Unless a fix is enacted during next year's legislative session, school districts will be faced with difficult choices, including closing campuses and firing teachers, said Mike Falick, president of the Spring Branch school board.
"It's an untenable system. No business in the world would be able to survive with fuel, health insurance and salary increases and a flat revenue source," Falick said. "It's not sustainable.
Some school districts eventually will face "insolvency, some in a shorter time than others," he said.
Humble Independent School District is about two years away from insolvency, Superintendent Guy Sconzo said. It will cover a $7 million budget deficit this year and a projected $23 million deficit next year by dipping into its $53 million reserve fund.
Humble ISD has cut spending by $17.5 million since 2002, Sconzo said, but is struggling with inflation and enrollment growth. Each new student costs the district about $6,800, but it gets only $4,937 from all sources to educate that student, he said.
"As we reduce more, we get on the road of becoming Minimum ISD. We will be able to comply and meet state laws and regulations, but we can't do anything more than that because we can't afford to," Sconzo said.
House Speaker Tom Craddick, R-Midland, said inflation has had a significant impact on public schools in his home district, especially in transportation and energy costs.
"For more than 60 years we have generally required school districts to cut spending or raise taxes to deal with inflationary pressures," he said. "I continue to believe that a long-term solution for public school finance will require updating the distribution formulas and re-evaluating these long-standing practices."
Craddick appointed a special legislative panel to explore education problems and said he expects they will be a high legislative priority in 2009.
Money for public schools is pegged on what districts were getting per student in 2006, called "target revenue" in school finance jargon, and officials complain those amounts are arbitrary, punishing some districts and rewarding others without rhyme or reason.
School officials also are miffed that the state benefits from rising property values. Instead of school districts keeping extra revenue from appraisal increases, the state subtracts that amount from its education funding to those districts. The only extra money for school districts goes to cover student enrollment increases.
Developing a permanent cost-of-living index to help schools cope with annual inflation will be a top priority next year, said Rep. Dan Branch, R-Dallas, chairman of the House Select Committee on Higher and Public Education Finance.
Lawmakers also will consider allowing tax revenue from property value increases to stay in school districts, he said.
Some school officials contend the state should spend at least $4 billion of a projected $10.7 billion budget surplus next year on public education.