning laws, laws that have, according to Digital

Learning Now, made them the number one state or digi-

tal learning in the country.40

What makes the Utah model so strong? Parents and stu-dents are in the drivers seat, at all times. Utahs flexible

environment allow numerous course providers to provide

content in Utah schools, including private and non-profit

providers working through Utahs Statewide Online Edu-

cation Program, as well as allowances or school districts

to run their own digital learning shops, independent o

the network.41

Another distinctive eature o Utahs digital learning pro-

gram is their embracing o the idea that course mastery

replace seat time. One o the least flexible elements o

exas school finance system is our WADA-based unding

structure, which is reliant on students being at their desks.

For digital learners in Utah, competency is valued above

all else, and the time involved is immaterial. Tis achieves

the ollowing:

Allows students to advance based upon demonstrated

competency.

Open-entry, open-exit permitted based upon provider

parameters.

Provider administers required state assessments

(CRs) upon course completionstate makes assess-

ments available at any time.42

The Texas Virtual Schools Networkis a substantial course provider, and

as of the 83rd Texas Legislature in

2013, has greater flexibility to allow

private and non-profit providersof content into the system.

Category 1 Category 2 Category 3 Category 4

$200 / semester $250 / semester $300 / semester $350 / semester

Financial LiteracyHealth

Fitness for LifeComputer LiteracyDrivers Education

Fine ArtsCTE

UncategorizedElectives

Social Studies

World Languages

Core Courses:Math

ScienceLanguage Arts

Concurrent Enrollment Courses

Source: Presentation on Digital Learning for Texas, Utah State Senator Howard Stephenson

Utahs Statewide Online Education Program


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O course, to operate a system with this much flexibility,

a unique unding model is required. Utah has developed

just such a model in the orm o tiered unding or their

digital education program. Te nature o that structure is

outlined in the table above.

Te structure was created based on such actors as

course subject and difficulty and necessary level o

teacher interaction.

Tese new course ees were designed to provide a rea-

sonable and air ee to the Public School Providers

o online courses while ensuring students receive the

high-quality curriculum and instruction necessary to

prepare them or their post-secondary goals.

Digital unding is always a slightly different animal than

traditional education unding, and lends itsel to a more

student-centric approach, as many states have incorpo-

rated models that, in one way or another, allow unding to

ollow student. Utahs design is among the most flexible, as

it lets the student tailor their learning experience to make

greater allowances or online coursework as they progress

through their high school years, including opportunities

or early graduation. Te rules are as ollows:

Students may enroll in up to two online courses in years

one and two, beginning in the 2011-12 school year.

In year three it expands by one course per year - ex-

panding to six courses in year six. (based on Utahs re-

quirement o 24 credits or graduation)

A student may use the program to graduate early in ac-

cordance with their SEOP.43

exas is airly strong as ar as online learning is concerned.

Te exas Virtual Schools Network is a substantial course

provider, and as o the 83rd exas Legislature in 2013, hasgreater flexibility to allow private and non-profit providers

o content into the system.44Te groundwork (potentially)

is there or exas to move in Utahs direction and adopt a

massively encompassing, student first online learning in-

rastructure.

Florida: A Long Time Leader in Puttingthe Student FirstFlorida has long been a leader in building student-first

mechanisms into their unding system. Much like ex-

as, Floridas schools are unded based on the number o

weighted, Full ime Equivalent (FE) students in atten-

dance, similar to our WADA system.45Alongside that tra-

ditional unding mechanism, Florida has two systems in

place to allow students to attend a school o their choice.

Te first o these programs is the McKay scholarship or

students with special needs. It is described by the Florida

department o education as ollows:

Te McKay Scholarships or Students with Disabilities

Program, originally created in 1999, provides scholar-

ships or eligible students with disabilities to attend an

eligible public or private school o their choice. Students

with disabilities include K-12 students who are docu-

mented as having an intellectual disability; a speech or

language impairment; a hearing impairment, includ-

ing deaness; a visual impairment, including blindness;

a dual sensory impairment; an emotional or behavioral

disability; a specific learning disability, including, but

not limited to, dyslexia, dyscalculia, or developmental

aphasia; a traumatic brain injury; a developmental de-

lay; or autism spectrum disorder.46

In 2012-2013, the McKay scholarship will serve over

26,000 special needs students, making it the largest pro-

gram o its kind in the country.47

Floridas second choice mechanism that allows public

school students to receive scholarships to attend a private

school is the Florida ax Credit program, created in 2001.

Any student enrolled in a Florida public school is eligible

to receive a tax credit scholarship. Again, rom the Florida

Department o Education:

Tese scholarships are unded directly by private vol-

untary contributions to nonprofit scholarship-unding

organizations or students who qualiy or ree or re-

duced-price school lunches under the National School

Lunch Act. In accordance with Section 1002.395, Flor-

ida Statutes (F.S.), up to $229 million in tax credits or

participating corporations is authorized or 2012-13.


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In order to be eligible or Florida tax credit scholar-

ships, a student must have been reported or unding in

a school district during the prior October and Febru-

ary surveys or received a scholarship rom an eligible

nonprofit scholarship-unding organization during the

previous school year.48

As o September 2013, there were 58,985 students partici-

pating in the Florida ax credit program.49A third pro-

gram, called the Florida Opportunity Scholarship, alsoexists as a choice mechanism, allowing students who at-

tend a low perorming public school to transer to a high

perorming public school. Originally designed to allow

these students to attend either a public or a private school,

the Florida Supreme Court ruled in 2006 that the private

school portion o the program was unconstitutional.50

As Florida has one o the oldest choice systems in the

country, it has some o the best data on what student first

unding structures can do or students in such a system, as

well as the positive impact student first reorms can have

on an education system as a whole.

Florida: Getting ResultsSince Florida instituted its slew o education reorms be-

ginning in the late 1990s, it has seen drastic improvement

in academic perormance among student populations thathad traditionally underperormed in the state. Black and

Hispanic students, which had lagged behind other student

groups in Florida in reading perormance, experienced

substantial improvement in their scores between 1998 and

2009. Perhaps no metric has been more substantially im-

pacted by the student first education reorms Florida put

into place than a reduction in the racial achievement gap.

Source: Heritage Foundation; National Assessment of Educational Progress, The Nations Report Card.

Floridas Minorities Narrow the Racial Achievement Gap

In 1998, black and Hispanic students in the U.S. lagged far behind whites in fourth-grade reading scores. While thattrend largely continues today, Florida minorities have made significant strides toward narrowing the gap.


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[W]e estimate that in Fiscal Year 2007-08, the state

saved $1.49 in education unding or every dollar loss

in corporate income tax revenue due to scholarship

contributions. Te scholarship unding organizations

collected $79.2 million in contributions and provided

scholarships to 21,493 students. We estimate that 90%

o these students would have attended public school i

not or the scholarship. Te state avoided $118.1 mil-

lion in education spending or these students, result-

ing in net savings o $38.9 million taking into account

oregone corporate tax revenue.54

Florida demonstrates that given enough time to be e-

ectively implemented, student first education spend-

ing reorms can yield high rates o parental satisaction,

positive academic results, and greater fiscal efficiency at a

statewide level. Te latter is particularly important in the

context o exas long history o school finance litigation,

as the states constitutional obligation is to provide an e-

ficient system o ree public schools. Student first reorms

drive such efficiency.

Making Texas #1: Going Forward

Tere is no larger problem in exas education than our

states steadast commitment to the status quo. We have

not only added billions in spending, we have adjusted and

tinkered with our school finance system repeatedly overthe last several decades, and we have very little to show

or those additions and adjustments, either in terms o

efficiency or academic outcomes. Tereore, it is time to

undamentally adjust the way we think about unding our

schools and look beyond minor tweaks to the system.

exas should make the ollowing changes to ensure that

we are getting the most out o every dollar we spend on

education and, hopeully, make strides against the cycle o

litigation that has plagued our school finance system or

the last hal century:

Recommendation: Re-Calculate the Cost ofEducation IndexTe Cost o Education Index is one o the most glaring

inefficiencies in the means by which exas disseminates

its education dollars. It is a two decades old metric that

drives billions o dollars into exas schools with a deeply

A 2010 study by Dr. Mathew Ladner directly attributed

the gains seen in Floridas education system to the imple-

mentation o significant, student first reorm. Whats more

exciting is that the reorms seem to have impacted Flori-

das public school system as a whole. According to Ladner,

ollowing the implementation o student first reorms:

Te percentage o Florida children ailing to master

basic literacy dropped by 36 percent in less than 10

yearsa remarkable achievement. Meanwhile, the per-

centage o ourth graders scoring proficient increased

by 54 percent, and the percent scoring advanced (the

highest level o achievement) doubled, rom 4 to 8 per-

cent.51

Floridas reorms were not limited to the implementation

o school choice programs, but all the reorms put stu-dent first. Changes to the states accountability system or

public schoolsnamely, moving to a clearly understand-

able, A through F grading systemmade it much easier

or parents to understand how their students school was

perorming.52

Reorming teacher compensation with emphasis on per-

ormance pay gave instructors an incentive to provide the

highest quality education possible or their students. Tat

stands in sharp contrast to exas salary schedule driven

model, which rewards longevity over all else.53

Whats more, the Florida reorms have put students first

while saving the state education dollars. A 2008 study by

the Office o Program Policy Analysis and Government

accountability studied the fiscal impact o the business tax

credit component o Floridas school choice program, and

reached the ollowing conclusion:

Florida demonstrates that givenenough time to be effectively

implemented, student first educationspending reforms can yield high

rates of parental satisfaction, positiveacademic results, and greater fiscalefficiency at a statewide level.


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o large scale school choice programs are the only way

to stem that growth and potentially generate meaningul

savings or exas. More importantly, this is the only way

to assure the system is constitutionally efficient and meets

the needs o individual exas students.

Recommendation: Eliminate StandingInefficiencies in the SystemAs previously mentioned, exas K-4 class size cap has

significant impact in exas education spending. How-

ever, it is hardly the only inefficient spending practice in

exas schools. Another significant problem is the manner

in which we compensate our teachers, which is to say on

a minimum salary schedule model.64 A salary schedule

model means that teachers are compensated based almost

entirely on experience, rather than their quality as an edu-

cator. Tey receive an automatic annual pay raise every

year, regardless o how they perormed during the previ-

ous year.

I exas is to put the student first when it comes to edu-

cation unding, it must move away rom this model and

toward a perormance pay based system. Perormance pay

has been shown to increase retention rates in high quality

educators and serves as a natural incentive or struggling

teachers to improve their perormance.65Quality teaching

is the most important actor impacting a childs education

outside o their home environment. Improving teacherquality, thereore, must be a key consideration when con-

sidering how exas unds its public schools and compen-

sates educators.

Conclusion

No adjustment exas has ever made to its school finance

ormula has brought long term stability to its education

system. Te reality is that finding a unding system that

keeps all stakeholders happy at all timeswealthy school

districts, poorer districts, parents, education adminis-tration, and teachersis impossible. inkering with the

unding mechanism and levels has through the years pro-

duced dissatisaction and more lawsuits.

Going orward, exas must change three things about

the way it unds its schools: First, it must iron out glaring

inefficiencies by implementing school choice and other

market-based reorms. Second, it must attempt to prevent

uture lawsuits as best it can by designing a constitution-

ally efficient system. Lastly, it mustund the student first

while updates to the CEI and adjustments to the way we

compensate educators and regulate our school districts are

importantcreating an education environment in which

unding ollows the student. Tis is the best step exas

could take toward improving the way it unds education.

Doing so will give students a chance at an opportunity

to choose an education that best suits their needs. I the

numbers rom Florida, Utah, and Arizona are any indica-

tor, we can expect such changes to improve academic per-

ormance, parental satisaction, and economic efficiency

in exas education. Tese are reorms that will impact our

school system as a whole positively, but most importantly,

they will impact our students positively.

Minor reorm in exas education has yielded stagnant ed-

ucation outcomes. Its time to rethink the way we allocate

the money we spend on schools. As the exas Supreme

Court said in the West Orange decision: Perhaps, as the

dissent contends, public education could benefit rom

more competition, but the parties have not raised this ar-

gument, and thereore we do not address it.

66

Tere is no way to determine an exact dollar amount re-

quired to educate a child, but it is possible to make sure

the unding exas invests in education allow students to

choose an education that best suits their needs. Its time to

put the student first.


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Endnotes1Texas State Budget By Program, Legislative Budget Board.2 James Golsan, Texas School Finance: Dedication to the Status Quo,Huffington Post(7 Feb. 2013).3 Deitz to Re-open School Finance Trial,Texas Association of School Boards (13 Sept. 2013).4Texas Constitutionand Statutes.5Texas State Budget By Program, Legislative Budget Board.6

A History of Texas Public Schools, Northeast ISD.7 Proposition #1, SJR 7, rejected by Texas voters in election dated May 1, 1993.8 Ibid.9 Ibid.10 West Orange-CoveRuling, Intercultural Development Research Association.11 Edgewood I, III,West OrangeCove I, II citations by Texas Supreme Court.12 Edgewood IV,Texas Supreme Court decision.13 Ibid.14Bill Peacock, Thinking Economically: Texans Seeking Real Budget Solutions, Texas Public Policy Foundation (22 Mar. 2012).15 Deitz to Re-open School Finance Trial, Texas Association of School Boards (13 Sept. 2013).16Texas State Budget By Program, Legislative Budget Board.17 Deitz to Re-open School Finance Trial, Texas Association of School Boards (13 Sept. 2013).18 Texas Supreme Court in Edgewood III.19

Ibid.20 Ibid.21 Ibid.22The Cost of Education Index (CEI), The Texas Education Agency.23 Dr. Steve Murdock, former state demographer, at trial as the first witness for the school districts in the current lawsuit.24 Ibid25 Section 2, The Existing Cost of Education Index,University of Texas Dana Center.26 Texas Supreme Court in West Orange Cove II, Edgewood II.27Texas School Finance 101, The Texas Education Agency (Jan. 2013).28 Texas Supreme Court in West Orange Cove II.29 Texas Supreme Court in Edgewood III.30Bill Peacock, Thinking Economically: Texans Seeking Real Budget Solutions, Texas Public Policy Foundation (22 Mar. 2012).31 Brooke Dollens-Terry, Bridgett Wagner, and Bill Peacock, Examining Decades of Growth in K-12 Education, Texas Public Policy Founda-

tion (June 2010).32 Joel Kotkin and Mark Schill, A Map of Americas Future, Forbes(23 Sept. 2013).33 Brooke Dollens-Terry, Bridgett Wagner, and Bill Peacock, Examining Decades of Growth in K-12 Education, Texas Public Policy Founda-tion (June 2010).34Texas F.A.S.T. Report Executive Summary, Texas Office of the Comptroller.35 Lindsay M. Burke, The Education Debit Card: What Arizona Parents Purchase with Education Savings Accounts, Heritage Foundation(Aug. 2013).36 Ibid.37 Jonathan Butcher and Jason Bedrick, Schooling Satisfaction: Arizona Parents Opinions on Using Education Savings Accounts, Fried-man Foundation (Oct. 2013).38 Ibid.39 Ibid.40 2012 Digital Learning Report Card, Digital Learning Now.41 Ibid.42 Ibid.43 Ibid.44 In Plain English: Texas HB 1926, Digital Learning Now.45 2012-2013 Funding for Florida Schools, Florida Department of Education.46 Office of Independent Education and Parental Choice, McKay Scholarship Program, Florida Dept. of Education.47 Ibid.48 Ibid.
http://sbp.lbb.state.tx.us/http://www.huffingtonpost.com/james-golsan/the-texas-school-finance-_b_2631203.htmlhttps://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://www.constitution.legis.state.tx.us/http://sbp.lbb.state.tx.us/http://www.neisd.net/ComRel/News/documents/2013CTPS_HistoryTexasPublicSchools.pdfhttp://www.idra.org/Education_Policy.htm/Fair_Funding_for_the_Common_Good/West_Orange-Cove_Ruling/http://www.idra.org/Education_Policy.htm/Fair_Funding_for_the_Common_Good/West_Orange-Cove_Ruling/http://www.texaspolicy.com/center/economic-freedom/opinions/thinking-economically-texans-seeking-real-budget-solutionshttps://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://sbp.lbb.state.tx.us/https://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://www.tea.state.tx.us/WorkArea/DownloadAsset.aspx%3Fid%3D2147499348http://www.utdanacenter.org/downloads/products/cei/ceipt4.pdfhttp://www.utdanacenter.org/downloads/products/cei/ceipt4.pdfhttps://www.google.com/url%3Fsa%3Dt%26rct%3Dj%26q%3D%26esrc%3Ds%26source%3Dweb%26cd%3D1%26cad%3Drja%26sqi%3D2%26ved%3D0CCoQFjAA%26url%3Dhttp%253A%252F%252Fwww.tea.state.tx.us%252FWorkArea%252FDownloadAsset.aspx%253Fid%253D2147511834%26ei%3DjiOrUqmUBKGr2QWvq4HACQ%26usg%3DAFQjCNFYr6_5VN-RpgjmWrCGP0C9LccYLQ%26sig2%3DWRH-n3PajvNmVaMXKN59uQ%26bvm%3Dbv.57967247%2Cd.b2Ihttp://www.texaspolicy.com/center/economic-freedom/opinions/thinking-economically-texans-seeking-real-budget-solutionshttp://www.texaspolicy.com/center/education-policy/reports/examining-decades-growth-k-12-educationhttp://www.forbes.com/fdc/welcome_mjx.shtmlhttp://www.fastexas.org/404.phphttp://www.edchoice.org/CMSModules/EdChoice/FileLibrary/1015/THE-EDUCATION-DEBIT-CARD-What-Arizona-Parents-Purchase-with-Education-Savings-Accounts.pdfhttp://www.edchoice.org/CMSModules/EdChoice/FileLibrary/1019/SCHOOLING-SATISFACTION-Arizona-Parents-Opinions-on-Using-Education-Savings-Accounts.pdfhttp://digitallearningnow.com/report-card/%23grade0http://digitallearningnow.com/news/blog/in-plain-english-tx-hb1926/http://www.fldoe.org/fefp/pdf/fefpdist.pdfhttp://www.floridaschoolchoice.org/information/mckay/faqs.asphttp://www.floridaschoolchoice.org/information/mckay/faqs.asphttp://www.fldoe.org/fefp/pdf/fefpdist.pdfhttp://digitallearningnow.com/news/blog/in-plain-english-tx-hb1926/http://digitallearningnow.com/report-card/%23grade0http://www.edchoice.org/CMSModules/EdChoice/FileLibrary/1019/SCHOOLING-SATISFACTION-Arizona-Parents-Opinions-on-Using-Education-Savings-Accounts.pdfhttp://www.edchoice.org/CMSModules/EdChoice/FileLibrary/1015/THE-EDUCATION-DEBIT-CARD-What-Arizona-Parents-Purchase-with-Education-Savings-Accounts.pdfhttp://www.fastexas.org/404.phphttp://www.forbes.com/fdc/welcome_mjx.shtmlhttp://www.texaspolicy.com/center/education-policy/reports/examining-decades-growth-k-12-educationhttp://www.texaspolicy.com/center/economic-freedom/opinions/thinking-economically-texans-seeking-real-budget-solutionshttps://www.google.com/url%3Fsa%3Dt%26rct%3Dj%26q%3D%26esrc%3Ds%26source%3Dweb%26cd%3D1%26cad%3Drja%26sqi%3D2%26ved%3D0CCoQFjAA%26url%3Dhttp%253A%252F%252Fwww.tea.state.tx.us%252FWorkArea%252FDownloadAsset.aspx%253Fid%253D2147511834%26ei%3DjiOrUqmUBKGr2QWvq4HACQ%26usg%3DAFQjCNFYr6_5VN-RpgjmWrCGP0C9LccYLQ%26sig2%3DWRH-n3PajvNmVaMXKN59uQ%26bvm%3Dbv.57967247%2Cd.b2Ihttp://www.utdanacenter.org/downloads/products/cei/ceipt4.pdfhttp://www.tea.state.tx.us/WorkArea/DownloadAsset.aspx%3Fid%3D2147499348https://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://sbp.lbb.state.tx.us/https://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://www.texaspolicy.com/center/economic-freedom/opinions/thinking-economically-texans-seeking-real-budget-solutionshttp://www.idra.org/Education_Policy.htm/Fair_Funding_for_the_Common_Good/West_Orange-Cove_Ruling/http://www.neisd.net/ComRel/News/documents/2013CTPS_HistoryTexasPublicSchools.pdfhttp://sbp.lbb.state.tx.us/http://www.constitution.legis.state.tx.us/https://www.tasb.org/Legislative/Legislative-Information/Legislative-Reports/2013/Legislative-Report-September-13%2C-2013/Dietz-to-Reopen-School-Finance-Trial.aspxhttp://www.huffingtonpost.com/james-golsan/the-texas-school-finance-_b_2631203.htmlhttp://sbp.lbb.state.tx.us/


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49 Ibid.50 Ibid.51 Dr. Mathew Ladner, Jeb Bushs Reforms Improved Public Schools, Townhall.com (17 Apr. 2008).52 2012-2013 Funding for Florida Schools, Florida Department of Education.53 Ibid.54 The Corporate Income Tax Credit Program Saves State Dollars,Office of Program Policy Analysis and Government Accountability (Dec.2008).

55George Clowes, Choices Dramatically Improve Milwaukee Public Schools; John Merrifield, NCPA Education Vouchers Benefit EdgewoodStudents; John Diamond, TPPF Evaluation of Horizon Scholarship Program.56 Dr. Jacob Vigdors expert report filed by the school district plaintiffs in the current school finance lawsuit.57Heartland Institute, Budget Impact of the Texas Taxpayer Savings Grant Program .58 Trial testimony by Dr. Eric Hanushek during current round of school finance litigation.59 Florida Virtual School Press Kit, Florida Virtual School.60 LBB Fiscal Note CSHB 3497, dated May 18, 2013.61 LBB Fiscal Note CSHB 3497, dated May 18, 2013.62 LBB Fiscal Note CSHB 3497, dated May 18, 2013.63 TEA Cost estimate SB 1575, dated April 6, 2013.64Texas Education Code Sec. 21.402.65 Sam Dillon, In Washington, Large Rewards in Teacher Pay,New York Times(31 Dec. 2011).66 Ibid.
http://townhall.com/columnists/drmatthewladner/2008/04/17/jeb_bushs_reforms_improved_public_schools/page/fullhttp://www.fldoe.org/fefp/pdf/fefpdist.pdfhttp://www.oppaga.state.fl.us/Reports/pdf/0868rpt.pdfhttp://www.oppaga.state.fl.us/Reports/pdf/0868rpt.pdfhttp://www.flvs.net/areas/contactus/Documents/Online%2520Press%2520Kit.pdfhttp://www.statutes.legis.state.tx.us/Docs/ED/htm/ED.21.htm%2321.203http://www.nytimes.com/2012/01/01/education/big-pay-days-in-washington-dc-schools-merit-system.html%3Fn%3DTop/Reference/Times%2520Topics/People/D/Dillon%2C%2520Sam%3Fref%3Dsamdillon%26_r%3D0http://www.nytimes.com/2012/01/01/education/big-pay-days-in-washington-dc-schools-merit-system.html%3Fn%3DTop/Reference/Times%2520Topics/People/D/Dillon%2C%2520Sam%3Fref%3Dsamdillon%26_r%3D0http://www.statutes.legis.state.tx.us/Docs/ED/htm/ED.21.htm%2321.203http://www.flvs.net/areas/contactus/Documents/Online%2520Press%2520Kit.pdfhttp://www.oppaga.state.fl.us/Reports/pdf/0868rpt.pdfhttp://www.fldoe.org/fefp/pdf/fefpdist.pdfhttp://townhall.com/columnists/drmatthewladner/2008/04/17/jeb_bushs_reforms_improved_public_schools/page/full


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