Emails, Amanda Brownson, director of research and policy, Raise Your Hand Texas, Nov. 4 and 7, 2016

From: "Selby, Gardner (CMG-Austin)"

Date: Friday, November 4, 2016 at 4:12 PM

Subject: Following up for fact check

It would be wonderful if I could explain in close-to-plain English why some districts are drawing less per student than in 2011. Below I am pasting what others have said.

For our story, can you unpack these explanations or offer your own analysis?

I see too the 2015 LBB projections indicated about 24 percent of districts would get less in aid per student in fiscal 2017 than before, an improvement by this indicator from fiscal 2016. What would have have changed from fiscal 2016 for those districts?

PASTE:

We asked RJ DeSilva of the LBB staff why some districts were projected to field less revenue than the districts got in 2011. He said lawmakers in the 2013 and 2015 sessions drove up aid to many districts by raising the state’s per-student basic allotment, an approach considered “one of the best ways to increase equity through an entitlement increase,” he wrote.

In 2011, DeSilva said, lawmakers “reduced Foundation School Program entitlement through the Regular Program Adjustment Factor (which has since been restored) and the Hold Harmless Reduction Percentage (which remains in effect). The Hold Harmless Reduction Percentage applies to districts that receive Additional State Aid for Tax Reduction (or ASATR).”

I realize the board’s Fiscal Size-up report issued after the 2011 session describes the Regular Program Adjustment Factor as a percentage of the basic allotment to districts as imposed by legislators through August  2013. Also, the report says, the 2011 Legislature reduced “hold harmless” payments put in motion in 2006 to make up for revenue lost by districts carrying out new state-required cuts in local property tax rates.

But I doubt that’s sufficient explanatory detail for our general audience.

As mentioned, at our request, Tom Canby of TASBO developed and emailed us this spreadsheet, drawing on audited revenues reported to the Texas Education Agency. The spreadsheet, also adjusting for inflation, indicates that compared to fiscal 2011, 37 percent of the state’s 1,024 districts fielded less funding per student in fiscal 2015, the latest year of available data. Canby said he focused on M&O aid, not considering aid related to debt service or capital projects. Also, when applicable, he said, he deducted “Robin Hood” payments from property-wealthy districts to others that are required by law.

Asked why certain districts got less than before, Canby replied that how school funding works here is so convoluted, “there is no simple plain English explanation.”

His further explanation: “As more districts have moved off of a target revenue amount since 2006, the districts are at the mercy of the Byzantine revenue calculations. The increases in average state aid per student have been minimum year over year since 2011. In reference to the average revenues per student, half of the enrolled students moved to a per student funding level that was less than the average and the other half to amount that exceeds the average. Therefore given the minimum increases in per student funding there are a number of districts below the average in 2015 or laggards and therefore below where they were before the 5.4 billion reduction in public ed funding.”

Finally, I would appreciate any thoughts on what distinguishes the districts trailing the most in dollars per student compared to 2011 and, at the other end, districts bringing in the most additional dollars in aid per student compared to 2011.

???

g.

W. Gardner Selby

Reporter / News

Austin American-Statesman

PolitiFact Texas

5:12 p.m.

Nov. 4, 2016

Why have some districts gained more than others?

When the legislature made cuts in 2011, they used two funding mechanisms: one was a cut to the “regular program allotment” and one was a cut to “target revenue.”  The regular program allotment is what drives the basic funding entitlement to all students, and reducing it reduced funding to all school districts.  The cut to “target revenue” reduced funding under the hold harmless known as additional state aid for tax reduction (ASATR).  ASATR was the hold-harmless that the legislature put in place when they did tax rate reduction back in 2005.  They told districts to cut tax rates, they increased formula funding, and they established a hold-harmless for when formula increases were not enough to equal each district’s “target revenue”.  Each district’s target revenue was based on the amount of revenue that district would have been able to receive at their old tax rates under a couple of different scenarios.  You can read more about target revenue and ASATR on the Agency website here: http://tea.texas.gov/Finance_and_Grants/State_Funding/Manuals/School__Finance_Topics_-_One_Page_Descriptions/

Over time, as formula funding increased, more and more districts stopped receiving revenue under the hold-harmless and became what we sometimes refer to as “formula-funded”.  This just means that when the agency compared the revenue they receive under the formula (state aid in Tier I of the FSP plus local tax collections at the compressed M&O tax rate) to their target, the formula revenue was greater, so no need for a hold-harmless.

As the legislature began restoring the funding cuts from the 2011 session, they did so primarily by increasing funding through the basic allotment, which drives money through the formulas.  They did not restore the cuts to target revenue, so for some districts, until the formulas grow enough to surpass their target, they don’t see gain and are stuck at their reduced target level, and least with respect to Tier I of the FSP, which controls most of FSP revenue. The legislature did this intentionally, wanting to drive districts over time to be all funded under the same formula system rather than some under the target system and some under the formula system.

There are also some local dynamics at play that will make this differ from district to district, particularly with respect to property value changes and tax rate changes.

Why is there a difference between FY 16 and FY 17?

I can think of two possibilities off the top of my head.  I’ll keep thinking about whether there might be anything else going on.

1.       The legislature increased the guaranteed yield on the first 6 pennies after the compressed tax rate in Tier 2 of the FSP between FY 16 and FY 17 (sometimes these are called the “golden pennies”).  The increase was from $74.28 to $77.53 per penny of tax effort per student in weighted ADA, or $3.25 per penny of tax effort per WADA for up to about 6 pennies of tax effort depending on the tax rate of the district.

2.       There is a one-year benefit to property value growth under the FSP.  This is because the state uses a prior-year property value when determining the local share of the FSP, so the district is collecting taxes off of the current-year value but the state is paying state aid off the prior-year value.  It is possible that, depending on the estimates that the LBB used, some districts were projected to benefit from increasing property values in a way that yielded improvements.

Hope that helps,

Amanda

Amanda Brownson

Director of Research and Policy

RaiseYourHandTexas.org

From: "Selby, Gardner (CMG-Austin)"

Date: Monday, November 7, 2016 at 11:45 AM

Subject: FW: Trying again

What I mean: It looks to me like most of the districts greatly trailing in per-student general aid are small to tiny – topped in 2015 by Westhoff – though several larger districts also remain behind: Austin (down $163 per student); North East (down $144); and Frisco (down $264). What would explain these kinds of detail?

On the flip side, nearly all the state’s largest-enrollment districts drew more aid than before if you focus on general aid. But for ALL FUNDS, per the TASBO analysis, more highest-enrollment districts were getting less in 2015 than before including Houston (down $26 per student), Dallas (down $253) and seven others. Still, 11 of the state’s top 20 in enrollment districts were getting more in All Funds. What gives?

G.

9:27 p.m.

Nov. 7, 2016

See if the answers below help.  There are a lot of moving pieces, and so to some degree, while there are patterns, the answer for any one district will depend on what is going on in that district.

It looks to me like most of the districts greatly trailing in per-student general aid are small to tiny – topped in 2015 by Westhoff – though several larger districts also remain behind: Austin (down $163 per student); North East (down $144); and Frisco (down $264). What would explain these kinds of detail?

There are a number of reasons for the small districts to stand out.  One is that we have a lot of small districts, so you are going to notice them on a most lists you run.  In Tom’s data, districts with fewer than 3,000 students make up 75% of the districts.  They are also going to be more likely to be outliers at both ends of the scale.  I sorted Tom’s general fund data by the change in inflation adjusted dollars (last column) and the 20 districts with the most loss per student all had fewer than 500 students and so did 15 of the 20 biggest gainers – and the other 5 biggest gainers had fewer than 1500 students.  Below is a graph with gain per student based on all fund data from Tom’s analysis on the y axis and number of students on the x axis.  I artificially cut it off at 20,000 students and +/- $20,000 so you could see the dots better, just for a quick view of the data.  You can see that the variation is  larger in the small districts.  Westhoff, for example, looks like it booked negative local tax revenue per student in 2015.  I suspect that they had to issue a refund to a major taxpayer and so had inflated revenue one year and deflated in another.  You aren’t as likely to see one event dominate the revenue picture like that in a big district.

 It looks to me like North East comes out ahead on the LBB printouts at the links you gave me, but behind in the inflation adjusted data.  Frisco is still reliant on target revenue, so that is why they are not doing as well – they are still waiting for formula increases to catch up to their target revenue amount.  Same is sort of true for Austin – they didn’t make their way out of ASATR until 2014-2015.  Remember that Tom’s analysis, unlike LBBs, takes inflation into account.

On the flip side, nearly all the state’s largest-enrollment districts drew more aid than before if you focus on general aid. But for ALL FUNDS, per the TASBO analysis, more highest-enrollment districts were getting less in 2015 than before including Houston (down $26 per student), Dallas (down $253) and seven others. Still, 11 of the state’s top 20 in enrollment districts were getting more in All Funds. What gives?

 In terms of the all funds versus general funds question, there has been a reduction in federal funds on a per student basis since 2011, so this may explain why more districts are coming out ahead on the general fund comparison than the all fund comparison (data from the TEA website below). But some districts may have gained enough in FSP revenue over this timeframe to do slightly better against inflation, even with a loss of federal funds.  Again, these are likely to be the lower-target districts whose formula amounts overtook their hold harmless funding sooner.

Here are the data on a statewide basis for 2011 versus 2015, not inflation adjusted.  While local revenue increased, on a per student basis, state and federal revenue declined, even before adjusting for inflation.  I just pulled this from the TEA website here: http://tea.texas.gov/financialstandardreports/

2011:

2015

Amanda Brownson

Director of Research and Policy