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The Texas Commission on Public School Finance met for the last time yesterday to adopt their final recommendations.  The final report will be posted to the TEA website here but staff have indicated it will take some time to roll all of the changes made by commission members into the final document before it can be posted.

Members discussed several changes to the report, even debating the report title, finally settling on "Funding for Impact: Equitable Funding for Students that Need It Most".  This title highlights two components in the report: outcomes-based funding and increases and modifications to the state's compensatory education program.  

Some of the highlights from the report and yesterday's discussion are summarized below.  Because we anticipate that these recommendations will play a significant role in the coming session, we are hosting a webinar on Friday, January 11 from 2 to 4 where we will discuss these proposals, how they might impact your district, and what school finance conversations we anticipate this session.

If you would like to participate in the webinar, you can register here.

Changes to Tier 1

The committee recommended a number of changes to Tier 1 of the Foundation School Program.  They include reallocating roughly $5.3 billion in existing revenue.  The report identified several formula elements that could be reallocated into the basic allotment or other formula elements including:

1. Eliminate the Cost of Education Index (saves $2.9 billion)
2. Use current-year property values and create a fast-growth allotment that spends $280 million on a per student basis for the districts in the top quartile of student-growth (saves $1.8 billion)
3. Eliminate the 1992-93 Chapter 41 Hold Harmless (saves $30 million)
4. Eliminate the Chapter 41 early agreement credits (saves $50 million)
5. Eliminate the gifted and talented weight (saves $165 million)
6. Eliminate the high school allotment (saves $400 million)

These funds would be used to implement some of the commission's new ideas and to increase the basic allotment, potentially to $5,800, although that decision appears to be in flux.  Some of the new ideas for funding include:  

1. Create a new dual language allotment for an additional .05 weight on top of existing bilingual education weight ($50 million in the first year)
2. Create a new dyslexia weight of 0.1 ($100 million)
3. Create an extended year incentive program for a half day of funding for up to 30 additional days of school for students in pk - 5^th grade who need additional support ($50 million)
4. Increase the compensatory education weight and deliver based on a spectrum of weights ranging from .225 to .275, and consider the use of alternative measures of low-income status ($1.1 billion)
5. Base transportation funding on mileage rather than linear density (cost neutral)
6. Provide transportation funding to chapter 41 districts ($60 million)
7. Recreate the small / midsized adjustment as a stand-alone allotment (members added language to do this on a cost neutral basis as modeling indicated that decoupling the small and mid-sized adjustment from the special programs would have saved $600 million per year)
8. Increase the NIFA appropriation ($100 million)
9. Expand career and technology to the 8^th grade ($20 million)
10. Increase the basic allotment (no cost was given, and the commission recommends using any remaining funds for the basic allotment)

Changes to Tier 2

Commission members recommended two important changes to Tier 2.  First, they recommended decoupling the yield on the "golden pennies" from Austin ISD.  Initially, the recommendation was to tie this yield to a specified percentile of wealth per WADA.  However, at the end of yesterday's meeting, members decided to tie it instead to the basic allotment.  This means the yield will not automatically grow as the relative levels of property wealth in the state increase, but instead will only increase if the legislature chooses to increase the basic allotment.

Under current law, we are anticipating the yield on these pennies will grow from the current $106.28 to $126.88 in 2020 and then to $136.24 in 2021.  The chart below shows what the golden-penny yield would have generated per student in weighted average daily attendance per penny of tax effort over the past 5 years under current law and if the yield had been set to grow in proportion to changes in the basic allotment in 2014-2015.  As the basic allotment increased only once during this time, there would have only been one increase to the golden penny yield.  And if we had indexed it as a percentage of the basic allotment, it would have increased even in that year by far less than it did under current law.

	2014-2015	2015-2016	2016-2017	2017-2018	2018-2019
Basic Allotment	$5,040	$5,140	$5,140	$5,140	$5,140
Current law golden penny yield	$61.86	$74.28	$77.53	$99.41	$106.28
Golden penny yield indexed to the BA	$61.86	$63.09	$63.09	$63.09	$63.09

The second change commission members discussed was increasing the yield on copper pennies to $43.50, and indexing these as well to the basic allotment.  Members recommended that the increase in yield be tied in some form to property tax rate reductions.  For example, if a district had tax effort for the copper pennies in tier 2 of 11 cents, they would be generating $351.45 per WADA under current law ($31.95 * 11).  If the legislature were to increase the yield to $43.50, they would be able to generate $478.50 per WADA at that same level of tax effort. 

However, the committee discussed pushing the tax rate down such that districts would generate the same revenue overall.  In this example, the district would reduce their rate by roughly $2.9 cents rather than experience the additional revenue.  Chairman Huberty recommended allowing the district to keep its prior rate in the first year by board action.  Chairman Taylor suggested the need for a second TRE to maintain the full rate, or for a prohibition on increasing the rate for a period of time.  This appears to be an issue that will be further explored during the legislative session.

Additional Funding Proposals

The commission recommended two outcomes-based funding allotments. The first is an allotment based on the number of third grade students meeting standard on the state reading assessment.  The report proposed $3,400 for every low-income student meeting standard and $1,450 for every non-low-income student meeting standard, for a total statewide allotment of $400 million.  The second outcomes-based allotment would be based on a college and career or military readiness measure.  The commission recommended $5,380 for every low-income student who graduates and either enrolls in a post-secondary institution, achieves an industry accepted certificate, or enlists in the military.  The funding would be $2,015 for every non-low-income student meeting that target, for total spending of an additional $400 million.

The commission recommended setting aside funds for an educator effectiveness allotment, which would begin at $100 million per year and scale up to $1 billion per year in FY 2028.  This allotment would be available to districts who implement approved plans to provide differentiated teacher compensation according to guidelines that will be established by TEA and / or the legislature.
Finally, the commission recommends spending $780 million per year on a new weight for low-income and ELL students who are in grades k through 3.  In return for the funding, the report recommends requiring all districts that currently offer prekindergarten to do so on a full day basis, or obtain a waiver from the commissioner if they do not have sufficient classroom space.

Property Tax Compression

Commission members did not recommend one mechanism for property tax reduction, but rather included three proposals for legislative consideration.  One, put forth by the Governor's office, would see individual district compressed tax rate reductions depending on the relative level of property tax growth in each district.  Here, Tier I tax rates (compressed tax rates) would be capped at the level needed to produce a tier I tax levy that was no more than 2.5% more than the prior year.  The remaining deficit against the Tier I entitlement would be made up with state aid.  The second, put forward by TTARA, would see future recapture growth invested in a statewide buy-down of compressed tax rates (so all districts would see a uniform reduction in the compressed tax rate).  The third would see increases in recapture split evenly between reducing property taxes, increasing school funding, and covering other cost increases in the state budget.

Other Ideas

A number of other ideas were added to the report as well.  These ranged from modifying how ASF payments interact with recapture costs in chapter 41 districts to allowing prekindergarten students to count in the WADA calculation to requiring students to complete the FAFSA  or have a parent/guardian sign an opt out form in order to graduate.