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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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
75 ADA is used Grades K-8 60 30
60 ADA is used Grades K-6 40 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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