"Rube Goldberg" School Finance System Faces New Test

Noteworthy comment by Daniel Casey regarding possible responses to the budget shortfall and education:

The most obvious way to make up for the cuts in state aid would be to increase financing from the federal government or to raise local property taxes.

-Patricia

by Ross Ramsey | Texas Tribune
2/21/2011

Cutting $10 billion from the state’s bill for public education could push more than two-dozen school districts from the group that receives state financing into the group that writes checks to the state to even things out between richer and poorer districts.

That’s dangerous political territory, but familiar terrain for Texas lawmakers. They’ve been in trouble with the courts over school finance for decades, and generally move to change things only in the face of lawsuits.

But over the years, they’ve also been careful to make sure districts don’t go backward financially, using “hold harmless” provisions to ensure that changes in school finance law don’t cost districts their state aid. By one estimate — from the Texas Taxpayers and Research Association — those requirements now account for $5.5 billion of what the state sends to school districts.

Despite those provisions, and the fact that public education eats up 41.2 percent of the state’s general revenue, the state government paid less than half of the cost of public schooling in Texas.

Texas has a school finance system that would have made Rube Goldberg giggle. It is a mash-up of state, local and federal taxes — the state paid 42.9 percent of the total, the districts paid 47.1 percent, and the federal government covered the other 10 percent in the 2009-10 school year, according to the Texas Education Agency — that is supposed to provide kids in every nook and cranny of the state with the same educational opportunity.

It forces lawmakers to balance the financing of schools where property values are high with those where the values are low, all without dictating local school property tax rates. Not surprisingly, it ends up in court every few years, with the state getting sued by whichever group of schools feels most mistreated at the time.

The state’s red budget could trigger the next round. The Texas Education Agency — directed by Robert Scott, a former aide to Gov. Rick Perry — asked lawmakers for $10.4 billion more than those lawmakers included in their proposed two-year budgets. That’s a little more than $1,000 per student, and the first set of printouts detailing what that might mean to each of the state’s school districts was a sea of negative numbers. According to the Texas Taxpayers and Research Association’s estimates, per-student spending would drop to $7,850 in 2013 from $9,200 in 2010, or about 14.6 percent.

Wealthier districts that already send locally raised tax money to the state — so-called “recapture districts” — would send more. Districts that get money from the state would get less. And depending on how it’s done, some districts that now get money from the state would have to turn around and write checks instead.

According to Moak, Casey & Associates, an Austin-based school finance and accountability consulting firm, a budget cut of that size could shift 30 new districts onto the recapture rolls, bringing the total to 195 districts and raising the amount sent by that group to the state to $1.4 billion from the current $959 million. Daniel Casey, a partner at the firm, who has years of experience in school finance, said the details of what will happen to each school district are unclear until the Legislature decides how to distribute money, what to allow school districts to do with their own taxes and so on. But there’s no way to absorb cuts of that size without affecting the whole system and, some lawmakers and experts say, without putting the state back into court defending its system.

That’s enough numbers to numb most lawmakers, but the politics of it could wake them back up. The most obvious way to make up for the cuts in state aid would be to increase financing from the federal government or to raise local property taxes. The state and the feds are arguing over $830 million in federal funding that Perry refused because of requirements it would impose on state education spending, but even that is not enough to cover a $5-billion-per-year hole.

And the financial problem is only half the trouble; getting the money always, or almost always, forces some change in the balancing formulas.

One trial balloon rises with every school finance crisis, and generally takes 24 to 48 hours to crash to the ground. In the early 1990s, it came from state Sen. Carl Parker, D-Port Arthur. Sen. Bill Ratliff, R-Mount Pleasant, gave it a try a decade later. And this week, it was Sen. Robert Duncan’s turn.

A statewide property tax could replace the local property taxes and end, for the most part, the fight over where the money comes from. The Lubbock Republican shot it down himself, talking to the local Lubbock Avalanche-Journal: “It’s just a discussion. It’s not a proposal.”

Something like that might keep the state out of court on school finance. But it wouldn’t solve the other, bigger problem.

Got $10 billion to spare?

Inside Intelligence: Public Education Funding Is...

Check out the full report: Inside Intelligence: Verbatims for Feb. 21

-Patricia

by Ross Ramsey | Texas Tribune
2/21/2011


Our insiders took on school finance this week, and they're not optimistic that there will be a happy ending.

Lawmakers have proposed spending $10.4 billion less than the Texas Education Agency says it needs to keep things running like they're running now. Is that current level of services sufficient for public education? Two-thirds of our panel said no, it's not.

Do they think the Legislature will close the gap? Yes and no. Twenty percent say the schools will end the session $10 billion short, while 70 percent say they'll end up less than $5 billion short. The remaining 10 percent split between full restoration, more money than requested and don't know.


Should lawmakers free local schools to raise their property taxes to make up for money lost to state cuts? Most of our insiders — 70 percent — said yes, while 27 percent said no.

Our open-ended question this week was "What areas of education spending should be on the cutting block?" The full set of answers is attached, but here's a sampling:

• "TEA. Regional Centers."

• "Administrative costs."

• "Administration"

• "School district administration is bloated, and everything else is starved."

• "Administration; non-core programs; discretionary spending on curriculum, test preparation, consultants, public relations, etc."

• "We should be investing in public education, not cutting it to the bone."

• "Athletics."

• "The pensions of school teachers. They should have 401k plans like the rest of us and have to pay for their own healthcare."

• "Building stadiums; consolidating school districts;"

• "General administration, ridiculously expensive and counterproductive pension policies and practices, labor practices that reward retaining ineffective teachers, inefficiencies due to too many districts, local and state programs with no record of success in boosting student achievement, sports excesses, and inefficiencies due to inadequate use of technology"

• "Start with non-classroom expenditures. Next: support and administrative staffing has increased 20 percent since 2004, while student population has risen 7 percent. Moving from the current 1:1 teaching/non-teacher ratio to a 3:2 ratio would produce $3.25 billion in savings. Force a reduction in administrator pay and bonus packages. Abolish the regional service centers."

• "The Target Revenue entitlement should be eliminated first (total elimination saves about $4.5 billion per biennium). Second, outside the system grants should be eliminated (saves about $2 billion). Delaying the July and August payments to districts moves another $3.7 billion into the 2011-2013 biennium."

• "Wrong question, Texas ranked in the bottom quarter of states in per capita student funding throughout the 20th century and into the 21st century. Given the demographic changes taking place Texas needs to step it up, not cut back."

• "Football."

• "Well now, that question reveals the conservative bias in the media! Do we just assume that we're getting overeducated in Texas, and it's time to trim it back a little? I know it's pointless to ask Who's taxes should be raised so that our kids are a little smarter when they get to tomorrow? But still! The arrogance of the assumption that, without question, some education should be cut back is just more than I can stomach."

• "Though a tough political choice, consolidation of the smaller districts is one way to bring huge efficiencies to a bloated mess. Incentives for consolidation - and disincentives for not consolidating - should be in play."

• "This is a no brainer. Consolidate school systems and drastically cut administrative expenses. If that doesn't do, fire teachers."

• "None. Our entire education system from pre-K to post-secondary has been on a starvation diet for far too long. After over a decade of Republican mismanagement, Texas is already seeing the fruits of a policy that is virtually guaranteeing the creation of an entire generation of poorly educated Texans who will be ill equipped to compete and contribute to our state's prosperity. This is the ultimate mortgaging of our future, and I fear we will discover too late that it was a subprime one."

Three House Freshmen on Cutting Public Education

Legislators already revising proposed payday lending regulations

By Laylan Copelin | AMERICAN-STATESMAN STAFF
Wednesday, Feb. 23, 2011

The powerful payday lending lobby already has Texas senators reworking proposed legislation that would regulate what has become a lender of last resort for many Texans.

Several lawmakers, led by state Sen. Wendy Davis, a Fort Worth Democrat, have filed bills that would prohibit payday lenders and auto title lenders in Texas from sidestepping interest rate caps by charging fees that, in some instances, can push the effective annual percentage rates on short-term loans above 500 percent.

Texas is one of a half-dozen states that don't regulate payday or auto-title loans. In 2009, similar legislation to regulate the industry died in the Legislature without a floor vote.

At Tuesday's legislative hearing, the first on the issue this year, Davis said she would rework her bill so it would regulate payday lenders for the first time, but also would create a special interest rate for the industry.

"I'm willing to negotiate a unique rate structure," Davis said during a break in Tuesday's hearing.

Payday lenders such as Cash America Inc. of Fort Worth, ACE Cash Express of Irving and EZcorp Inc. of Austin partner with banks, which make short-term loans. The industry uses brokers in neighborhood storefronts to take loan applications, review the applicant's credit and collect payments. The stores are typically located in lower-income areas, including along East Seventh Street and East Riverside Drive in Austin.

The fees that the broker charges are not considered interest under state law.

If customers cannot repay short-term loans on time, they can "roll," or extend, the note by paying more fees, running up the high annual percentage rates.

"We're constantly rolling these people," said Sen. Royce West , a Dallas Democrat who has proposed a bill similar to Davis'.

At Tuesday's hearing, however, the industry matched the bills' supporters, with witnesses including consumers, pastors and experts.

"If this bill is passed, we will be forced to shut our stores down in Texas," said Jay Shipowitz, president of ACE Cash Express. ACE has 500 payday lending offices in Texas, including eight in Central Texas.

Gerri Guzman , executive director of the Washington-based Consumer Rights Coalition , an industry-backed group, testified that the legislation would eradicate an industry that serves consumers who can't get short-term loans at banks or credit unions.

"These people are underbanked," she said. "If this passes, consumers will be left without an important credit option."

Michael Price of Austin and Frederick Haynes III of Dallas are pastors on opposite sides of the issue.

Price said the industry financially supports his organization, Texas Coalition for Consumer Choice, which promotes personal responsibility and consumer freedom.

He testified that short-term loan rates can be less than fees for bounced checks or penalties for paying utility bills late.

Senators asked him whether it was fair for consumers to pay $1,200 in fees on a $500 loan, as a Houston woman testified about earlier in the day.

"It depends whether she was informed on her decision," he said.

Haynes said his church and three others have organized because "the community is saturated" with payday lenders.

"We are concerned why our community has been targeted," he said.

Haynes said payday loans are harmful to his church members: "Instead of throwing them a lifeline, we're throwing them shackles."

Sen. Chris Harris, R-Arlington, said he had received only two complaints about payday loans over the past decade.

Sen. Mike Jackson, R-La Porte, echoed that sentiment.

"I'm wondering if we're trying to fix something just to fix it," Jackson said. "If there is a huge problem out here, I'm having a hard time finding them."

Davis said that payday loan documents do not tell consumers where they can complain because the industry is not regulated.

She said she's not interested in putting payday lenders out of business. But she complained that industry officials would not tell her what fee cap would allow them to make a profit and stay in Texas.

The legislation was left pending in the Senate Committee on Business and Commerce while Davis and others rework the bill.

Dallas school district plans to offer incentives up to $10,000 to teachers to resign early

By MATTHEW HAAG, Staff Writer | Dallas Morning News
22 February 2011

The Dallas school district is proposing to offer up to $10,000 to teachers who agree to resign at the end of the year to lighten expenses before possible deep budget cuts.

Under a plan that could be approved Thursday by DISD trustees, the teachers would receive an incentive of 15 percent of their annual salary, up to $10,000. It could cost the district up to $10 million and force it to dip into an already low reserve fund.

The offer would be available to the first 1,000 teachers with contracts who volunteer. That would be about 10 percent of the district’s 10,600 teachers.

Employees who accept the offer must notify the district by March 11, but they would work through the rest of the school year.

“The goal is to help us lay off less people,” said DISD spokesman Jon Dahlander. “We wanted to create a very lucrative incentive. It is to get their attention.”

The proposal comes as Dallas ISD grapples with how to offset a possible $253 million state-funding cut under a worst-case scenario. A reduction that steep could prompt the district to cut 3,900 of its 21,000 positions — 3,100 of those employees would be teachers or others at the campus level.

Neighboring school districts have approved early resignation incentive packages in recent weeks as the Texas Legislature contemplates cutting $10 billion in public education funds over the next two years. But the packages pale in comparison with Dallas ISD’s proposal.

The Rockwall school board approved a $1,000 incentive this week. Cedar Hill is offering $1,000 to the first 50 teachers who step forward.

Irving is offering $500 to staff and $1,000 to teachers if they’re among the first 250 employees to resign. Only 79 employees have accepted so far.

“It’s not bad, but we are certainly not at 250 with about 21/2 weeks to go,” said Irving ISD spokesman Tony Thetford.

The idea is that the offers could be cheaper for the district than laying off employees, who could file grievances and receive unemployment benefits. They also allow districts to better understand next year’s staffing levels and prepare budgets in advance.

Possible cutback targets

Dallas school officials are already eyeing deep cuts to payroll, which consumes more than 80 percent of the district’s $1.2 billion annual budget.

Local and state teacher associations praised the district’s proposal and said they believe many teachers will jump at the offer.

“I think it’s great,” said Rena Honea, president of teachers association Alliance-AFT Dallas. She said teachers at or nearing retirement age would be the most likely candidates.

The deal comes with caveats, however: An employee who takes the offer cannot file for unemployment benefits.

Also, few teachers would qualify for the $10,000 incentive cap, which applies to those making about $66,000 a year. Only those with about 35 years of experience are paid that much, according to DISD records.

Clay Robison, spokesman at the Texas State Teachers Association, said it was the largest offer he’s heard of and he believes it will get teachers’ attention.

“If the teacher is nearing retirement or thinking about retirement, it’s certainly preferable so they can have a little extra,” he said.

But Dallas ISD’s incentive package wasn’t praised by everyone.

DISD trustee Lew Blackburn said he believes the incentive would be accepted by 1,000 teachers, but a $15,000 offer might be snatched up sooner.

He said he would like to know how much money the district expects to save by offering the incentives compared to laying off the same number of employees. “We are going to have to find out,” he said. “But I’d be willing to bet that we are going to save money.”

Savings unknown

Dahlander, the district’s spokesman, said he didn’t know how much the district could save or the size of the severance package laid off employees might receive.

In 2008, DISD laid off 415 educators, who received a severance package of two months pay and benefits if they didn’t challenge the termination.

If trustees approve the proposal, the district could use up to $10 million of its roughly $70 million in reserves. Dallas ISD projects to end this school year with a $20 million surplus, but district officials have tried to improve the reserves and have cautioned against tapping into it.

Michael MacNaughton, a founding member of the watchdog group Dallas Friends of Public Education, questioned the proposal.

“Since DISD is already recommending that 3,100 teachers should lose their jobs, why spend $10M to nudge 1,000 out the door early,” MacNaughton wrote in an e-mail. “Aren’t these teachers going to be let go anyway under DISD’s preliminary proposal in the ‘worst case’ scenario?”

Staff writer Tawnell D. Hobbs contributed to this report.

Texas Education Agency layoffs begin

Officials won't confirm numbers, but past state budget history could signal losses in the hundreds.

By Andrew Kaspar | AMERICAN-STATESMAN STAFF
Wednesday, Feb. 23, 2011

The Texas Education Agency laid off an unspecified number of its 1,054 employees Tuesday, with Education Commissioner Robert Scott releasing a brief statement acknowledging the beginning of a process that could reduce the agency's staff by hundreds.

"Based on the impending budget reductions, we have taken steps to reduce the size of the agency. We will continue our mission to serve our school districts and students," he said.

The final tally of axed employees will be determined in the Legislature's final appropriations bill. Texas' 2003 budget shortfall — about $10 billion — resulted in 200 TEA layoffs, and this year, lawmakers are attempting to close a gap of $15 billion to $27 billion.

Debbie Ratcliffe, a spokeswoman for the agency, described the mood as "very somber" around the William B. Travis Building, where the bulk of TEA employees work.

She declined to give specifics on the number of state employees or positions that were eliminated, saying the agency was informing employees individually. Exact numbers would probably be available later this week, she said.

At the beginning of 2010, Gov. Rick Perry and legislative leaders asked all state agencies to reduce their costs by 5 percent. In December, they requested that agencies find an additional 2.5 percent of their budgets to cut. Tuesday's layoffs are the latest development in a budget crisis that could cut up to 9,600 state jobs before all is said and done.

TEA has cut about $153 million from its budget since the reduction orders were issued, Ratcliffe said, but Tuesday's layoffs were the first significant hit for the agency since 2003. Ratcliffe said these layoffs are not so much part of Perry's belt-tightening request but rather "more in anticipation of what's to come."

"We know that this may not be the end of it, depending on what happens with the budget," Ratcliffe said.

Other state agencies are feeling similar budget pain. The Department of Information Resources cut 22 positions in late January. The Department of Criminal Justice will cut 555 positions by April 15, with notifications to employees beginning next week, agency officials said. Depending on the final budget, as many as 1,200 more jobs could be eliminated from the state's correctional agency.

TEA, which serves as a guiding force and administrative hub for public education statewide, is cutting positions as school districts are also preparing for big cuts to teachers and other personnel. On Monday night, the Austin school district upped its estimate of those to be laid off, bringing its potential job losses to more than 1,100.

"There's probably some sentiment that if school districts are going to be hit, then the state education agency also needs to get leaner," said Andy Homer, director of government relations for the Texas Public Employees Association.

Hundreds of Texans Protest Proposed Immigration Bills

by Julian Aguilar, Justin Dehn and Thanh Tan | Texas Tribune
February 22, 2011



Hundreds of Texans descended on the state Capitol on Tuesday to draw attention to what they say are dozens of bills that, if passed, would hinder economic development, stymie education and — above all — encourage racial profiling in the Lone Star State.

Some marched and waved signs supporting the United Farm Workers. Others, cloaked in Texas and U.S. flags, proclaimed that “Texas Can Do Better Than Arizona.” The immigrants’ rights advocates, former military personnel, lawmakers and students — from seemingly every rural and urban sector of the state — rallied and proclaimed that bills like HB 17 and HB 22 would serve only to increase insecurity and distrust within immigrant communities, hinder Texas’ future workforce from being competitive and lead to an increase in crime. The bills, by state Rep. Debbie Riddle, R-Tomball, would make it a Class B misdemeanor to be in the country without proper documentation and mandate that school districts report the immigration status of their students. Riddle has also filed HB 1202, which would make it a state jail felony to knowingly and “recklessly” hire an unauthorized worker.

Immigration-related legislation faces its best chance of passing in decades after a Nov. 2 election that tilted the balance of power to the Republican Party in Texas. Republicans now control the Texas House, 101 to 49. Despite the shift, however, Democratic lawmakers are pushing their own legislation. State Sen. José Rodríguez, D-El Paso, touted his SB 600, which would prevent law enforcement from asking the immigration status of victims of or witnesses to crimes. Rodríguez said the cooperation of the immigrant community has made El Paso one of the safest cities of its size.

State Rep. Armando Walle, D-Houston, told protesters on Tuesday that he was once asked by a reporter why the immigration rallies didn’t draw crowds the sizes of other movements. “It’s because they are all out there working,” he told the crowd, which took up its “Sí Se Puede” chant in response to the lawmaker's comments. “They are out in the fields, in the restaurants.”

Added state Rep. Lon Burnam, D-Fort Worth: “You are here to say ‘no' to the most racist session of the Texas Legislature in a quarter of a century."