April 23, 2004
Perry plan dead, real work to begin

The Perry Plan for school finance reform appears to be officially dead, and other plans are starting to come out of the woodwork.

"We're starting out with a clean slate," said Rep. Kent Grusendorf, chairman of the House Select Committee on Public School Finance.

Grusendorf, R-Arlington, withdrew from consideration two pieces of legislation that contained Perry's proposals, saying the committee was not ready to vote on them. He said the committee might draw from some of the governor's proposals in writing its own bill.

Rep. Mike Krusee, who introduced the legislation containing the governor's plan, said the plan got a fair hearing.

"The governor has shown very bold leadership and deserved to be the first one to get a hearing," said Krusee, R-Round Rock.

"Now some other people and their ideas will also get a hearing. At the end of that process the committee will be in a position to judge what they want to deliver to the floor."

Grusendorf said he will begin laying out his ideas for school funding in the coming days.

In a letter to school district superintendents, Grusendorf said any new school finance system "must focus attention and resources on the differences in student demographics."

Grusendorf has relied on a study by economists at Texas A&M University that found a "significant relationship between school spending and student performance."

The researchers concluded that school districts need additional funding of between $226 million and $408 million to ensure that at least 55 percent of students pass the state's reading and math tests.

The study also found that it costs more to educate students who are economically disadvantaged, have limited English skills or have special education needs, and that it costs $4,000 more per pupil to educate a high school student compared with an elementary student.

Bigger investment leads to better results. My God, this changes everything!

Not that the idea of Kent Gruesendorf taking the lead should make anyone feel better, as this exchange makes clear.

Grusendorf did not supply details for the plan he will outline this weekend. But his committee went through its third day of testimony on the plan that Perry has put forward.

Marjorie Wall, who represents the Texas State Teachers Association, told the panel that the organization opposes the provision that ties higher salaries to certain performance standards. She said that all teachers need more money and that most would be left out under Perry's incentive package.

That sparked a spirited debate between Wall and several lawmakers, with Grusendorf asking her if "socialist" salary schemes where all workers receive equal pay have ever proven effective.

"I didn't say that, Mr. Grusendorf," Wall replied, adding that Texas has fallen far below the national average for teachers' salaries.

Thanks for keeping such an open mind, Kent.

More details on various proposals are here.

House leaders have drafted a new education funding system that dramatically alters the way revenues are distributed to public schools, including for the first time a larger basic grant for secondary schools.

The proposal also would eliminate so-called program weights that provide an extra percentage of funding for special categories of students those who are low-income, bilingual, special education or career and technology specialists.

Instead, the proposal would switch to a system of block grants that would provide a specific amount of extra money for those students.

Elimination of the program weights, which have been used in Texas for two decades, is expected to draw some opposition, particularly from districts with large numbers of high-cost pupils.

A preliminary version of the plan, distributed to some House members on Thursday, is scheduled to be taken up Saturday by the 29-member House Select Committee on Public School Finance. A special legislative session on education began Tuesday.

Perhaps the most significant change is the plan's recognition of the higher costs to educate a high school or middle school student. Under the proposal, districts would receive $1,000 more per year for those students than for elementary school children.

The basic annual grant for secondary students would be $5,460, while the grant for elementary students would be $4,460. Currently, the basic grant is the same for all students.


The proposal also would update the state's education cost index, which adjusts funding for school districts by reflecting the various costs of educating students in different parts of the state. Costs are based on teacher salaries, school district size and location, and concentrations of low-income students.

Changes in the index are expected to boost funding in higher cost urban and suburban districts and reduce funding in rural areas.

A preliminary analysis indicated that an average district that is "adequately" funded would receive $6,428 per student in the 2005-06 school year. The average funding level for students receiving block grants would be $7,805.

Last year, Texas schools received an average $6,317 per student, according to the Texas Education Agency.

All school districts would be guaranteed a minimum funding increase of 2 percent regardless of their property wealth in the 2005-06 school year under the proposal.

House leaders are considering various options for the revenue side of the school funding equation.

One leading proposal would cut school property taxes to a rate of $1 per $100 valuation, a 50-cent reduction from current maximum $1.50. The $1 rate would become a statewide property tax on all business and residential property, and school districts would be able to levy up to 10 cents more locally for enrichment.

Creation of a state property tax, which would require a constitutional amendment, would allow the Legislature to scrap the provisions in current law that force high-wealth school districts to share their property tax revenues.

A 50-cent property tax cut would trim about $5 billion in revenue, leaving lawmakers to replace that revenue with a tax increase somewhere else. The two leading options are either an increase or expansion of the state sales tax, or an overhaul of the business franchise tax.

Meanwhile, the Statesman delved into the war of words between Governor Perry and Comptroller Strayhorn and declared Strayhorn the winner.

[A]round the Capitol, a good number of Republican and Democratic officeholders, legislative staff members and lobbyists with no particular bone to pick with Perry say the finances of his plan have a gaping hole. A $2.6 billion hole in the 2006-07 two-year state budget cycle, to be precise.

And you don't necessarily need fuzzy math, an accounting degree or rampant political ambition to detect that gap. It's right there on Page 21 of the governor's plan.

To pay for the $7.1 billion in tax cuts and education spending increases that Perry envisions for the 2006-07 fiscal years, the governor would reach back into fiscal 2005 and ahead into fiscal 2008 for almost 37 percent of the money. The upshot is that without that one-time windfall in budget cycles to come, that money would have to be generated some other way.

"You'll be back on the biennium schedule" after the one-time money shift, Sen. Florence Shapiro, R-Plano and chairman of the Senate Education Committee, said Thursday. "And then, you're stuck."

Kathy Walt, the governor's spokeswoman, said time and a recovering Texas economy would solve any such problem.

"The economic expansion will more than fill that," she said.

Why don't you pull the other one, too, Kathy? It was exactly this sort of overoptimistic belief in future economic expansion that led Strayhorn to her wildly-off-the-mark prediction of the budget deficit last year. You know, her fuzzy math projection that you derided earlier this week. Fuzzy for thee, but not for me, I suppose.

Aside from Shapiro, another who sees a glitch in the Perry plan is Sen. Steve Ogden, R-Bryan, chairman of the Senate Finance Committee, who attempted with little success at a committee hearing earlier this week to get Perry to explain the disparity.

The critics say that Perry, in attempting to present a balanced financing plan, relied on some accounting tricks commonly used in state and federal government to balance budgets -- derisively referred to as "smoke and mirrors" -- but stretched those strategies to the breaking point.

Perry wants to cut property taxes by $3.4 billion and increase education spending by $3.7 billion in that 2006-07 cycle. To pay for it, he proposes, among other measures, to raise cigarette taxes by a dollar a pack, legalize and tax video lottery terminals, levy a $5 surcharge on admission to strip clubs and close some loopholes that allow many businesses (including the American-Statesman) to avoid paying the state franchise tax.

But according to Perry's own figures, those changes would generate only $4.5 billion during 2006-07, leaving the $2.6 billion shortfall. To fill that hole, Perry's plan contemplates starting several of the revenue-raising strategies in the 2005 fiscal year to stockpile $1.44 billion for use during the following two years. In addition, Perry suggests shifting sales tax revenue for the first month of the 2008-09 biennium to 2006-07.

That 25th month of sales tax revenue would bring in another $600 million -- but the next biennium would once again have just 24 months of sales tax. Perry would bring in another $600 million by doing a similar acceleration of collection on the franchise tax.

Ogden asked Perry about all this when the governor testified Monday before the Joint Select Committee on Public School Finance.

"It looks to me like there's two one-time measures," Ogden said. "How are you going to replace that $2.6 billion in the future?"

Perry said the accelerated tax collections could be continued indefinitely. "That will never catch up to you," he said.

"Yeah, but you can only spend it once," Ogden said.

And once again we have those who forget history repeating it. Here's Rick Perry last year:

"Betting the economy will pick up to solve our budget challenges, rather than making the hard decisions needed, is a recipe for an eventual tax hike," he warned.

"If you remember the cartoon Popeye, then surely you will understand what I mean when I say using budgetary sleights of hand is something like ol' Wimpy would have done," Perry said. "It's the same as saying, `I will gladly pay you Tuesday for a hamburger today.' "

Makes a nice contrast to this year, doesn't it?

Finally, the Star Telegram puts some of the blame for the recent unpleasantness back on Strayhorn, while the Chron lambastes Perry for his pushing of "sin taxes". And so it goes.

Posted by Charles Kuffner on April 23, 2004 to Budget ballyhoo | TrackBack