House Public Education – February 5, 2019

The House Committee on Public Education met to hear invited testimony and a basic review of school finance.

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.

Mike Morath, Texas Education Agency Commissioner

Bill required mandatory sanctions by multiple years of low performance on a campus
Not sure if you would call it HB 1842 effect but numbers of IR campuses have been dramatically reduced
Idea behind ACE is to identify talent, and provide incentives to have group move on mass and then support that campus that they move to
- Has not yet been tried at the High School level to his knowledge
- Tried to support with incentives but not sanctions
- There is concern the program will be viewed negatively if made it about sanctions
Bernal – heard just the opposite, the challenge is of cost of scale; he understands the stipends are more than $5k on top of differentiated base pay – wants to know how this is an unattractive option
- There are multiple considerations, gives example where one school did similar things but did not tier talent and as a result the program did not work
- May need lead in time
- When do you want this incentive, IR 5 seems late
VanDeaver – is ACE program scalable to districts that have one campus
- No, provides more details
- This would be used in an early turnaround plan
Achievement School District is another tool in the tool box option
- Theory is campus is snatched out of a school district and becomes part of a different legal entity
- Instead of closing a campus, remove it from governing body and give it to someone else
- Commissioner appoints the Superintendent for the district
- This may make sense in a geographically contained area, this is being done in other states
- Was asked to present other options for 1842 so this was just another option
- Gonzalez – points out some of the complexity in this system, Superintendent needs to be accessible
- Agrees, there is no easy answer
More options to locals to react and respond before the Commissioner is required to respond
- Before a district reaches IR3, call an election for the whole school board
- If you had a mechanism for voters to take another look, it will get attention
Bernal – did not realize you could win an election with a plurality in some districts
SB 313 was passed by both chamber and vetoed
- Bill asked SBOE to streamline TEKS among other things
- SBOE took bill to heart and did everything the bill required
Accountability, A-F ratings will become live for campuses
- Heard request to set goal post and keep it for a long period of time
- Originally 45/45/10 weight but feedback was that it devalued graduation rate so they responded
- Had a large challenge with the school progress domain
- Meeting today on how to tweak 3 out 4 Fs rule for the accountability cycle
- Wants to hear back on how the committee decides on it, can tell them with 24 hours what the recommendation is
- Huberty – ok get back to us
Reviews statutory changes that can be made that does not upset federal government: no reason a student has to meet/pass in order to be promoted to the next grade, stakes in Texas are applied to 5^th and 8^th and EOCs that a student has to pass in order to be promoted
VanDeaver – We are required to have standardized testing to prove to federal government they are meeting knowledge and skills but not require to have the test for grade promotion
- That is correct
- Generally research literature points to structure
Huberty – discussion on having weight at different levels, how did we end at 40/40/20
- Was not unanimous, strong opinion on educators to significantly increase graduation rate
Huberty – cut scores questions
- One that determines grade or meets, approaches, etc
- Huberty – the second
- In grade 3 it was just over 30 questions last time and need to get about half right to meet grade level
- Meets grade level – roughly 60% chance in college of getting C in Freshman class
- Masters grade level – roughly 70% “ “ “
- Approaches – one standard deviation from meets
Huberty – are we setting bar higher and why if we are
- Reviewed setting curriculum standards, none of the other tests being discussed are based on state standard
- Huberty – adopted streamlined standards and then look at assessment based on it and compare to national test; is it a tool
- Our standards are superior than common core standards, they are clearer and easier for people to understand discrete skills people should have
- STAAR is only thing based on these standards
- If switched to SAT.ACT then will be out of alignment
Huberty – clearly have improved campuses significantly
Refers to Lake Wobegone study, all systems in West Virginia were using the same assessment framework but no common rules on how it was applied and researcher pointed out results may not have been accurate
Huberty – as we start working on fixing things that we talk to Superintendents
Huberty – would like to make sure TEA is not creating an artificially high score
- No evidence that, that is being done
Huberty – would like company involved in the process to come testify at the hearing to ensure test is on material that is being taught
Talarico – culturally responsive assessments
- Teachers in team look at it and also improve by making cross-curricular passage
Dutton – why 60% reduction in IR campuses, asked about Kashmere and if he has talked to HISD board? Do they know what the problem is?
- The bill is part of the reason for it
- Have had a number of conversations with HISD board
- Believes there are a number of hypothesis on what is going on systemically
Dutton – Is HISD the only district that is out the bottom of the barrel?
- There are about 24 districts that have an IR 3 or more campus, but thankfully this is a rapidly declining number
- Kashmere is unique in that they have been IR for 9 years (actually 11)
- Says things have gotten better since conservator has been in place
Huberty – was a plan submitted by HISD? Did they even try?
- No, his understanding the board did not provide one
Huberty – there may be outliers on IRs
- Would like to reflect on this a bit more and then respond

School Finance 101

Huberty – will accelerate schedule, talk about current system today and tomorrow talk about where they will go

Eric Henderson, Legislative Budget Board

Provide overview of FSP
Huberty – 6545 is that the avg of what charter schools receive
- Yes
VanDeaver – confirm charters funding not on standard allotment
Talarico – any practical application for something not being written into statute
- Huberty – do it by appropriation
Gonzalez – in last biennium how much did state receive in recapture?
- In current biennium $4.7 billion
- Gonzalez – how much did state give to support charter schools as a whole
- Don’t have that number off hand but can get that number
$9 billion included as contingency on certain school finance bills
Huberty – is LBB supposed to study CEI and when was the last time you did that?
- There are certain elements they are supposed to report on, beginning this session they were able to compile what was assumed in HB 1 which is on the website
Huberty – not sure that answers the questions, when was CEI looked at
- over 26-27 years ago
Gonzalez – thinks there may be contradictions on what is occurring, LBB creates assumption on costs but what happens if they don’t do it
- If they don’t do it then status quo remains, looked at 2017 and said a number of legislative decisions would need to be made
- Gonzalez – even that part of the statute needs to be reconsidered
- Fair considering that part of the statute

Von Byer, Texas Education Agency

Two issues where state has lost, Edgewood III and West Orange Cove lost on Property Tax, last time they lost was 2005
Lost on equity in Edgewood I and Edgewood II, last time they lost was 1991
Covers details on cases – standard to meet is general diffusion of knowledge; once that standard is met they then have some flexibility
Provisions you will normally see in school finance: Prohibits a statewide property tax and requires a general diffusion of knowledge must make an efficient system of public free schools
Continues to provide additional detail on historical cases
In Texas Taxpayers, Court provided a summary of what is sufficient in terms of statewide property tax and financial efficiency, basic framework has not changed since 1989
“Substantially equal access to similar revenue per people at similar levels of tax effort”
Court also illustrated that system dependent on property tax must draw tax from all property at substantially similar rates
Standard to meet is funding sufficient to promote general diffusion of knowledge
Financial efficiency turns on relative differences between wealthier and poor districts
TX Constitution prohibits statewide property tax, also requires general diffusion of knowledge; duty of Legislature to establish and provide for efficient system of public education
Before Edgewood I in 1989, a 1935 case explored the concept of the state requiring one district to educate students from another, court found that state cannot compel this without just compensation
Provides history of case specifics, Edgewood I and II tested the efficiency of the funding system, also established that once diffusion of knowledge standard was met then there would be some flexibility
In Edgewood III, property tax was tested, court ruled that it is a statewide property tax when state levies the tax or when it controls the levy of the tax rate too much; e.g. systems that take away or bypass district discretion
Two tier system resulted from this with large portion taxed similarly, system with addition of recapture tested in Edgewood IV & Supreme Court ruled it was constitutional
Court also warned legislature that this could become a problem as some districts would need full taxation to support diffusion of knowledge; this happened when districts all crowded near the cap of $1.50
Legislature reacted by compressing tax rates, redrafting two tier system with enrichment and recapture; Court determined this was constitutional in 2015
There are other issues that state has not lost on yet:
- Inadequacy – Court stated this is tracked by performance of the system as measured by outputs
- Suitability – Not likely, triggers on system that functionally could not work
- Financial efficiency – Court determined that 2015 ratios were significantly less than previous cases & state was fine
Court foresaw possible issues with tax elections, but agreed that allowing local districts to ratify tax rates was the exact opposite of a statewide tax
Huberty – So in the ruling in 2015, while the state won, we also got the message that the state should fix its own issues without coming to the courts?
- Yes, court essentially stated it was not in the business of micro-managing the legislature
- There is a limit to this latitude if the system is not functional
Huberty – Have been concerned that we are approaching a similar situation to a statewide property tax due to many districts approaching cap, what’s your take?
- Difficult to say, court has noted that it only takes one district that needs to be at cap to support general diffusion of knowledge
Huberty – My point is that we are going to need to take this into consideration; can’t increase money for all districts & need to be thoughtful in distribution
- Guidance from the courts is focused around need to raise revenue to meet the general diffusion of knowledge

Leo Lopez, TEA

Walking through more detailed view of school finance calculations
Slide 3 details history of funding weights, most created in 1984 and have not been updated in some time
Special Education Allotment was $3 billion last year, one of the more complicated allotments to calculate
Allotment divided into full-time equivalent (FTE) weights for instructional setting,
Huberty – Funding for special education is also based on contact hours?
- Correct, Committee meets and determines appropriate setting for an individual student
Huberty – Did not redraft contact hours aside from arbitrary cap of 8.5%
- My understanding of why this was left alone
M Gonzalez – So it is working, but there some concerns with the 2018 case re: maintenance
- Byer, TEA – We appealed decision to the 5th Circuit
M Gonzalez – I know this was started in 2012, is state in compliance with maintenance of financial support?
- Lopez, TEA – Looks like we still have an issue, should have updated forecasts later on in the next week
Huberty – This case is over $100 million, also short by roughly $40 million this year; need to get us info on what needs to be worked into bill because we need to get money we would pay to federal gov back into the system
Huberty – If you’re deciding not to appeal, we need to determine how we will deal with this
M Gonzalez and Huberty discuss the possible appeal, Huberty notes we will be short this year & there are chances something will need to be done
- TEA Agrees
Lopez provides overview of getting from enrollment to average daily attendance (ADA)
For special education, each special education setting has its own contact hour multiplier, convert from contact hours based on 6 hrs/day, 1,080 hrs/year, FTE of .45 is calculated from this
FTEs are then converted to weighted FTEs, 1.35 weighted FTE for special education; however, mainstream is funded through ADA and wouldn’t need this step
Special education allotment is then determined, allotments are determined for each student in each setting and aggregated for district total special education allotment
Because special education and current technology are funded on contact hours, current technology is calculated to be funded only on those hours students are not receiving special education hours
Total funding a student is entitled to is addition of regular program allotment and special education allotment
Bell – Asks after students in state hospitals/state schools
- Would calculate this using the contact hour multiplier for this setting, provides overview of specific calculation
Bernal – You mentioned that the mainstream is done on an ADA basis, is that overall or for this only?
- This is overall, mainstream is not subtracted out of regular program
For compensatory education, weight of .20, pregnancy-related services at 2.41; bulk of compensatory education is determined based on number of students eligible for free and reduced lunch
Meyer – How do you determine economically disadvantaged, is it based on income?
- Yes, determined at federal level
Meyer – IS there a weight for homelessness currently?
- Not at the moment
Meyer – Would you agree that we could look at a weight for homelessness and that these students might need more support?
- Seems reasonable
For bilingual education, $500 million allotment, no differentiation currently for ESL or ELL, Commission has been exploring alternatives
Bilingual is funded on an ADA basis, so similar to other formula
For current technology allotment, regular has weight of 1.35
M Gonzalez – TEA set the bilingual allotment in 1984, when it was established it was commonly understood as underfunded?
- Don’t have direct knowledge
M Gonzalez – Could we be underfunding this weight?
- Have not done a study on this
M Gonzalez – If the service costs more than the weight provides, then the district has to make it up in other ways, correct?
- To the extent of what the district is required to spend if the weight is funding below
- Byer, TEA – In Tier 1, comp ed and bilingual is a component of basic allotment, so weights can remain stable and districts can see funding increases with basic allotment increases
- Required spend was set as 55% when $1.50 was compressed by 1/3rd
Current technology is excluded from regular program allotment, state spends over $2 billion on this currently
For gifted & talented, weight is .12, state is spending $155 million/year, minimum spend of 55%, GT is limited to 5% of student population
Huberty – And we have done a remarkable job of distributing GT children at 5% across districts?
- Yes
Huberty – Amazing how this works out
For IR for FY17, allotment for GT was just over $3 million
Huberty – So we spend a little more than $3 million for all 200 or so IR campuses
- Yes
High school allotment is different from others in that it has a dollar amount per ADA, direct spend requirement of 100%, moved to Tier 1 in 2009
NIFA allotment, $1,000/student, helps fund start up costs for new campuses per ADA at the new campus; bill that increased per student didn’t increase overall appropriation so the funding was prorated to roughly $250
Also have two different formulas for mid and small-sized districts, two version of the small district adjustment, but these are being phased out
K King – Commission discussed doing away with these adjustments, also discussing of moving this to end of formula; can you explain the why of moving this to the end
- Currently, the number at the beginning would be used to calculate all the student adjustments, essentially compounding
K King – I think this is the beginning due to economies of scale; when you put the adjustment at the beginning, it provides more funding as you move through the formula
- The Commission discussed moving this to a standalone allotment to see the total spend as a result of this
K King – All for transparency, but unsure how you would move this to the end and guarantee revenue neutrality when you aren’t sure what the student body will look like
$1.6 billion annually on small and mid-sized adjustment
Slide 31 shows sparsity adjustment, doesn’t change basic allotment, but essentially provides minimum ADA for districts with low population; 60 districts receiving average of 28 students currently
$.50 test that a district must meet to issue bonds for facilities, district can levy I&S to pay for debt service on the bonds
Huberty – How many districts are at the $.50 cap?
- 11 total above 50 cents
Huberty – This is another area we need to look at in terms of what we need to do
Slides 36 & 37 speak to IFA program, facilities program funded on $35/ADA basis, similar to Tier 2; only for instructional facilities and through applications only
EDA, yield changed by HB 22 to spend the rest of the existing debt allotment
Provides figures of districts receiving IFA and EDA funding, >$12 billion for these two programs
Huberty – With EDA, this is something people complain about that the state hasn’t put money into this, but over $200 million in each; is this through LAR?
- Yes
Allen – In October, schools do the snapshot that determines how much money will be received next year, students are often transferred after this for test time; can we make the money follow the student?
- Money does follow the student, driven by attendance and enrollment and proportional to time enrolled

Closing Comments from Huberty and Committee

This is the current deal that we have & much of the discussion tomorrow is based on moving these things around
Will have several Public School Finance Commission members, will be presenting thoughts from the different working groups
Next week we will have opportunity for more discussion, will be working as expeditiously as possible to get a bill compiling ideas to work with the Gov.’s emergency items
Encourages members to look at the whole system instead of one piece of the puzzle; things like hold harmless provisions can benefit a smaller number of districts and could be archaic, need to think about issues like this as we continue discussion to change the system
Allen – I hope we take all employees into consideration at the districts
K King – All of us have thought about what is best for our districts, needs to be equal opportunities for education for all children in the state
Teacher compensation is a complicated process, will be discussing some issues tomorrow; need to also consider the other staff at schools that make the system work
If we are able to increase basic allotment & not dictate then district will be successful
Will announce schedule as we move forward, will have bill later this month, will be discussing bills when they get referred to us on February 19th