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House Appropriations

February 14, 2023

 

The House Committee on Appropriations met on February 14th to hear from Comptroller Glenn Hegar, the Legislative Budget board, the Sunset Advisory Commission, and Education Commissioner Mike Morath on the following topics:

  • 2024-2025 Biennial Revenue Estimate
  • Economic Stabilization Fund
  • House Budget Recommendations and Spending Limits
  • Sunset Advisory Commission
  • State Auditor’s Office
  • Property Tax Proposals
  • Public Education Funding

A video archive for the hearing can be found here.

This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Biennial Revenue Estimate

Comptroller Glenn Hegar

  • Link to BRE
  • $188b available for general purpose spending, 26.3% more than current budget
  • 22-23 ending GR of $32.7b, $0b reserved for transfers to ESF/SHF; would be $4b higher but for constitutional limit on spending
  • $108.4b in federal money and $68b in other revenues, but these are dedicated and not available for general purpose spending
  • $342b in 24-25 biennium
  • High tax revenue has led to high budget, but offset by high inflation; state expenses this biennium were also not as high as expected
  • Amount available for general purpose spending would be higher if legislature chooses to swap federal dollars for GR spend
  • Revenue increases will likely not happen again, cannot expect another huge surplus
  • $26.4b ESF by the end of 24-25, early in 2024 will need to make an unusual transfer of $3.3b
  • Amount will not to be transferred from unencumbered balances, has happened a couple times in the past but this one is substantially higher; budgeting decisions like supplemental approps or federal fund swap will impact the transfer amount
  • Projections for O&G severance can vary widely; large amount of uncertainty in future amounts
  • Wu – Had concerns in the past that rating agencies would downgrade the state, is that still a concern? Prudent to save amounts from the significant surplus?
    • Hegar – Based on revenue projections staff estimated we would hit ESF cap, but not necessarily suggesting to raise cap; likely a one-time anomaly & probably will not hit it in the future; not worth effort to try and raise it
    • Dealing with property tax, pension issues, is important; also opportunities to set money aside outside of the ESF
    • Issue is not if you have a large ESF balance or small one; if you have a large ESF balance but you’re not willing to use it, it’s the same as not having one
    • For ratings, we have used the ESF before, agencies don’t have an issue with it because we’ve been willing to use it before
  • Wu – Could be an opportunity to fill gaps right now
    • Will be going through priority process in the coming months
  • Gervin-Hawkins – Any concern about supplanting versus supplementing; concern about timelines for federal dollars?
    • Yes, COVID relief dollars have timeline; special session funding was allocating federal COVID dollars for swaps with GR
    • Also other amounts needed to be spent for specific purposes like education, etc.
    • Different amounts have different timelines, all being tracked by agencies to hit markers
    • Federal infrastructure bill dollars also have different mechanisms, in particular Comptroller’s Office is tracking the broadband dollars
    • Also some federal dollars that we could reasonably stand up a program for within the timeline; Comptroller’s Office has an energy efficiency fund & uncertain if it can be done within timeframe
  • Gervin-Hawkins – Specific roll over number?
    •  Yes, substantial amounts still left, LBB tracks
  • Toth – Do we track the amount of capital for O&G to build & drill?
    • No, no numbers available
  • Toth – Used to be a pretty broad free flow of capital, now with ESG small companies are getting squeezed
    • Part of the discussion last session, Comptroller’s Office was asked to come up with a list of entities boycotting O&G/who is constraining capital
    • In many cases companies are still investing despite the ESG metrics
  • Toth – Have a constituent whose clients can’t find capital to drill with even at $100 barrels
  • Howard – In terms of the ESF, do you still see using this for pension fund viability as a possibility or good idea?
    • Good that discussion happened to open up ESF for investing & to cover inflation, etc.
    • Still a 25% cash requirement
    • It can take a year to invest amounts, meaning a lot of transfer amounts are remaining in cash; important to remove the 25% cash req
    • As for a legacy fund, you could put some into a savings account to create an ongoing stream of revenue; would be a majority vote
    • As long as we’re making decision to do good things for the future, the mechanism doesn’t matter
    • Permian Basin and other locations were supposedly gone in the past & it came back; there will not be a 3rd resurgence & important to store some funding away
    • Now that ESF is $20b+, that essentially is a legacy fund
  • Howard – Difficulty of ESF is often hard to take advantage of funds, legacy fund would be a separate endowment & would free up GR normally used for pensions
    • Possible ratings ding is pensions, but legislature has dealt with those; in good shape
  • Howard – If it turns out we cannot make full transfer to ESF because we hit cap, amount that spills back into GR could be used to create separate fund
    • Large unencumbered number will likely not happen due to approps choices
  • Howard – $6.5b was from GR-D not spent on intended purpose?
    • Yes
  • Howard – We can certify the budget with these?
    • Correct
  • Howard – Rep. Darby had a bill previously to wean us off of these
    • You have eliminated some of those, some of it is not spent for reasons, federal funding dried up, etc.; variety of reasons these are not spent
  • Howard – $6.5b of the $32.7b are dedicated funds that can’t be spent on other things
    • Correct
  • Howard – Does the $32.7b also include benefit to FSP?
    • Yes
  • Howard – Additional $3.8b was a federal swap of GR
    • Right
  • Howard – This gets me down to $18.1b
    • Still an impressive number
  • Howard – You’re projecting we’re still going to grow just not at the same rate; need to invest in one-time expenditures, but can also look at things like ed investments as we’re still growing
  • Martinez Fischer – With regard to ESG firms, do you intend to update the list of O&G boycotting firms?
    • Have to update every year, can update quarterly; plan to update in the next month to two months
    • A couple other factors I would like to include in that process
    • Part of goal is to make sure companies know how they get on and how they get off; won’t change test until sure we can explain it clearly
  • Martinez Fischer – Part of the update would potentially be new firms added or subtracted
    • Two lists essentially, “entities” and “investment tools”
    • Will be updating both lists
  • Martinez Fischer – What does Comptroller’s Office believe inflation was for 2022-23? Comptroller says 8%, other agencies list different figures
    • Think we’re right
  • Martinez Fischer – Can you give some context?
    • Historically have had 2.4% inflation, but has been substantially higher over last 15 months, averaging about 8%
    • Going forward it will be less increase because we’ve already risen up
    • As we continue through session, the number will move downward but will take time
  • Martinez Fischer – $5.7b unobligated balance transfer, may have ways to utilize this; SB 1 has transfer of $9.7b to property tax relief fund, can you explain how this costs the bill?
    • Tom Currah, Comptroller’s Office – There is a transfer in 24-25 that would not affect unencumbered balance
  • Martinez Fischer – Would that impact the spending cap?
    • Would defer to LBB
  • Martinez Fischer – Is it GR, is it Other Funds?
    • Would depend on what revenue is appropriated
  • DeAyala – Required to have 25% cash on hand in ESF, how much would you like to free up?
    • Hegar – Don’t think there should be a requirement, will have cash on hand due to it taking time to invest funds & can get cash in 30, 60, 90 days, etc.
    • 25% should be removed
  • Bryant – You have a property tax assistance division, local appraisals still struggle to appraise everything & results in unequal property tax distribution with disproportionate share going to homeowners; are you going to bring any proposals?
    • Will continue to work with you, system is complex, used to be more of an issue in Urban/Suburban areas but has now spread to entire state
    • In a perfect world wouldn’t have a property tax system, but would be difficult to get rid of it; question is how to have tools to help taxpayers along in the process, but will likely still be a burden for users
  • Bell – Inquired about appraisal district process not being abusive
    • They don’t have that authority, don’t oversee them, would need additional oversight authority

 

Legislative Budget Board

Jerry McGinty, LBB

  • Link to presentation
  • Provides overview of LBB operations & staff
  • Bill does not include $5.4b from ARPA that was not appropriated
  • Significant increase in other funds due to $9.7b transfer for property tax relief
  • Pub ed and Higher Ed combined represent the largest area of the budget
  • $2b decrease in General Gov’t is transfer from Trusteed Programs to Texas Military Department

 

Aaron Henrickson, LBB

  • Major Funding highlights for on Pg 4-6
  • $15.0 billion set aside for additional property tax relief, includes $9.7b transfer
  • Supplemental appropriations bill details on Pg 6

 

Jerry McGinty, LBB

  • Provides overview of spending limits for current biennium on Pg 7
  • Regarding $9.7b property tax transfer, funds would not be subject to spending limit, would be dependent on constitutional dedication of funds within Property Tax Relief Fund
  • $3.8b in 22-23 available in capacity
  • Consolidated GR Limit and Tax Spending Limit based on rate of 12.33%
  • $5.4b left on ARPA, states have until end of 2024 to obligate and 2026 to liquidate
  • Walle – On COVID relief dollars, document mentions $5.4b, not being used in the current HB 1?
    • Henrickson – Correct
  • Bryant – Appears to be a reduction in spending on public education?
    • Henrickson – This is in GR, in All Funds there is an increase & primarily related to property tax relief
  • Bryant – Taking property tax relief out of it, does the proposed budget increase education funding?
    • Henrickson – Fully funds current entitlement required by the FSP; everything Ed Code requires & more
    • ISDs funded at full enrollment, most additional revenue
  • Bryant – Is the share of state’s burden increasing?
    • McGinty – $71b to $79.3b from 22-23 and 24-25
  • Bryant – So leaving property tax relief are we increasing or decreasing effort to educate children
    • Henrickson – Increasing state share of FSP, in 23 it fell down to 35.4%, will grow to >42%
  • Howard – Property Tax Relief Fund is made up of franchise tax, cigarette tax, etc. but these are not property tax dollars
    • Henrickson – Correct
  • Howard –  Looking at $5.4b federal funds available to approp and looking at spending limit, if we did choose to use federal funds to replace COVID salaries we could increase spending limit?
    • Henrickson – Spending limit includes base level GR from HB 1, if $5.4b was used to pay salaries then there would be a reduction in $5.4b in GR that could then be spent
  • Howard – In addition to the $4b?
    • McGinty – Yes, assuming you replaced money currently in the bill with ARPA; would add amounts together, would be the new spending limit
  • Howard – Could choose to do other things too obviously, like increase the base which would increase amount available
    • Henrickson – Correct
  • Howard – Have same growth rate, but spending limits end up at different amounts?
    • McGinty – Board could’ve adopted two separate rates, but adopted on rate
    • Difference is that property tax and disaster funding is exempt from Consolidated; if same percent is used you will always have case where one number is larger
  • Howard – So because it is the same this time, we can make these work together?
    • McGinty – Yes, different limits smaller and larger in different sessions
  • Allison – Will have available funds above the caps?
    • McGinty – Depends on how much more the legislature spends
    • With the introduced bill, there is $43.6b available; slide 7 details how you can spend $4b more & then depends on what is spent for 22-23
    • Simple math is $43.6b so $4b available
  • Allison – How do we access excess funds?
    • McGinty – You can vote to bust the limit, resolution for Tax Spending Limit requires majority vote, Consolidated is 3/5ths
  • Allison – Any opportunity to do it by means other than busting limit?
    • McGinty – Limit is on tax revenues not dedicated by constitution, funds dedicated by constitution are exempt from limits; this is way $9.7b property tax transfer is possible
    • Only way absent busting the limit
  • Allison – Rider 81 dedicated $15b to property tax relief, ongoing cost to state?
    • Henrickson – Essentially brings local ISD collections in line with before 2023, you can then project cost onwards
    • Will also have another presentation on property taxes later today
  • M Gonzalez – 46.2% state share?
    • Henrickson – For M&O it had fallen to 34% in 23 & expecting it will go up to 46%
  • M Gonzalez – Looking at inflation, ISD buying power is lowered, so schools could unintentionally be getting a cut; any numbers on this?
    • Henrickson – Can look into this
  • M Gonzalez – Without thinking of this may not be putting more money to public schools
  • M Gonzalez – When you get more info, would also like 46.2% broken down for what goes to property tax, charters, public schools, etc.
    • Henrickson – Can do this
  • Martinez Fischer – On TDCJ, $5.4b in COVID ARPA funds, $1b for HVAC would be smart money to spend & would available GR go up?
    • McGinty – In this case would be a new spend, would not be a swap
    • Would want to make sure it was all used by 2026, but wouldn’t free up GR
  • Martinez Fischer – Wouldn’t help GR if we upgraded facilities?
    • McGinty – It wouldn’t necessarily free up GR, but could address priority that GR might have been used on
  • Martinez Fischer – How does the $9.7b cost the bill?
    • McGinty – Reducers Pay-As-You-Go Limit, expecting bill that will exempt the amount from the spending limit
  • Martinez Fischer – Any impact on unencumbered GR?
    • McGinty – Would depend on what year you would be spending those dollars, different impact if it is FY23 versus FY24
  • Martinez Fischer – Will need your help in understanding this
    • McGinty – Can work up something
  • Martinez Fischer – Why isn’t there a column for initial approp in 22-23? Some numbers are nominally decreases but could actually be increased spending e.g. on Art I agencies
    • McGinty – Can get this to you
    • LBB is available at any time, open to members reaching out
  • DeAyala – Any calculations on effect on recapture?
    • Henrickson – Amounts included in HB 1
  • DeAyala – Per ISD?
    • Henrickson – Not broken out, can provide the numbers per ISD

 

Sunset Commission Overview

Brian Francis, Texas Sunset Advisory Commission

  • Link to presentation
  • Sunset schedule was completed in January of 2023, 21 entities reviewed with 200+ recommendations
  • Will see results in the 14 Sunset bills that will come before the legislature
  • Provides overview of the Sunset process, system to review agency performance that leads to statutory, agency management, and appropriations recommendations
  • Sunset typically stays a way of appropriative recommendations, but made some for PUC and TJJD
  • Recommending that PUC exceptional items on data analysis and cost recovery be funded
  • Recommending funding for construction of new TJJD facilities next to urban centers with better access to job markets and expansion of grant programs that operate beds for counties
  • Several agencies under review will have exceptional items to help implement Sunset recommendations
  • Sunset recommended administratively attaching Veterinary Board to TDLR for oversight and guidance, recommending more funding to TDLR to account for new duties
  • Wu – On TJJD, some of the issue is that they have some of the lowest paid employees in the state, TDCJ has a similar problem; both prison system have difficult jobs but some of the worst compensation
    • Francis – Compensation could be an answer to problem of retention and turnover
  • Wu – Not doing a good job about only sending kids who need to be at TJJD there
    • Rachel Gandy, Sunset – Diversion has to do with resources available at the county level; influx of funding was initially good to help with diversions, but TJJD is so focused on state-level operations that they haven’t been able to maximize regionalization
    • HB 1 allows TJJD to do this via county salaries, state funding for county beds, etc.
  • Wu – Cost to state to place children in TJJD is high, if we take some of this money to give to counties to prevent kids from needing to be placed, could be saving money
    • Yes, cost and recidivism at the county level is lower; counties are doing what they can, but HB 1 and Sunset provide opportunities to expand local benefits
  • Wu and Sunset staff discuss TJJD placements and lack of resources in certain regions
  • Jarvis Johnson – How much are we increasing staff pay?
    • HB 1 includes raises at county and state level, TJJD received separate raise over summer & HB 1 has statewide
  • Jarvis Johnson – Staffing issue even with raises, recommending building new facilities even when TJJD isn’t stabilized?
    • Francis – Conversations with TJJD made clear Exec Dir is aware of what is needed
  • Jarvis Johnson discusses using funds to correct turnover and stabilize agency instead of building new facilities
  • Toth – Illiteracy rate among children in Juvenile Justice Program?
    • Gandy – Youth in TJJD typically 5 grades behind in reading, 6 grades behind in math
  • Toth – At least 60% functional illiteracy in TX, what are we doing to help them and ensure they don’t come back? Rep. Dutton had a bill last session that died in the Senate

 

State Auditor’s Office

Lisa Collier, State Auditor

  • Link to presentation
  • Provides overview of State Auditor’s Office operations, conducts audits of entities receiving state funds, audit plans guide regular and risk-based audits & includes flexibility for audit requests
  • Office also looks at compensation and classification for state employees
  • Has investigations team and professional development team also looking at & supporting agencies
  • GAA riders included analysis of Medicaid Managed Care rates, actuary did identify some things they would’ve done differently, but did determine rates were actuarially sound
  • Released report on HHSC rate development last year; working on 2024 rates now
  • SAO also looked at industrial hemp, emergency communications during disasters, Red River Authority
  • Also conduct efficiency audits every 6 years for TANF and annual audits on foster care SSCCs
  • M Gonzalez – When you do audits and note discrepancies?
    • Collier – All agencies are required to report implementation status, if they report full implementation then SAO will follow up
  • M Gonzalez – So you follow up on all audits?
    • Typically for high priority
  • M Gonzalez and Collier discuss staff turnover, SAO has a dashboard that details turnover by area of the state
  • Martinez Fischer – Does SAO have authority to audit emergency declarations?
    • Not sure
  • Martinez Fischer – No audit on Operation Lone Star?
    • No
  • Martinez Fischer – Audit on border spending?
    • Had a border security audit maybe 15 years ago
  • Martinez Fischer – Would be interested in how SAO reads law in whether they have authority
    • Angie Welborn, SAO General Counsel – Can audit any entity receiving state funds, do audit the flow of funds, but don’t have specific authority to look at emergency declarations and determine if they can remain
    • Can audit funds related
  • Martinez Fischer – Interested in looking at what is going on and being spent; area with virtually no reporting and few metrics
    • Welborn – Happy to look at any areas requested
  • Martinez Fischer – Happy to discuss, but don’t want to ask for areas you don’t have authority
  • Toth – In 2014, Texas sued Xerox, what role did SAO play in that?
    • Collier – Not aware of a role we played in that
  • Toth – Supreme Court awarded Texas $1b for Medicaid fraud from that, now Texas has awarded Xerox another contract, SAO didn’t play a role?
    • Can check
  • Rose – Asks about TANF audits?
    • Contracted with PCG vendor, report is on the website, issues related to lack of centralized collaboration between agencies
  • Rose – Did you look at fraud?
    • Wasn’t part of the scope, if it had come up would’ve looked into it further

 

Property Tax Proposals

  • Chair Bonnen – Rider 81 has about $15b in property tax relief, methodology open for discussion

 

Maggie Jebsen, LBB

  • Link to presentation
  • Provides overview of FSP on Pg 2&3, primary vehicle to deliver state funds to ISDs and charters
  • Focusing discussion on Tier 1 of FSP, ADA and M&O
  • As property values grow, so do local property taxes, and state share decreases for Tier 1; HB 3 slowed collection growth
  • Pg 5 outlines Rider 81 Property Tax Relief
    • Section (a): $3.1 billion required by current law due to property value growth expected in 2024-25 biennium
    • Section (b): $2.2 billion required by current law due to certain state savings from 2022-23 biennium
    • Section (c): $9.7 billion transfer from General Revenue Fund to Property Tax Relief Fund (PTRF)
    • Section (d): $9.7 billion from PTRF for additional property tax relief; lists relief options
  • Going over options in section (d) of Rider 81
  • Details and examples of compression in (a) & (b) on Pgs 6-8
  • Section (a) compresses taxes based on growth of MCR compared to statewide average; ISDs lower than statewide average will compress at a lesser percentage (Pg 7)
  • Section (b) compresses according to MCR floor, 90% of SCP; ISDs may be limited to MCR floor
  • Section (d) options for $9.7b additional relief on Pg 9, incl. 1) reduction of SCP through another GAA rider, 2) decrease MCRs by an equal amount via statutory change, 3) collection limit reduction through statutory change, and 4) exemptions and special appraisals like homestead exemptions
  • Pg 11, additional SCP reduction can be done by rider in the GAA, would effectively reduce maximum and minimum Tier 1 tax rates, would help districts at these limits the most; estimated cost of $.10 reduction would be $6.5b
  • Pg 12, equal MCR reduction of $.10 would cost $7.6b, every district would benefit but ISDs at the floor would benefit the most
  • Pg 13, Collection Limit Reduction, would reduce the current allowable 2.5% limit before Tier 1 tax rates compress, 1% to 1.5% reduction would cost state $1.4b
  • Pg 14, exemptions and special appraisals includes homestead exemptions, etc., would vary widely and most options would require Constitutional amendment
  • Tepper – Would be helpful to see effects on ceiling, floater, and floor for the different options
    • LBB Staff – Each district would be impacted differently, last option for special exemptions would vary widely
    • Such a large range of options that it would be difficult to say impact on taxpayer
  • Tepper – And different homestead exemption based on region?
    • Would apply to the statewide homestead exemption
  • Tepper – Statewide would be sufficient to determine ceiling, floor, and floater
  • Bryant and Chair Bonnen discuss property tax compression
  • Chair Bonnen – System is very complex; HB 3 in 2019 worked and resulting in billions in compression
  • Chair Bonnen – Even if we didn’t set aside additional money, would still do $5b in compression, planning to expand with the $9.7b; could do this within Education Code, but ISDs are impacted differently
  • Chair Bonnen – Not affecting ISD entitlement, impacts properties taxed in the districts; these would experience more or less relief
  • Chair Bonnen – Impacting other properties would require changes to Education Code; options incl. could put more money in the system, move everyone down in unison, etc.
  • Chair Bonnen – Also could move us closer to a statewide M&O Tier 1, more money into this the more quickly this happens
  • Chair Bonnen – Some interest in looking at taxable value versus appraised value, e.g. lowering amount of taxable value year-over-year, but would require constitutional and statutory change
  • Chair Bonnen – Could infuse remaining capital in the $15b through existing pathways, looking at potential for other options
  • Howard – Looking at option to decrease max and minimum Tier 1 rate, if we moved $.10 to $.5 would that cut cost in half
    • LBB Staff – Would be roughly in half, would be some variation
  • Howard – So trying to look at most fair way to provide relief to most taxpayers, first options are across the board
    • Yes, MCR reduction would benefit all taxpayers
  • Howard – $5.3b will happen anyway?
    • Yes
  • Howard – will got o everyone paying property taxes?
    • $2.1b includes reduction in state compression percentage, $3.3b varies by district but applies to all property tax payers in the district
  • Chair Bonnen – Also interesting for the 90%, there is a 10% band where if you are floating you are not seeing compression; eventually you would be captured by state percentage and getting to that point, but currently there are floating districts that aren’t seeing relief property owners in other districts are seeing
  • Howard – These would be ongoing expenses?
  • Chair Bonnen – State paying greater percentage, decreasing recapture, etc. will mean state needs to maintain effort; could cost more in a subsequent biennium than now, likely to be more than $15b to maintain same property tax effort, which is the goal
  • Chair Bonnen – $15b in property tax relief is really net zero for what ISDs have to spend, but have a whole other bucket that will impact what goes into ISD budgets, will have a healthy discussion on this

 

Public Education Funding Opening Comments

  • Chair Bonnen – Would like to keep an eye on overall cost, will be ongoing expenses
  • Gervin-Hawkins – $15b is specifically for taxpayers, school property taxes will go down?
  • Chair Bonnen – That is the goal
  • Gervin-Hawkins – So should reduce property taxes across the state

 

Public Education Funding – Rider 81

Education Commissioner Mike Morath

  • Link to presentation
  • Speaking on Rider 81 property tax compression and Rider 82 public education funding
  • ISDs care the most about what their budget is, how much is available to spend serving students; state spend is difficult to tabulate, popular figures are incorrect
  • Provides overview of student spend and FSP funding mechanism; funding entitlement to ISDs derived from different formulas determining per student spend
  • FSP includes local share & state share, plus extra spend; funding entitlement follows student through the school system
  • Local property taxes are the first revenue source, then state supplements; collecting more than necessary leads to recapture
  • Provides overview of HB 3 which set up an automated compression mechanism, icon. historical rates; total cannot grow by more than 2.5% in any given year
  • Tax rates have fallen; if HB 3 hadn’t passed, ISDs would’ve collected $6.7b more
  • From an approps perspective, will need to answer “how much does compression cost relative to prior law?” and “how much does compression cost relative to prior year?”
  • Need to consider this in concert with subsequent spend on compression, e.g. what the state cost will be in coming years
  • Chair Bonnen – Can you comment on enrollment growth for the next decade
  • State spend without HB 3 would’ve been a lot more, but from 2022 to 2023 the state spend is actually a little bit lower; due to demographic shift have fewer kids per adult in Texas than we used to
  • Projections for total enrollment are beginning to look negative
  • In summary, property tax compression typically has zero impact on ISD budget
  • I&S is worth talking about when talking about property taxes; high degree of equalization for students for operating funds in law, but not the case for I&S, local taxpayers pay almost the entire tax burden for I&S
  • Gervin-Hawkins – Average paid per student is $13k?
    • Average total amount on K-12 is $13k, made up of many different factors like Tier 1, Tier 2, federal funding, etc.
  • Gervin-Hawkins – Do you have the number that separates federal versus state?
    • Can follow up
  • Gervin-Hawkins – How is the attendance rate impacting? If funding is reduced due to attendance does the state keep the remainder?
    • ISDs are paid on a mix of attendance and enrollment; Comp Ed set aside for low-income children is an enrollment based rate, this is mixed with attendance based funding
    • Funding issues in 21-22 is partly due to weird fluctuations in attendance
  • Gervin-Hawkins – Pre-K used to be half-day, now full day, each Pre-K student is $13k spend?
    • Complicated question, formula funds on a half-day basis for 2 & 4 year old Pre-K, state req is 4 year old services are provided on full day, and have Early Education Allotment that funds this other half day
  • Gervin-Hawkins – And that’s the $13k?
    • More complicated, $13k includes building; M&O is about $10.5k and Pre-K is in that mix; they don’t generate $10.5k themselves but there is the other funding bucket that may bring it there
  • Gervin-Hawkins – Smaller districts suffer with funding based per pupil, is this rule or law? Do we need to look at this?
    • Comes from state law structure of the entitlement system, Small and Mid-Sized Allotment means extra money per pupil for ISDs with fewer than 5k children
    • School safety allotment is different, TEA thinks it might be wise to do a per-campus allotment & would require statutory change
    • Also about to present on changes that could be considered for the Small and Mid-Sized Allotment
    • Reports that minus federal funds it is $11.5k/student/year
  • Tepper – If you had a clever ISD who slashed rates, would state make up difference
    • Interesting question, reducing Tier 1 reduces entitlement, Tier 2 is different and goes beyond state entitlement
    • Tier 2 can tax up to 16 pennies, reducing these could reduce state aid
    • I&S is a different deal entirely, need to tax enough to pay off bond holders, some ISDs get creative and temporarily hold it higher and lower
  • Tepper – What you’re saying is the state is watching and there are stopgaps to prevent Boards from relying to heavily on state funding
    • Correct assessment, I&S has a $.50 limit
  • Tepper – Are you tracking values in each district?
    • Yes
  • Tepper – Important to consider that the state doesn’t charge property taxes, ISDs, cities, and counties set rate
  • Martinez Fischer – Charts that take inflation into account?
    • Short answer yes, typically published every year, can get those to you
  • Martinez Fischer – Inflation metric in the Rider 65 report was .4%?
    • Mike Meyer, TEA – Don’t have exact figure, follows fiscal calendar and would’ve only captured 3-4 months of higher inflation; will follow up
  • Martinez Fischer – Some acknowledgment that charts may not take into account the full effect of higher inflation; if you had a chart that had 2022, sense is that $13k spend per student would be different
    • Morath – Rider 65 provide inflation and raw dollar basis; report provides most recent year for which books are closed
    • Record inflation will erode purchasing power for everyone, also anomalous is massive federal funds for everyone
  • Martinez Fischer- District would love to have raw dollars today; number of things we can do with allotment, teacher pay raise, don’t want to send signal that we’re precise on property tax relief and not focused on the teacher pay and allotment
  • Martinez Fischer – When will 2022 charts be available?
    • Can send you the most recent version of Rider 65 report today
    • 2021-22 school year will likely be available late March or early April
  • Martinez Fischer – You have data on tax collection for 2022, but would help on allotments if we had inflation-adjusted dollars
  • Toth – On I&S, is there any direction on what can be rolled into I&S debt? Types of things you can bond?
    • First indicator system basically looks at matching asset length to debt length
    • I do think there is guidance, but will need to follow up
  • Toth – Seems like we’re seeing more pushed into I&S due to 2.5% cap
    • Some ISDs are getting creative with what is going into bonds
  • Bryant – Asks about state spend without property tax compression included
    • Will need to track down that number
  • Bryant – What is the total expenditure?
    • $22b, will get exact number
  • Bryant – Charters?
    • All funding charters receive is state funding
  • Bryant – How much?
    • Whatever the entitlement is, $10k/$11k pre student
  • Bryant – Charter portion?
    • Will get this to you, roughly 7-8% of total spend

 

Public Education Funding – Rider 82

Education Commissioner Mike Morath

  • Link to presentation
  • Slide 17 shows employee more teachers than ever before, have high teacher attrition rate, average teacher pay highest than before and student teacher ratios are low
  • Slide 18 shows median salary of teacher varies dramatically based on size of district
    • Median salary for smaller districts is lower than state average
    • Rural teacher pay lags rest of the state by $8k
    • Small and mid-size allotment addresses but possible policy makers may want to consider a larger adjustment
    • Charter schools seem to have lower pay than ISDs but not lower student teacher ratio
    • Increase basic allotment could happen but if trying to address differentials then a statutory change needs to be addressed
  • Slide 19 TIA projections will grow automatically under state law, for additional money could grant funds to help rural districts get into TIA like launch money, could increase the money a teacher gets under TIA, could also consider another TIA designation category
  • Slide 20 Basic Allotment, a $50 increase in BA example was provided
    • $50 increase in ADA funding and $21 on average in per pupil with the weights
    • $358 million increase in public education
  • Tier 2 yield increase in penny taxation, it has risen from $98.56 to $126.21 so legislature has already increase ADA as a result by approx. $239 per ADA
  • Legislature can make changes in Tier 1 and Tier 2, but points out they have done something in Tier 2
  • The school safety allotment is provided to district per ADA
  • As new funds are considered, a per campus allotment plus funding per ADA may be wise to ensure all schools have a sufficient level of safety resource; this would require a statutory change
  • Have a lot of digital learning devices, slide 23 shows change of state due to COVID
  • State currently at a one to one device posture, question must be asked if state wants to replace those devices or not
    • Districts will either not replace devices or rob from another bucket which may be textbooks
    • Slide 24 shows state funding in IMA went down significantly in 2022
    • Teachers report on average they spend 7 hrs per week designing lessons, because they are not consistently given textbooks anymore
    • They now have a full time job designing instruction in addition to delivering instruction
    • If districts shift spending away from textbook, then this problem becomes more pronounced
    • Slide 25 shows teachers do not have enough time to prepare rigorous lessons and Slide 26 shows students are not consistently exposed to rigor
  • Toth – Record amount of funding being spent while teachers are walking away
    • Convened a teacher vacancy task force finding a number of needs including addressing discipline and developing lesson plans
  • Toth – Talked to teachers about discipline need in the classroom
    • Need to have sufficient tools available for teachers
    • Notes introduced budget fully funds TCHAT which provides supports to every student on a referral basis
  • Toth – Discipline something that needs to be addressed now
    • Agrees in addition to mental health
  • Toth – Where are we losing teachers
    • Not sure there is a discernable pattern, but it is all over
    • Notes this job of teaching has been engineered to be very difficult
  • Toth – Hearing concern that teachers are working for administrators who only have classroom experience for 3 years, should there be a minimum
    • Depends
  • Stucky – Need to retain great teachers and it sounds like discipline is a big issue, also what does it take to get salary up
    • Texas has 378k teachers, every $1k costs $400 million
    • Student teacher ratio has been declining significantly, we have more teachers than students today
    • Districts are balancing raises and student teacher ratios
    • California ratios are 22-1 and we are 15-1
    • If we had California ratios then teachers would be making $85k
  • Stucky – Has the ratio gone down due to SPED
    • It is a factor, there is a growth in classroom teachers and growth in other teachers that are not full time teachers
  • Stucky – How can we invest in everyone participating in TIA
    • Increase number of districts participating and ensure all teachers are eligible for TIA
  • Johnson – Asked about vouchers impact to public education
    • Depends entirely on how the statutory creation of something like it was set up
    • Could address based on the policy changes
    • An example could be – is it only eligible to students drawing down FSP, if true then program would have no new costs but if it were eligible to homeschool and private then could create a new funding entitlement
  • Walle – HB 3 was intended to reduce recapture
    • Yes and it did do that
    • Almost every district across the state was growing but that will no longer be the case due to declining enrollment
  • Walle – How does HB 1 impact districts?
    • Budget is function of enrollment, formulas a few other things introduced in HB 3
    • There is a mechanism to increase tier 2, if district taxes in tier 2 and are below recapture threshold
    • Districts can also increase budget with TIA, increase number of days
    • Ultimately will need to make more changes to FSP or statute in order to get increase if want more to go to districts
  • Walle – Asked about golden penny yields
    • Everyone not a recapture district is seeing budget increase
  • E Thompson – there is not a lot of difference in pay from teachers that have been in the classroom for a long time versus new teachers, is that being discussed in Teacher Vacancy Task Force?
    • Rate of pay increase looks different for teachers than any other profession
    • TIA helps address problem fundamentally for districts
    • This is effectively a local issue
    • Lawmakers could potentially restructure salary schedule
  • E Thompson – asked about study of administrators to teacher ratios
    • Administrator to student ratio has been growing dramatically over the years
  • Howard – asked about basic allotment language on compensation
    • Notice not rate of pay but compensation is stated
    • Increase of BA triggers compensation, 30% but any other area of increase does not impact
  • Howard – asked about PSF cap
  • Martinez Fischer – Confirms basic allotment is just GAA, no other changes in statute needed to increase
  • M Gonzalez – appreciates appropriator language in the rider for increasing funding, what if BA were increased to account for inflation – what would be the amount?
    • Depends on inflation rate that is picked
    • Example of 1% – $61.60
  • M Gonzalez – would like agency to look at inflation rate, schools are having to pay more for basic things
  • M Gonzalez – would like urban vs rural district breakdown using TIA
    • Thinks it is around 40%
  • M Gonzalez – special education concern, district paying out of own pockets of about $1.8 billion in special education; also brought up facility funding
    • Could transition into intensity of services model so could be less funding
    • Depending on how much you which to fund
  • Bonnen – If there are statutory changes to funding, it will be challenging to see how it impacts until bills make it through the process
  • Bonnen – Can’t consider other funding mechanisms in isolation
  • Toth – Asked about funding in the classroom
    • About half of employees are teachers and the other half are not
    • That doesn’t mean admin, there is campus admin and district admin that avg about 5% of campus
    • School resource officers, custodians, etc. are non-teaching positions
    • Toth – to his point these are positions that are not in the classroom
    • Will get employee counts to him
  • Morath – System predicated on local control, question for lawmakers is how descriptive vs prescriptive do they want to be
  • Toth – Vision is set by trustees, seems like trustees just looking for direction
    • There is a training requirement, but no specifics on what is in that training
    • Ruling on that is in the SBOE
    • Not particularly directive at all, most board members not getting training through TEA
  • Rose – Inquires about devices, concern about children taking it home and don’t have access to tech
    • There is a federal subsidy and access is being set up and it is having an effect slowly but surely
    • There are a few gaps in households
    • Broadband office goal is to address gaps
  • Hawkins – Can TEA coordinate community programs and asked for total of property tax collected across schools
    • Funding, about $40 billion goes to traditional public education but for recapture
    • Charters would get a proportionate share of recapture
    • In regards to community based programs, previous legislation asked them to locate resources and help connect to community regarding mental health resources
  • Hawkins – What about a training program for nontraditional mental health people?
    • Rider that funds mental health first aid to help with training

 

Closing Comments

  • Chair Bonnen – Tomorrow will start at 8am moving to Article II and infrastructure funding