Texas Commission on Public School Finance Expenditures Working Group – September 25, 2018

The Expenditures Working Group met on September 25, 2018 to present and vote on final recommendations.

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

Presented to the committee a State of Public Education annual report
Publication tries to synthesize picture of public education
Bettencourt – concern of dispute between General Land Office and SBOE, SLB sending funds to ASF fund but sending none to the SBOE
- Looking at letter from Commissioner Bush, saying he will not reconsider his vote
- Watson has told him SLB could have sent more funds and are bypassing SBOE
Bettencourt – asked the Commissioner if he had any comments on that
- Last year about $750 million but this year the amount is around $600 million, so decline in amount of net send
- Also SLB has also sent to ASF and SBOE, SBOE traditionally sent that amount to instructional materials
- Morath – either way you look at the amount has declined
- Bettencourt – said his amounts say a reduction of $190 million and concerned about this, may need a discussion on public policy
- Ellis – notes ch. 41s and 42s receive the money differently, there are issues that need to be discussed; the other issue is that there is $4 million in cash; but states Commissioner is not doing anything outside of his authority but may be something to discuss in the 86^th
Huberty – statutorily limited on amounts they send
- Morath – limit on amount from GLO to ASF but no stator limit on amount being sent to SBOE
- Huberty – also points out there are two endowments and there is also a philosophical difference on who is doing better on their investment policy
- Morath – $300 million cap to the ASF is actually Constitutional not statute
Bettencourt- in response to Killian’s remarks about Robin Hood funds coming into the budget, said at least one member of the revenue committee is looking at actively freezing or weening of Robin Hood
Ellis – SLB can change their mind and SBOE would have available to change distribution rate
Williams – talking about outcomes and how far we need to go to reach goals in annual plan, laudable
Brister – found frustrating trying to find where to pull funding from to fund good programs, despite his repeated question he did not feel the answers/solutions were forthcoming
Brister- focus is on programs that move the bottom line, big picture problem is we have a huge number of economic disadvantage and English as a Second Language students that we are failing – its hundreds of thousands if not millions
Brister – with all programs, shifting money from one group to another; there will be some groups that don’t get money that they used to get
Discussion of meetings during December time frame, Brister said to expect some December meetings and where “the rubber hits the road” between what we have got and what we want to do
Ellis – hoping to get revenue recommendations back before long
West – would be great to think about which dates they should plan for in December
Conley Johnson – encourages the thoroughness of the discussions, said good recommendations for revenue on the table but need to have a strong conversation on the revenue side, she has advanced ideas to Sen. Bettencourt, encourages transparency on next meetings

Recommendations

Group goals on page 4
Page 6 starts discussions on recommendations

Reallocate CEI funds

Ellis – for the whole package to work these fit together, not looking at this individually but the whole package
Killian – appreciates focus on increasing basic allotment
Conley Johnson – worry about down the road effects, would it impact teachers not being able to afford to live in the community they are hired; suggests cost studies to account for variability
West – if not using CEI or funding it might as well put it into the basic allotment

Reallocate Ch. 41 Hold Harmless Funds

Reallocate Chapter 41 Early Agreement Credit Funds

Brister – If you give people a discount that doesn’t cost them anything, they will take it

Reallocate Gifted & Talented Allotment Funds

West – Not doing away with gifted & talented programs in Texas, recommending that this funding go into basic allotment
Killian – Someone is going to say in the future that there is not a set aside for GT & that we are asking them to do all these extra things
Huberty – Funding is only identifying 5%, which could say we are under-identifying by 2-3%
Killian – If you put it in basic allotment, GT is over and above basic education funding, can’t address the extra 2% without extra funding
Huberty – We do start looking at Tier II funding later in the discussion, need to holistically look at all of those things, putting this into basic allotment will help everyone
Ellis – Just because districts are receiving funding, this does not mean this is all they are serving
Ellis – What are the statutory requirements for serving GT students? IS there a grey area?
- Byer, TEA – Allotment is in Chapter 42, program requirements are in Chapter 29 Subchapter D, SBOE establishes the criteria and each school district needs a process for identifying the students
- Lopez, TEA – TEA has rules that further expand on this in the administrative code
Brister – You don’t audit to ensure schools spend X amount of dollars on GTE?
- Lopez, TEA – We do monitor special programs to ensure they meet the minimum on a 3-year average
Brister – And is it true that some districts spend substantially more?
- Lopez, TEA – This is what I recall
Brister – And you can give salaries and stipends to teachers who only teach GT students
- Lopez, TEA – Would need to look back at this
Brister – Personally not convinced that school or principles would have any incentive to shortchange their best students, they have no reason to drive off students that will raise scores
Brister – Is there a way that if money is shifted it won’t exclude GT
Killian – You could weight it; concern is that if it is moved to allotment it essentially won’t be GT funding
Bettencourt – Is there any specific cost/benefit or positive angle of taking out the dedicated 5%, are we getting net administrative cost reduction? Agrees that eventually over time will have the perception of an unfunded mandate, asked what is the gain, concern if teacher were getting salaries and stipends from this will they no longer be able to get those
Huberty – We can talk about a weight, but everyone is receiving 5%; so with this suggestion it is up to legislature to look at this and study the basic allotment moving forward
Huberty – If you pull this allotment out, it is $165 million less than would be going into the system
Williams – Would like to look at GT identification based on demographics (income, race and district) by next meeting; I’m hearing there is a risk we will under-identify children
Williams – Want to ensure that this is tracked over time
Williams – If we do the incentives, I think this helps counterbalance that
West – Agrees, should be a way for us to continue coming up with the same funding & ensure we don’t have unfunded mandates
- Byer, TEA – SBOE adopts a state plan for GT education, can provide this to committee

Reallocate High School Allotment Funds

Johnson – So the allotments that get reinvested, are spending requirements going to be maintained for tracking purposes? Especially for the high school allotment, this one has specialized spending requirements
Huberty – Goal is to create the Career & College Readiness program for 60x30TX that this has nothing to do with
Bettencourt – We need to keep track of administrative reduction as we’re doing this; there have to be inherent costs we are picking up by getting rid of things like the GT allotment
Killian – I just don’t want us to get in a position where we are under identifying GT kids, example corrective action plan on 8.5% cap/ under identifying Special Education students

Move From Prior Year Property Values to Current Year Property Values

Lopez, TEA – Recapture currently uses prior year property values, implication is that value drop or slow growth would lead to improper conception of tax revenues, smooth out variability
Huberty – growth forecasted was 6%
- Lopez, TEA – Yes
Ellis – Is this more of an increase for 1 year or moving forward ass years progress?
- Lopez, TEA – Depends on how you look at this, can compare to how each of the out years would’ve looked in relation to current law
  - Fast growth districts would see a current cut but wouldn’t be a year over year cut
Ellis – What would it do for districts that are high in recapture?
- Lopez, TEA – We use 6.7% value growth across the state, would see double value growth across the first year, local share requirement for Tier 1 would also increase
- However, when the generated savings are put back into programs and basic allotment, you mitigate the increases in recapture and the loss in state aid
Killian – This is a $22.7 million loss for a fast growth district in a year, would need to be something in the formula to mitigate this loss, fast growth lives on this one year lag
- Brister – This is why we are waiting to vote until all the pictures are in, if we are trying to get money to those that are building more schools, then money should go there and not a surrogate (ie this method) that goes there
Williams – First is this is more accurate, this also has an equity component such as areas that have fast growing values are more affluent
Killian – Also need to do state aid calculations, right now our property value picture is pretty fuzzy; if on July 1^st fiscal year start then this would be a big issue as it makes state aid projection more fuzzy in turn
- Lopez, TEA – There is typically a ratio between state certified values and property values, can use historical ratios in state certified values during the lag time
Bettencourt – By moving it into current year, you mitigate prior year lag, but you generate other problems like needing to work with July 1 year; strongly recommend that part of public policy discussion is getting people off of July 1^st because will not have accurate data moving into a school year, sometimes not a final count until August or later
Bettencourt – Moving up may be a good idea but not complete panacea, there are things that school districts do that need to be standardized with the tax year
Brister – This is the issue with setting budgets for the next 2 years
Johnson – This recommendation is the most concerning for me in terms of practicality, we don’t know where we will rest in terms of student enrollment & this would add uncertainty in property tax values
Johnson – as property tax grows so do appeals, 5-6% of property tax base not fully resolved so concerned with unappropriated funds to meet needs; not necessarily a benefit but this gives you the ability to smooth out to make payment in the following year; asked to reconsider this option
Brister – If we did something to help on recapture, would this be as big a problem?
Johnson – Hard to guess without the complete picture, especially difficult with this large of a number
Brister – This does create other administrative problems and problems with recapture, agrees need to look at whole package
Taylor – Trying to come up with a system that is fair, difficult when each individual part is criticized without looking at the whole system; temporary hardships are possible, let’s remember part of the transition as we are getting there
Taylor – Someone will be negatively impacted individually by every item
Huberty – Commissioners are representing every child in Texas, recommendations will impact positively and negatively, talking about putting new money in the system and fixing outdated formulas
Rep. Huberty – Found $5.4 billion in savings from these programs in total so now for spending that

Base Compensatory Education Funding on a Campus Specific Spectrum (0.225 to 0.275)

West – And the expectation is that districts will direct money to campuses with most need based on zip codes
West – goes to district based on poverty level, don’t supplant but supplement funding
Bernal – Just to be clear, compared to right now we’re saying baseline would be the same to the districts, but then campuses that have more challenges (ex: higher levels of generational poverty) would get an increase
Ellis – what is minimum?
- Lopez, TEA – minimum would be .225
Taylor – This is our largest and fastest growing demographic, need to do better with this demographic
Huberty – The additional weight is on top of what has already been funded, no money be lost but it can go up based on need of the campus
Reyna – Have you looked at numbers of districts at poverty level and total cost statewide?
- Huberty – noted amounts being spent on comp. ed but spending would increase on top of current spend
- Lopez, TEA – We did go through on a campus-by-campus basis
Bettencourt – When we go through a zip code model and then down to a campus model, there will be changes over time; needs to be a flexible response maybe on a yearly basis
Huberty – Ultimate goal is to statutorily fix this, in discussions with Commissioner of Education
- Lopez, TEA – We did use number of economically disadvantaged students at every campus
Bettencourt – This will change, need flexibility and not a fixed number in statute, may need a bandwidth
Bernal – This reflects what I see in many districts leaving zip codes behind, some do this according to census block so as not to average out the need; the measure is important and needs to be statutory and not just rulemaking
Martin – Also want to ensure this makes it into classrooms, goes to teachers and not higher administration

Base Transportation Funding on Mileage (80¢ per mile)

Huberty – mileage rate should be set in appropriations bill, thinking 80 cents is the floor but there should be different amounts incentivized

Provide Transportation Funding to Chapter 41 districts

Bettencourt – Going back to Martin’s comments about bringing money into the classroom, we have not discussed incentives yet, would say in both these transportation recommendations need to look at incentivizing good behavior
Bettencourt – Have seen the reports from Crosby ISD, sad that the district has no idea on several budgetary matters
Huberty – Incentive is on the 41s to do this, also moving from linear density pattern which also takes administrative cost; will need to pick the right number, but should do this through appropriations
Killian – Also need to look at inflationary factor due to fluctuating cost of gas
Unpredictability cost of gas was briefly discussed
Taylor – This makes it much easier for legislature to determine how this is funded
Killian – funding this means you are putting money back in the classroom, funding this means district can put money back into the classroom

Recreate Small/Mid-Size District Adjustments as a Stand-alone Allotment

Huberty – Trying to create incentives for more efficiencies in the system
Brister – For this measure, there are districts that could do this and eliminate administrative costs, people should know what it cost to keep 1k school districts in business
Ellis – This is more to simplify, not to harm small or mid-size districts
Bettencourt – There was an interesting case of a failed TRE in Medina County; would we be trying to incentivize merging school districts, especially considering issues like Medina County?
Brister – Would be helpful to know what exactly we are subsidizing with the allotment; big picture is large number of students graduating that can barely read & write
West – Big picture is making certain we close the gap and the free & reduced lunch students get the benefit of everything we have, how many of the smaller districts are serving those students are serving in the manner in which we think they should be servicing
Bettencourt – Important to offer something to offer something to incentivize mergers for certain districts, gives example of underperforming district
Killian – Wonders if this could not just be put into basic allotment
Huberty – You can, would just increase their allotment; need to ask ourselves what incentives we can offer to consolidate/be more efficient
Huberty – School districts should not be collecting their own taxes, etc.; need to look at these type of inefficiencies
Killian – Might look at sparsity adjustment being a sliding scale
Bettencourt – Travis County created an online portal detailing spending of taxes, should not have separate tax offices at school districts
Killian – Charter schools benefit from this because it raises the average, our students moving to charter schools that are functionally the same are suddenly worth $1,000 more; needs to be a level playing field
Huberty – Would disagree, Charter schools have overhead that is not absorbed into 25,000+ students; will have this debate in time but want to focus on question like why are the charter schools building right down the street

Increase New Instructional Facility Allotment (NIFA) Appropriation to $100 million per year

Huberty – Appropriation should go to fully funding NIFA accounts, this is a direct benefit to fast growth districts, the appropriation request should be to fully fund NIFA
Bernal – Worked on a NIFA bill previously that allowed for NIFA use for repurposing facilities as well; would like this interpretation ironed out as we move forward with NIFA
West – asked Bernal about this concern, haven’t heard about this issue, is the hold up at the agency
Bernal – We purposely adjusted NIFA to allow for existing campuses to repurpose older building, there seems to be disagreement in NIFA on what constitutes a new instructional facility
West – Is this an agency problem or what?
Huberty – I think this is a rule interpretation problem with the bill
West – Who is misinterpreting, is it TEA? Why can’t we get this taken care of without waiting until the next legislative session? Noted to Bernal he would help with this issue
Killian – This is much appreciated as we were supposed to get $1.1 million in NIFA, but only received $400k
Taylor – points out this is a much clearer way to help fast growth schools

Expand Career & Technology Allotment to Include Courses in 6th – 8th Grade

Huberty – believes other districts would start participating if there was an option to participate in this funding

(Lunch break was taken)

Create New Dual Language Allotment

Williams – Is the point of a range because we don’t know how many will move from bilingual to dual language
- Huberty – Correct
Martin – If any student moves into that program they will get that weighted funding as well?
- Huberty – Correct
Bernal – Is the dollar amount large enough? As it strikes me as being small, I guess because we are trying to predict an adoption rate?
- Huberty – Agrees
Bernal – Is this the only option schools have as an improvement from the current system?
- Huberty –Based on adoption rate and how much they implement it
- Williams – Would go up by $285 million if every student goes to dual language
- Bernal – Dual language is not an easy thing to pull off, relatively small number of teachers who can do it, campuses with student base to do it; is this the only thing that relates to this student group?
- Williams – There is heavy overlap with low-income students, and what they are doing with comp ed they are benefiting from this as well
- Bernal – I think there is an additional challenge in dual language, support dual language, but many more ELL students who will not be able to take advantage of dual language, is there anything else for them?
- Taylor – Also adding in incentives to drive more resources into those areas
- Huberty – Also will be talking about PreK – 3rd Grade reading, including for ELL
Bernal – Because of the requirements to make a dual language program, will be difficult for districts to do this even with the incentives
- Huberty – Other aspects exist, NIFA funding, etc.
- Bernal – Doesn’t want this student group to be passed over
- Huberty – What student group would this be, focused on assistance for all groups
- Bernal – There will be a large group of ELL students who will not be able to access this funding due to difficulty of spinning up program, what are we doing in the meantime?
- Taylor – This is the beginning of getting us to a better system
Bettencourt – Any change like this would move the market with it & there will be a pipeline to fill this market; will take some time to fill the market, but should start soon
Killian – agrees this is a very expensive program to do and requires more teachers
Johnson – Non-ELLs would be eligible for this category of funding
Martin – Also wondering what grade levels this would impact
- Huberty – This is to be determined, but intent is to be expansive
Williams – Need to also focus on teacher’s ability to do this, doesn’t matter if you provide the funding if the teachers cannot do this
Huberty – Will look at this legislatively and figure out the best way to move forward
Lopez, TEA – just looked at existing ELL students and could certainly look at cost if non-ELL students were given access to the program
Brister – gives example of increase in basic allotment overall by $1 billion would not work, spreading all money equally is not going to change very much at all

Create New Dyslexia Allotment

Huberty – Dyslexic students qualify under 504, have created dyslexia & autism grant programs and will suggest revisiting these moving into the next session as well
Williams – There is no cap as this has been proposed correct?
- Huberty – Correct
Bettencourt – And the change between 5%-17% is due to?
Huberty – Improved our data capture, previous estimates were at 2.5% and new data suggest greater than 10%
Huberty – If we are really at 5%, it could cost $200 million
Taylor – Also need to look at which of these students are dyslexic, if we identify more students with dyslexia its built in that this will get more

Create New Early Childhood Support Allotment

Williams – We asked TEA to provide us data on likelihood of passing 8th grade reading & math with passage of 3rd grade reading
Williams – If you are offering Pre-K, should consider doing this with HB 4 quality measures
Killian – Could we also say that the money comes first to Pre-K?
Huberty – I’m supportive of the recommendation that came from the Outcomes group, less than half of the population go through Pre-K; I don’t want to restrict it & let districts create their programs to meet the goal
Bettencourt – this is the perfect example of what a block grant should be, programs tailored according to goal of 3rd grade reading
Taylor – Have seen a significant drop in 3rd grade reading statistics even recently, need to focus on this

Create New Grade 3 Reading Incentive Program

Williams – Non-economically disadvantaged students achieve a 60%-65%, at a minimum should argue that the weight should be twice for economically disadvantaged students
Huberty – When we think about ELL students in Humble, etc., the thought process is that they aren’t getting the same funding source

Create New College, Career & Military Readiness Incentive Program

Huberty – Thinks that bonus programs for career & college readiness are important
Williams – $500 million in Pell grants lost is per year, so that’s $2 billion per graduating class
Huberty – Will be speaking on compensation programs shortly, data currently suggests we have roughly half of counselors that are needed in the system; seriously under-utilizing staff
Williams – Need to ensure we train additional counselors in understanding all jobs out there that don’t require a BA
Martin – This is one of the benefits of expanding CTE programs as well
- Martin – At what point will students be required to enlist?
Williams – We don’t know how many enroll in college until September either, need to have possibly a 1 year catchment period
Killian – On the CCMR there were proposals to not include enlistment in the reserves and to not count on-ramps unless they accepted credit, these things aren’t fair
Huberty – These are 20,000 ft recommendations, will be discussing these during the legislative process
Bettencourt – Would love to see the data on the Promise and P-TECH in Dallas; still don’t see any incentive we’re doing for Promise and P-TECH
Huberty – When we think about CTE & additional funding in 6-8th grade, I think we did; would be supportive of additional incentive for P-TECH
- Lopez, TEA- will be contacting Bettencourt’s office for more detail
Johnson – Are you incorporating other performance like SAT or ACT in the incentive?
- Williams – I think we recommended they needed readiness under SAT< ACT, or TSI and that they were supported in the transition

Create New Teacher Compensation Incentive Program

Taylor – If this did grow to $1 billion over 5 years, if we get results as in Dallas, I think people are willing to pay this not afraid of this cost growing
Bettencourt – There is a role for private industry in this as well, so long as we have the outline and you remove barriers in law
Bettencourt – have seen astonishing improvements when we see public schools working with community colleges and employers
Taylor – Allowing districts flexibility in spending in a way that they can obtain the incentives, helps everyone
Bettencourt – Agrees, focus is on growth
Williams – I think it’s also important that we advocate for other assessments aside from STAAR, pay is not the only important evaluation for our system; also need to look at distribution of skilled teachers, teachers who can mentor, etc.
Johnson – This is a systemic game changer for many districts, need to find the right balance versus locally derived solutions vs. not undermining solutions; do you have a conception of how we protect this? How many teachers is the cost analysis based on
Williams – 325k teachers across the state, if you had $1 billion and distributed you’d have $3k per teacher, flexible and can distribute to top performing teachers, etc.
Bettencourt – Asks Lopez, how did TEA come up with the cost analysis?
- Lopez, TEA – $100 million in first year, $200 million in the second year
Huberty – Always easy for school districts to raise across the board, but this does not create an incentive; point is that this could incentivize quality teachers and costs could grow, worth it if the outcomes improve
Martin – Electives, Fine Arts, teachers etc. will want to know if they are eligible
- Brister – Biggest difference will be made in the primary grades, also looking to incentivize teachers to address largest problems identified
Brister – This is something that should ramp up slowly, much like Dallas did
Bettencourt – Can’t “legislate leadership,” what has been seen in Dallas is due to those with leadership skills, far advanced of what I have in Houston right now; need to make sure they have the management tools to take advantage of that good leadership

Create an Extended Year Incentive Program

Huberty – This would be a program that would defend against loss of progress in Summer, would be a great incentive for teachers and some urban student populations
Taylor – Wonders as to possibility of using technology to help mitigate this, e.g. allowing students to take technology resources home over the Summer and create incentives to encourage learning

Utilize Remaining Funds from Reallocations to Increase the Basic Allotment

Huberty – Cost becomes budgetary and will need to see how revenues come out as well

Link Tier II Copper Penny Yield to a Percentage of the Basic Allotment

Huberty – Trying to equalize the difference with recapture districts and bring this back to a level that makes sense
Bettencourt – Asks after cost analysis for this, whether we have an idea
Huberty – We don’t have a cost estimate, basically need to pick a number
Huberty – If you target it to a number close to what the BA is, basically giving districts back what the property growth is
Huberty – This could be used to push down current year property values, could be used to fix the valuation system
Brister – Still need to see how this works out with the Revenues group, there is a trade-off between spreading money around and concentrating it
Brister – Main thing we could accomplish that would be different is concentrating funds; uncomfortable with a set percentage figure, could be adjusted year-to-year
Bettencourt – The rolling total that I had as of Rec. 19 was about $1.6 billion up, now spending those funds on the downhill slide
Huberty – Not necessarily, need to answer how we help the 400 school districts that are at the maximum cap, many of these fast growth; would be very unpopular to raise the cap, fix is that we need to fix the Tier II yields
Huberty – Was created in 2006-07 and was tied to a percentage, but didn’t keep up
Brister – We want school districts to spend and be excellent, but not too much because then it becomes a statewide property tax
Ellis – Focusing on quality teachers is based on premise that we have an adequate pay basis
Killian – We haven’t been able to keep up with inflationary costs, important to incentivize performance, but need to ensure baseline
Huberty – If we don’t do this, this will be one of our largest upcoming issues

Link Tier II Golden Penny Yield to a Set Percentile of Wealth per Student

Huberty – Looked at a variety of options, whether 95th or 98th, etc.; if we are going to change the system we will change how we do things & need to consider this
Johnson – Are the Golden Pennies still golden or are they subject to recapture?
- Lopez, TEA – Would still be recapture free
Johnson – Revenue working group follows the trend of Outcomes and Expenditures in finding additional resources; will there be opportunities to consider inflationary components in basic allotment or any other yield levels in the basic allotment? If we can find capacity, would there be willingness to build in indexing?
Brister – From a legal standpoint, no legislature can bind future legislature’s hands, can put COLA in, etc., but can’t do it in such a way that a future legislature cannot undo it; future legislatures may be concerned about
Taylor – Need to also consider costs of rural districts, geographical issues, etc., that are beyond their control
Huberty – Ultimately the discussion comes back to the basic allotment, will not get property tax relief without a discussion of the state share of education; point of this process is to assist all students throughout the state
Ellis – Material is good, but timeline is running short and we do not yet have a product
Bettencourt – Would disagree as there are many things that will affect the outcome over the next month
Bettencourt – There has been significant discussion about weaning off of recapture, very important to look at this; property growth cycle will continue for some time