5 takeaways on public education in Senate Finance

On Monday, the Senate Finance Committee held their first hearing on Article III of the budget, which included an overview of the Texas Education Agency.

The hearing started with the Legislative Budget Board laying out their summary of budget recommendations for the Foundation School Program, as well as the Texas Education Agency and non-FSP programs.

Following the Legislative Budget Board’s presentation, Texas Education Commissioner Mike Morath provided updates on the agency’s Legislative Appropriations Request and answered questions from committee members for more than two and a half hours on a variety of topics.

Here are our five key takeaways: 
1. When asked about the Teacher Incentive Allotment, Commissioner Morath stated that it is working as a tool for recruiting and retaining teachers.  

There was much discussion around how rural districts participate in this program. There were opportunities identified by committee members and the Commissioner to provide seed grants from rural districts to help implement this program, as the level of technical expertise needed to implement the program has been a deterrent for some smaller districts.  

The Teacher Incentive Allotment is a tool that districts can use to make sure that the best teachers in the hardest to serve schools are paid the most money. Texas 2036 believes that there is an opportunity to expand the Teacher Incentive Allotment this legislative session to make sure that more teachers are eligible for the program, and that those who qualify are paid even more. 

2. Concern about the Elementary and Secondary School Emergency Relief, or ESSER, cliff was high. 

Texas schools were given more than $19 billion in federal ESSER funds, but these funds were intended for COVID recovery and one-time uses. The funds will not be renewed by the federal government and the state has not expressed an intention to provide funds to offset ESSER revenues after they’re gone.

Commissioner Morath shared that TEA data indicates that districts are using these funds for ongoing expenses, with an estimated 50% of ESSER funding going toward recurring expenses. This poses a large problem for districts that used these funds for long-term recurring costs, such as ongoing staffing and teacher pay raises. With roughly $10 billion left in ESSER funds, districts were advised to prepare for the upcoming expiration date and either use these funds for meaningful one time investments or consider cost swaps that substitute federal funds for state and local taxes, allowing those dollars to be placed in fund balances for future use.

Source: Texas Education Agency 2022 annual report

3. Student enrollment is slowing and will soon decrease due to slowing birth rates, according to the Commissioner. 

While Texas public schools have experienced consistent growth over the past decade — increasing by almost half a million students since 2012 — TEA is projecting that enrollment will fall by over fifty thousand students in the next three years.

Texas, as well as the rest of the United States, has experienced a sharp decline in birth rates over the past decade, and it is finally catching up to the public school system. While Texas still has a higher birth rate than the U.S. average, the rate of decline in birth rate exceeds the national average. 

Source: Pew compilation of annual data from CDC National Center for Health Statistics reports

Of note, however, for school finance hawks: WADA, or weighted average daily attendance, is increasing, despite declining enrollment. WADA is the school finance variable that looks at both the number of students in our classrooms and the educational needs of those students. Greater educational needs, due to circumstances such as poverty or English language learner status, drive greater weights that drive more funding. So while fewer students are in Texas classrooms, the students that are in our schools need more funding and support.

4. The mental health of students was top of mind for committee members. 

Committee members emphasized the balance between providing mental health services and surveys while making sure parents were involved and notified at every step. In the wake of the pandemic and the aftermath of the Uvalde school shooting, lawmakers have emphasized the need for more mental health support in schools. A CBS News analysis of TEA data revealed that half of Texas schools districts currently have no mental health services.

Source: CBS News analysis of TCHATT and TEA data

5. Committee members want to find a way to eliminate recapture, but the solutions are very expensive. 

Recapture is when the state collects excess tax revenue from high property wealth districts who have more than what is needed to fully fund their school district’s entitlement. That excess revenue is then used by the state to to help fully fund education in low property wealth districts that did not fully fund their entitlement through local tax revenues.

State leadership has indicated that they intend to use a large portion of the $32 billion state surplus to ease the property tax burden on Texas homeowners. The base budget writers have already appropriated $15 billion in property tax relief, including $5.3 billion to continue existing cuts and $9.7 billion in new cuts, which will be decided by the Legislature. Their job now is deciding how specifically to return these funds back to taxpayers, including potentially building on the tax compression from HB 3 in 2019, which could reduce recapture as tax rates decline.