Highlights from our interview with Adam Jones, writer, expert, and consultant on school financing in Texas.
Lone Star Standard: How does the Texas school finance system work?
Jones: I don’t have a whiteboard behind me and I wish I did but a crash course comes down to this. The public schools are financed through what we call the state aid program for public schools, the Foundation School Program. That’s what it’s called in statute. It has always been a partnership between the state funding schools with general revenue, the Foundation School Program, and local districts which fund schools with local property tax revenue. The state promises each student a full glass of water meaning every school district is entitled to a certain amount of funding per student. This is called the basic allotment in statute. If a school district’s local property tax receipts cannot pay the full allotment, the state of Texas will pay the difference so each student has the full allotment. That public school district that has very little tax base is almost fully subsidized by the state. If a school district creates so much property wealth that it vastly outstrips that amount to which a school district is entitled to, those extra funds are harvested by the state for lack of a better term. They are reallocated to the state in a manner called ‘Recapture.’ The appropriations bill refers to it somewhat sneakily as appropriated receipts, but a school district that exceeds what’s called an equalized wealth level in the system has to give that money back to the state. There are a few ways to become a property wealth school district. One is it can be a rural school district with massive amounts of energy wealth. So, in the Permian Basin or in the Eagle Ford Shale and a penny of property tax creates exorbitant sums. Well, the state takes that off the top, and eventually that becomes state general revenue, it’s in the Foundation School fund. Or you can be what is called a rooftop district. This is what people think of when they think of a property wealthy district like Highland Park in Dallas or Alamo Heights in San Antonio where you have very, very wealthy residential property. They have very expensive rooftops and they’re educating pretty affluent kids. There are not a lot of these in the state, but they’re the poster child for recapture.
Lone Star Standard: How can districts like Austin deal with recapture?
Jones: As Texas expanded economically and school districts like Dallas and Houston started edging in to recapture, that brought about a very different conversation. The only way you can bring down recapture and the legislature’s been pretty successful at this, is to buy down local property tax rates. Over the last decade through legislative action, including in 2021 and 2023, where the legislature passed a $16 billion tax reduction plan. As the state invested more money in public education and you buy those rates down, you are ostensibly moving districts out of recapture. And you’re sort of reestablishing that balance between the state and local property taxpayers. And this works for 95% of the district. So, I’m not necessarily doom and gloom about the current school finance system. I think Austin has broken it. And we’ve never seen an outlier like Austin. And, I’m not quite sure what to do about it. It is not an easy policy discussion.
Lone Star Standard: Is the proposed education savings account proposal financially sustainable?
Jones: It’s a great question. I don’t know whether it’s a sustainable system or not. Comptroller Hager will get mad at me for saying this but at the moment, Texas is flush with cash. We have at least a $20 billion surplus when the legislature convenes and millions in the Rainy Day Fund. It’s not the $30 billion surplus we had last time. If you’re going to pass a new major education program, this would be a pretty good time to do it. So in Austin, this is a zero sum game. The state entitles every school district or charter school to a certain degree of funding for every child who enrolls. If that child chooses to take an $8,000 voucher instead and go to a private school, well, that’s money you’re not paying into the public system. So the question really is, with regard to sustainability, how many kids who are not in the system at all will be voucher participants. We don’t know that. And we don’t know the provisions of the bill. There are some states which set up education savings accounts, which have prior enrollment requirements. In other words, the student had to be enrolled in public schools before they can get a voucher, which is a cost containment measure right there. So it depends on how expansive the program is and how many kids opt in to a voucher program that weren’t part of the system at all.
Lone Star Standard: Are there lessons from the past that legislators can learn from when considering school choice programs?
Jones: There has to be some quality control over vendors. There’s a precedent for this in Texas actually and that’s when we authorized open enrollment charter schools way back in 1993 when Texas authorized charter schools. There was a famous example, called Generation Schools, when the state board approved 80 charter operators all at once. They flooded the market. And a lot of those schools weren’t very good and gave the charter movement a black eye. Some kids got a pretty lousy education. To the state’s credit, most of those charter schools don’t exist anymore. So we had a reset. The process for being approved as a charter school now, and the accountability standards they’re held to are pretty high, among the highest in the nation now. So the state has seen what can happen when you rush through a major policy initiative and you’re not careful about the quality measures. So you hope they don’t repeat that mistake. You hope that an education savings account program would be a complimentary program where kids are getting high quality private educational opportunities in addition to public education opportunities. The devil is always in the details.
