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The House Appropriations Committee on Article III met on February 20, 2019 to hear invited testimony on House budget recommendations. This report covers testimony regarding the Texas Education Agency.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, 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.

 

Texas Education Agency

Ted Holiday, Legislative Budget Board (Non- FSP Programs)

  • Funding for technology and instructional materials allotment represents a decrease, attributable to unexpended balances included in 18-19 base.
  • Decrease of $25 million in one-time funding from ESF for E-Rate program.
  • Increase of $54.5 million for Safe and Healthy Schools Initiative.
  • Increase of $50.5 million for Special Education program.
  • Increase for communities in schools, adult charter school, and Texas AP initiative total $17 million.
  • Total GR funding for Non-FSP program funding declines by $95.8 compared to 18-19 base.

Aaron Henricksen, Legislative Budget Board (FSP Programs)

  • $6.2 million increase for facilities.
  • $9 billion in GR funds contingent on enactment of legislation that increases the state share of the FSP, enhances district entitlement, reduces recapture, and provides local property tax relief.
  • Comptroller projects strong property value growth.
  • 40 districts will successfully pass tax ratification elections each year, drawing additional state aid.
  • Yields:
    • Basic allotment: no change, $5,140.
    • Equalized Wealth Level: no change, $514,000
    • Austin ISD Yield: $126.88 per penny per WADA in FY20 and $135.92 in FY21. (Increase is due to robust property value growth combined with student population decline in Austin ISD.)
  • Updated drives estimated to save $415 million due to student enrolment being lower than projected.
  • Harvey costs estimated to be $271 million. 20-21 increased mandatory costs due to Harvey estimated to be $365 million.
  • Total 18-19 base adjustments equal savings of $153 million in GR funds.
  • 20-21 FSP Costs over 18-19 adjusted:
    • Enrollment growth est. to cost $2.4 billion.
    • District property value growth est. to save $5.05 billion.
    • Increase in Austin ISD Yield growth est. to cost $2.2 billion.
    • Formula changes est. to cost $200 million.
    • Harvey est. to cost $365 million above 18-19.
    • Special education est. to cost $882 million.
    • Settle up est. to cost $120 million.
    • Enrichment tax effort and prior year and other adjustments est. to save $235 million.
    • Recapture revenue due to projected increase in property values est. to save $2.3 billion
  • State share of FSP entitlement is currently 37.8%, will decrease to 34.6% in 2021.
  • One of allowable uses of $9 billion is for local property tax relief.
  • Estimated required costs attribute to Harvey total $907 million for 18-21.
  • It is expected that enrollment in special education will increase dramatically.
  • Recapture as a percent of total M&O revenue has been steady since 2006 between 3-5% but will increase up to *% in 2021.
  • Large districts are responsible for the greatest share of total recapture paid by district size.
  • HB1 includes 54 federally funded FTEs to support Special Education Strategic Plan. Bill also increases $50.5 million for Special Education Supports. This program would establish a fund to reimburse local education agencies.

Ted Holiday, Legislative Budget Board

  • HB 1 includes a total of $1.1 billion in IMF.
  • Sherman – Clarified that $9 billion contingency appropriation has not been calculated to reflect the impact of recapture.
  • Sherman – What is the process in calculating the impact of recapture?
    • It would depend on the legislation that it was tied to.
  • VanDeaver – Was there a carry-over of $169.6 million from 16-17 to 18-19?
  • VanDeaver – Do we anticipate a carry forward from 18-19 to 20-21?
    • Agency has not anticipated an unexpended balance from the previous biennium, but it is a possibility.
  • VanDeaver – So this is money that we give to the districts, but not used by the districts?
    • Correct, the funds are available to the district, but it is at the district’s discretion as to whether the access them.
  • VanDeaver – It is my understanding that districts are struggling to find instructive materials, so it blows my mind that there is an unexpended balance.
    • One thing we have heard is that some agencies bank up balances and use them when large proclamations come up.
  • VanDeaver – In a previous session we gave them the freedom to spend any year of the biennium to take care of that issue.
    • Andy McLaurin, Legislative Budget Board – The issue that was addressed was the cash flow issue between fiscal years, which has been taken care of.
  • Stucky – Why is the state portion of TRS for districts is $2,378 and $2,856 for charter schools?
    • Presentation on TRS will occur later and will get information to them at that time
  • Gonzalez – Where did the money for the corrective action plan come from?
    • A couple of components, increase transfer to fund 54 FTEs and a piece in 2018-19 biennium but will can get that information to you.
  • Gonzalez – Asked for information on how much was spent for the corrective action plan and will the funding came from.
  • Howard – Asked for a walkthrough of FSP funds.
    • Savings of $1.64 billion in GR and increase of $882 million in all funds. $9 billion is added on top of those costs.
  • Howard – Asked for clarification on the district property value change.
    • As local property values are increasing, the level of local revenue increases as well, which would decrease the amount of state aid. Our estimates show a saving of $5.05 billion across the state based off of projections made from the comptroller.
  • Howard – The increase in property values helps cover population growth, AISD yield, etc., while reducing the state share?
  • Howard – Asked for clarification on local and state share.
    • Primarily because local property tax revenue is increasing, the state share is decreasing.
  • Howard – So with the $9 billion, we are not reducing the amount coming in from local property tax collection?
    • Correct, local property tax reform is one of the items included that can be funded out of the $9 billion.
  • Howard – Is there less per pupil in constant dollars than there was prior to 2011?
    • Compared to 2011, our information showed that there is less in constant dollars up to 2019.
  • Howard – If we had maintained funding at the 2011 level and continued to increase based on inflation and population growth, what would be the number that we should be at?
    • We can get you that analysis.
  • Bonnen – Asked LBB to factor in I&S funding and federal funding into the analysis that Rep. Howard requested.
  • Gonzalez – Conversation with LBB agent to understand the way charter schools impact state funding.
  • Gonzalez – Emphasizes that Charter schools are part of the reason AISD yield is increasing and costing the state more money.
    • Charter schools are a factor. State provides funding at district and charter level, but charter operators may have campuses throughout the state. One charter campus might pull from different districts.
  • Howard – Emphasized that charter students have 100% state funding per pupil, as opposed to traditional students being split into state and local costs. Documents she worked on with LBB indicate state share of district schools went down from 38% to about 31%
  • Howard – Asked for an analysis on the state share to district schools separate from charters

 

Mike Morath, Commissioner

  • Thanks, the committee for their support in fully funding two exceptional items, special education and safe and healthy schools, in the introduced bill.
  • Goal is to have 60% of HS graduates achieve a college degree within six years.
  • Priorities are to recruit and retain district staff, build a foundation of reading and math, increase college and career readiness, improve low-performing schools.
  • Estimated $60.8 billion in public education spending in Texas.
  • Big jump in FTEs from 2018 to 2020 are linked to SPED FTEs funded by the federal gov.
  • VanDeaver – Are school district able to carry IMA funds from one biennium to the next?
    • Correct, it is the school district’s money sitting in a state bank account. Schools often stockpile IMA to fund materials related to things such as ELA.
  • VanDeaver – Are schools positioned to be able to afford the ELA that is coming? How many schools are getting to spend anything on technology in IMA?
    • There has been a reduction in funds used to purchase technology. Given the structure of state policy the funds might be sufficient to get core text book materials, but possibly not enough to get the extended instructional materials for ELA.
  • VanDeaver – What is your recommendation to ensure that every student has the materials they need?
    • Could create more funds either by increasing availability in the account or reduce the strings tied to the allocation of funding so that school districts can make decisions that prioritize their conditions.
    • Some strings are worthy but in general business of district could reduce the strings
  • VanDeaver – Where do we stand today in dollars per students available for instructional materials allotments as compared to previous years
    • Monica Martinez, Texas Education Agency – The per student amount for this coming biennium would be lower than previous biennium, under $180 per student.
    • Last session was just over $186 per student
  • Walle – Was there any discussion of including early childhood education in your LAR request?
    • We only put two exceptional items one for safe and healthy schools and one for special education. Last biennium we had an EI related to early childhood education but it was not included in the budget. The legislature reviewed the issue and decided not to move forward, so we did not include it in our LAR request.
  • Walle – Is there an assumption that there will be money available for that in the school finance bill?
    • It is up to the legislators.
  • Walle – Emphasized the importance of advocating for early childhood education.
  • Howard – The permanent school fund has $44 billion dollars in it?
    • Roughly, yes.
  • Howard – What is the percentage they are allowed to disburse?
    • There is no such percentage. The SBOE makes distribution decisions that are guided on intergenerational equity. They make a choice of 1%-2.75% based on advice from our financial advisors.
  • Howard – So there is one outcome of the returns of these investments but they are managed by two separate entities?
    • Yes, one by SBOE and one by the school land board.
  • Howard – Is that very efficient?
    • The school land board’s investment authority is restricted in terms of what they can invest. Currently there is about $4 billion dollars that are restricted.
  • Howard – So with increase costs in traditional methods of instructional materials, the cost of associated with technology, it would be wonderful to have more resources put into it.
    • Since the bifurcated structure began, there has been about $1 billion in funding that we have not given our kids.
  • Howard – You have been on record saying that early childhood education has been successful.
    • Correct, there is promising research and statistics on the success of early childhood education.
  • Howard – Do you have dollar amounts regarding your strategic priorities?
    • There has been a relatively small amount of money allocated by the legislature for these initiatives, which has been rapidly used by districts.
  • Howard – You have a student success road map to get where we want to be, why are you not using it?
    • Some initiatives are harder to implement than others and talent is not always distributed equally.
  • Howard – Commentary on school initiatives to address student success issues.
  • Gonzalez – When did you get the first letter from the federal government about the maintenance of effort requirements?
    • In 2016 we received communication from the feds that there might be an issue with the maintenance of financial support at the state level to the tune of $33 million.
  • Gonzalez – Am I correct that you can still appeal this?
    • Yes, to the U.S. supreme court. We have begun settlement initiatives with the feds in lieu of further appeals. If the legislature does not take action on this the feds will reduce funding for special education.
  • Gonzalez – What is the total of the funds?
    • About $111 million. Assuming the feds support our settlement request, the legislature would have to decide if they want to provide the $111 million.
  • Gonzalez – What is the status of our current compliance of going maintenance of financial effort?
    • We think it is wise to statutorily address this maintenance of financial support issue. We provided some language that might solve the problem going forward.
  • Gonzalez – Expressed concern that the bar for funding special education should not just be the maintenance of effort and that the language institutionalizes the true cost of special education.
  • Gonzalez – Right now, if a school sees a kid who can be potentially designated as special ed and they test the student, who pays the cost?
    • The district. If the student is found to be special education, the district will look for financial resources from the state. If the student does not qualify, then the district incurs the cost of attempting to identify special education students. Therefore, funding for diagnosis is worthy of consideration.
  • Gonzalez – Agreed that funding for early diagnosis is important.
    • One of the recommendations that came out of the school finance commission was a .2 funding weight for dyslexic students. That may solve or partially solve this problem.
  • Gonzalez – Have you started hiring the 54 FTEs?
    • Yes, we have already hired them.
  • Gonzalez – What were the basic requirements for the 54 FTEs that you hired?
    • Matt Montano, Deputy Commissioner for Special Populations – Only 4 positions are left to hire. They hired those with significant experience as special educators. Every one of them has a master’s degree or above related to special education.
  • Gonzalez – We have included an increase in the rider from $2.5 million to $5 million for year.
    • The feds allocate $115 million for central support. This has historically show up in the program budget portion not the administrative portion. We have asked for transfer authority to use it for its intended federal purpose.
  • Gonzalez – So you are taking money from the local districts to go back to TEA?
    • Sort of, we have re-tooled how we are spending all of it as part of our corrective action plan.
  • Gonzalez – Expressed concern that the legislature has not given TEA the resources to be technical support systems to local school districts. Asked LBB to increase the share of how much is going to TEA and how much is going to the field.
  • Gonzalez – You have asked for $50 million in an exceptional item request, is that state or federal funding.
    • It is state funding for compensatory services that would go to the district.
    • As the special education population increases, TEA has seen more money in the field and less for the agency.
  • Wale – Asked for clarification on the percentage reduction options.
    • Andy McLaurin, Legislative Budget Board – We ask agencies to illustrate how they would implement the 10% reduction. That is not included in the bill introduced.
    • We are required to prepare a schedule, based on a hypothetical that the legislature reduces funding by ten percent, of where we would recommend cuts.
  • VanDeaver – What role do the ESCs play in providing support to the districts and will any of this funding flow to the ESCs to provide this support?
    • The ESCs have played a critical role and will continue to.
  • VanDeaver – Asked about the additional funding requested by TEA.
    • $50 million exceptional item goes directly to districts, the $2.5 million transfer authority comes out of the overall discretionary bucket. It may or may not come out of a bucket that has affected service centers and districts historically.
  • Gonzalez – Can you talk about the unspent $80 million?
    • Over about 15 years, the discretionary portion of the $115 million that the agency receives has not been spent down.
  • Gonzalez – Have you spent that all down?
    • We have allocated it all down.
  • Gonzalez – Clarifies that the $80 million was from the feds for special ed kids.
  • Howard – Is there a correlation between staff cuts and oversight?
    • It is a contributing factor.