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Lynn Moak

This time it’s different

Why is this school finance ruling different from all other school finance rulings? For one thing, it was way more comprehensive.

The changes needed to correct the constitutional violations [Judge John] Dietz identified could comprise the most far-reaching overhaul of education policy the state has enacted in more than 40 years, said Lynn Moak, a school finance veteran who has testified in all six of the school finance lawsuits dating back to 1987.

“I don’t think it’s an understatement to say that the bill that resolves yesterday’s decision is going to be one of the most comprehensive and far-reaching pieces of legislation that we have seen in the education system certainly over my lifetime,” Moak said.


Dietz’s decision Monday looked much like the court order he issued in 2004, when he heard the previous legal challenge to the school finance system.

At that time, the Texas Supreme Court agreed with Dietz’s finding that the Legislature had effectively imposed a statewide property tax in violation of the constitution. The high court rejected his conclusion that the Legislature had failed to provide adequate resources to meet the state’s academic standards.

This time around, Dietz also declared that the funding differences between school districts are now constitutionally inequitable. He had turned aside that claim from property-poor school districts in 2004.

The funding gap between property-rich and property-poor school districts has grown since the previous case from $965 per student to nearly $1,600, according to data from the Texas Education Agency.

“The facts scream out that there is an equity violation,” said Richard Gray, a lawyer who represented more than 600 property-poor school districts.

The court has said that districts that tax the same must have access to essentially the same amount of funding. It is the state’s constitutional obligation to even out the differences among property-poor districts and their wealthier peers.

The fix implemented after the last lawsuit, which involved freezing the amount of per-student funding each district got, contributed to the inequity problem that Dietz ruled was unconstitutional. If the Supreme Court upholds this, it’s going to be a big effing deal.

On a side note, please read this. The key takeaway:

Bottom line: While the claim that the state has increased spending on public education is technically correct, data from the Legislative Budget Board, which accounts for inflation, shows that state spending has largely flat-lined — even before accounting for the roughly 70,000 students who enter the school system each year.

That was a key aspect of Judge Dietz’s ruling as well. The budget cuts of 2011 exacerbated the problem, but it was a problem even before that. Assuming the Supreme Court doesn’t gut Judge Dietz’s ruling, it will finally be time to fix this.

Finally, the Chron prints an excerpt of Judge Dietz’s remarks from his ruling.

Finally, I would point out the simple truth: We are in competition with 195 other nations and their economies. If I ask the 20 million Texans who are not in school right now whether they agree that we should have more rigorous and challenging standards for our education systems, what would their answer be? I believe a vast majority of Texas would say “Yes” and that for our students to successfully compete in the future, we must have tougher, higher standards now.

So with this vast majority of Texans in support of higher standards, I now say, “Great, we’re going to have to develop a new curriculum, we have to substantially upgrade our technology in schools, we have to increase training for teachers, we have to hire some new teachers in complex content areas that we will be teaching and we have to provide more tutoring and remediation to our challenging population. We need to have evaluation and accountability to make sure we are meeting our goals concerning these increased standards. Finally, we need some public outreach to make sure the parents buy into this new program. I think we can do all of that for an additional $2,000 per student, or in other words, an additional $10 billion to $11 billion. You support this tax increase, don’t you?”

Suddenly, my vast majority becomes a minority. Now, what I begin to hear from my vast majority is, “You can’t solve the problems of education by throwing money at it.”

As the economists put it, there is no free lunch. We either want the increased standards and are willing to pay the price, or we don’t. However, as the economists point out, there is a cost to acting, namely the tax increase, and there is a cost to not acting, namely loss of competitive position. So, we as a state and as a nation are wrestling with this question of priorities, and our leaders are looking for direction from you, the public.

The full decision will be released later this month. Given the price tag suggested, you can see why most Republicans are eager to appeal this, and not so eager to do anything until the Supreme Court has ruled.

Eight billion dollars

That’s how much is needed per year to make public education whole.

Lynn Moak

Lynn Moak told state District Judge John Dietz that it will take more than $8 billion a year in additional money to get students on target to graduate and to meet new college and career readiness standards. About 150,000 9th-grade students, or 47 percent of last year’s freshman high school class, are not on track to graduate, according to the state’s more rigorous academic standards, Moak told the court.

“We are in a current crisis. The crisis gets worse in the future,” Moak said during a break in the hearing. “The crisis is sufficient now to demand action.”


Moak told Dietz it will take about $6 billion in additional money per year to adequately educate Texas students, on top of restoring $2.65 billion per year in education cuts that lawmakers made last year to help balance the budget.

“If we don’t see improvement, you will see even larger numbers of students at risk of not being able to graduate,” Moak told the judge, who said he planned to grill policy experts on both sides.


The new accountability standards are hitting low-income students the hardest. Only 40 percent of them have passed all of the 9th grade tests, which are required for high school graduation.

The number of low-income students increases each year and now makes up more than 60 percent of Texas’ 5 million K-12 public school enrollment. Low-income students generally cost more to educate because many arrive in kindergarten or first grade with less-developed vocabularies and other skills than children from middle- and upper-income families.

Republican legislators last year cut $4 billion from public education formulas and another $1.3 billion in special grants, such as full-day Pre K programs for low-income children and student success initiatives for tutoring and summer school programs to help struggling students.

Moak said he could not assess the impact on schools and students.

“I do not know of any significant legislative review to determine if these programs were not needed or were not producing good results,” he said.

Spending per student in Texas peaked at $7,415 in 2009, and has dropped to $6,293 in 2013, Moak said.

I don’t expect there to be any significant legislative review. I don’t think the authors of these cuts want to know what their effect was. The Statesman notes that while only 40 percent of low-income kids are passing the required tests, 69% of non-economically disadvantaged students are passing. You can expect that gap to grow.

All this came from direct testimony – the state had not had the chance to cross-examine Moak as of the writing of those stories – so there will likely be more of these depressing numbers to come. The Moak, Casey website is a pretty good resource for following the trial on a blow-by-blow basis. Here’s an interesting tidbit from their embedded Twitter feed: “Moak: from 10-11 to 11-12 school year, 26.5k fewer teachers and staff while Texas schools added 44.5k students #schoolfinancetrial #txlege”. With numbers like that, what happened next should not surprise us.

Back to school finance

The Lege has started the process of picking up where it left off on school finance. The Trib reminds us how we got here.

[T]he earlier failure of SB 1581, which put a behind-closed-doors conference committee in charge of any decisions about how to distribute $4 billion in cuts in state funding across school districts, was a dramatic warning of just how much further lawmakers had to go to find consensus on what they repeatedly called the “second most important bill” of the session. As lawmakers again tackle the issue in the special session the governor called on Tuesday, it is worth revisiting the demise of SB 1581.

Passing a new school finance plan, said veteran education consultant Lynn Moak, often depends on selling lawmakers on what changing formulas will mean for their districts. That can lead to a situation, he said, where “we’re really passing a printout and having to translate it back into a school finance bill.” Difficult under normal circumstances, that becomes infinitely more challenging when the state is coming up $4 billion short in funding for public education.

“Nobody has ever done this before. Nobody has ever had the kind of massive cuts to deal with,” he said, adding, “The Legislature really did not spend any time prior to January trying to work out a game plan, and wrote one as they went along, and it showed.”

Before the conference committee were three options to chose from: separate proposals from Rep. Scott Hochberg, D-Houston, and Sen. Florence Shapiro, R-Plano, that enacted cuts relative to a districts’ wealth, and a proposal from Rep. Rob Eissler, R-The Woodlands, that chopped districts the same across the board. Each, though, contained a numbers game nobody really wanted to play.

The simplicity of Eissler’s approach — which was originally a last-minute amendment to SB 1581 — gave it a political advantage among House members. In a scenario with no real winners, lawmakers newly unsettled by the stark realization of what the gaping reduction meant for schools in their districts realized they wouldn’t have to return to their superintendents and explain why they voted for deeper cuts for some and not others.

That still wasn’t enough for the House to coalesce around Eissler’s plan in time to pass it as a part of SB 1581. As the bill was debated on the House floor, “there was no single bloc of votes for anything,” said David Anderson, an education lobbyist for the Austin-based HillCo Partners, a government consulting firm, who described a “meltdown” that night between 6 p.m. and 9 p.m. as members began taking a hard look at projections of the cuts for their districts.

[Rep. Jimmie Don] Aycock and Eissler both said that until shortly before then, members had been concerned with what the budget cuts were going to look like across the state, and hadn’t had an opportunity to consider the impact on their individual districts.

“People were so focused on the cuts that only those few geeks of us who wade around in school finance even saw it coming,” Aycock said, adding, “It was only late in the session when we figured out the number, and then the question became how do we divvy it up.”

In other words, these yahoos voted to cut billions of dollars from the state public education budget without having any idea what the effect would be on their own school districts. And remember, the House initially voted to cut $8 billion from public ed, which is double the amount that wound up getting cut. If they’re blanching at what that means, imagine what they’d be thinking if the House budget had been adopted as it was. The mind boggles.

Meanwhile, of course, more than enough money is in the Rainy Day fund to cover this shortfall. It still wouldn’t account for growth and other higher expenses, but it would moot this current exercise. More seriously, the legislation that’s being considered, which the Democrats fought tooth and nail against, would not just distribute cuts for this biennium but would mean permanently lower allocations for public schools.

For about 60 years, Texas lawmakers have afforded public education a special status in terms of state funding.

Written into law is a guarantee that schools would get enough money to provide a basic, foundational education for each student. That obligation has dictated what the state has put into the Foundation School Program to cover growing enrollment and a changing student population.

But the school finance plan now under consideration by legislators wipes that guarantee out and makes future appropriations dependent upon how much money is available rather than how much is needed.

“The commitment to fund current law would cease to exist as a legal commitment,” said Lynn Moak, a school finance expert and consultant. “Public education has lost its special status.”


On Sunday, state Rep. Scott Hochberg, D-Houston, highlighted the shift in Texas’ future obligation to schools during an exchange on the House floor with Public Education Chairman Rob Eissler, R-The Woodlands, one of the House negotiators on the compromise.

Eissler had already acknowledged that the change would mean that school districts would no longer be legally entitled to a certain amount of state aid.

Hochberg asked him if that change would allow the state to routinely short school districts.

“That would allow us to,” Eissler said, “but I don’t see that happening.”

“This is not a good year to make that argument, Mr. Chairman,” Hochberg responded.

Anyone who thinks that we can simply take the Lege’s word for it that they wouldn’t use their new authority to short school districts to actually short school districts needs to pay attention to Dan Patrick:

State Sen. Dan Patrick, R-Houston, said the school finance change “is a true cut in an entitlement” and an essential cut at that.

“There are no guarantees, and for a Legislature to say we can guarantee this forever is not being straightforward to the people,” said Patrick, who was deeply involved in the Senate’s school funding discussions.


But in the future, a specific vote to change the law would not be necessary. Lawmakers would simply put less into the budget than the funding formulas call for, as is the common practice for higher education funding.

“That is a very, very big change in the way that we do funding for the schools,” Hochberg said.

Patrick agreed that it is a significant change to how the state has done its business.

“I think it’s a change that is needed as we move forward. We need to have real cuts,” Patrick said.

So at a time when Texas has a population that is much younger than the national average, which is a key driver of the state’s population growth, Dan Patrick thinks we need to cut education funding, not just now but forever. If you think that maybe isn’t such a hot idea, you need to vote that way in 2012.

So what happens if there isn’t a school finance deal?

You may recall that having to change the school finance formula to distribute the billions of cuts to public education is causing problems with the budget. What happens if no changes are made to the formula? The Trib contemplates the question.

So what would doing nothing look like? Without legislation that provides a mechanism to allocate the billions of dollars in cuts, the state would have to pay districts under existing law. That would mean borrowing from the second year of the biennium to fully fund the first year. When the money dwindles in the second year, Commissioner of Education Robert Scott would have to ask the Legislative Budget Board to tell the Legislature to vote on using the Rainy Day Fund to fill in the gap. He also has the authority to decompress property tax rates, which would allow school boards to make up the difference in state funding with local revenue.

The former is the expected choice — an appointee of Gov. Rick Perry isn’t likely to endorse a property tax hike — and it would probably happen when the 83rd Legislature, which meets in 2013, is up and running. Tapping the Rainy Day Fund in that situation would require approval from three-fifths of the House and Senate. If they decided not to access the fund, Scott would distribute what’s left of state money through what’s called proration, which would proportionally allocate funding according to districts’ statewide property value, with the idea that the state would pay back its share during the next budget cycle. That could potentially leave districts under proration for only a few months. Or he could opt for a combination of decompressing tax rates and proration.

There are serious drawbacks to avoiding school finance legislation, said veteran school finance expert Lynn Moak, who runs the consulting firm Moak, Casey, and Associates. The 1993 statute governing proration, he said, addresses scenarios in which the state comes up short by relatively small amounts in the second year of the biennium and isn’t designed for a multi-billion dollar reduction.

“It wasn’t written against the background that we intentionally screw things up by not having a school finance bill and appropriations bill that match,” he said. “It never visualized the kind of situation we’re talking about.”

There is also uncertainty as to how proration would work with target revenue and the “hold harmless” guarantee the Legislature made to districts with the 2006 property tax reduction. “We haven’t done this since property tax relief funding, and statutes on proration and relief weren’t written together,” Moak said.

So as is the case with the Senate budget and Medicaid, the most likely scenario is that the Rainy Day Fund gets tapped to cover the shortfall. How it is that this could possibly be better public policy than just tapping it now to avoid the shortfalls, and fixing the structural deficit that will lead to future shortfalls, is an exercise best left to the geniuses at conservative think tanks who believe that the time to act is always during the next crisis, which thanks to their preferred policies will be just around the corner. This is more than a theoretical concern:

The Texas House’s barebones budget proposal would run out of money for public schools by early 2013 and for Medicaid soon after unless lawmakers add money to the plan and revise education funding formulas, the chamber’s chief budget writer said Thursday.

“There’s a lot of holes in that budget that we need to fill,” House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, told his colleagues after postponing bills that would use accounting maneuvers and other changes to provide more revenue.

The House needs to take up the repeatedly postponed legislation next week, he said. The legislative session ends May 30.


Besides agreeing on a funding level for the overall budget — and finding the revenue to pay for it — lawmakers must agree on a school finance plan that would allow them to spend billions of dollars less through the next two years.

Otherwise, current school funding formulas would entitle school districts to current spending levels, Pitts said. At those levels, under the House budget proposal, Pitts said the money would run out by February 2013 or perhaps months earlier.

“That means the schools cannot operate. The teachers will not be paid,” Pitts said.

The House proposal would give schools $8 billion less through the next two years than they’d get under current funding formulas. The Senate proposal’s cutback would be half that.

A Legislative Budget Board staffer said in a memo that if education were underfunded and formulas weren’t changed, the LBB would propose spending money from the rainy day fund for fiscal year 2013 to meet the gap. If the Legislature didn’t do so, the education commissioner would pro-rate state aid.

A special session is looking pretty likely, so there is still a chance to do something about this. Otherwise, Medicaid also runs out of money at about the same time as the schools. What it comes down to is simply this: We can spend Rainy Day funds now to plug this hole, or we can spend it later. We will continue to be in this position until we fix the underlying problem. And that will never happen until we have a different Legislature. Burka, EoW, and Abby Rapoport have more.

How does school finance work, anyway?

The Trib has a useful guide to this incredibly complex topic.

Here’s our layman’s guide to figuring out the current system, compiled with the help of experts at the Texas Taxpayers and Research Association, the Equity Center and the Texas Education Agency.

The state’s 1,030 traditional school districts operate with a combination of federal, local and state revenue. In the 2008-09 school year, the federal government paid $4.7 billion, the thinnest slice of the pie at 10 percent. At $20 billion, the state paid 42.9 percent of the total funding for schools, and local districts paid 47.1 percent, $22.2 billion (the state’s portion includes money “recaptured” from local property taxes; more on that later).

Most federal money comes through Title I, the law intended to help districts educate economically disadvantaged students. That money is distributed based on the number of students who qualify for free and reduced meal plans — and almost all districts in the state receive some amount of Title I funds. They can also receive specialized federal grants, including those for students with disabilities, English-language learners, preschool programs, migrant students and vocational education.

Texas allocates most state funding for schools through a mechanism called the Foundation School Program, which was created in 1949 to distribute money from the state’s Available School Fund. Now the program distributes operating funds to school districts via two streams that each contain a local and state component. A portion of state facilities funds also comes from the Foundation School Program. The Available School Fund contains earnings from something called the Permanent School Fund, which was established in 1876 and is made up of revenue from land sales, fuel taxes and leases on offshore oil lands. It also finances instructional materials and technology for schools outside of the Foundation School Program.

It goes from there, so go read the whole thing. There’s a good chance that the entire system will be overhauled this session, as the current shortfall combined with the structural deficit and some glaring inequalities in how funds are distributed have made an increasing number of people aware of its deficiencies. Abby Rapoport takes it from there.

Before 2006, the state gave money to school districts based on how much it would cost to educate students in the districts. Schools got extra money for students who were more expensive to educate, but they also got more money for other costs. For instance, small schools got extra money because, if your district only has 500 students, you can hardly take advantage of buying in bulk. The costs per student are higher. Logical enough, right? It was called funding by “formula.”

The problem in 2006 was that the formulas were out of date. The “cost of education index,” which was supposed to account for the costs of teacher salaries and other expenses, was based on data from 1989. Districts that had been rural in the ’80s were still funded that way—even if they’d become booming suburbs. The formulas didn’t offer enough money to districts. But at least the distribution of funds was based on the cost of educating students. Formula funding, which the state had used for decades, was imperfect. It made sense, though.

Sense went out the window in 2006. Updating the formulas would take time—and huge amounts of money—and it would raise all sorts of political fights between members. Rather than go for a systemic solution, the Legislature opted for what they said would be a temporary quick fix. They would add money and freeze district funding at a certain amount per average daily number of students. (They weighted the counts for expensive-to-educate students, like those who are bilingual or special needs.) Most education advocates supported reform because it offered them more state funding. There was even a modest pay raise for teachers. Districts were too desperate to sweat the long-term implications. “They hadn’t gotten any new money in a long time,” said Rep. Scott Hochberg, a Houston Democrat and the Legislature’s leading school-policy wonk. “If you’re on the side of the road and you don’t have any gas and someone comes along with half a gallon, you take it, and you go on down the road as far as you can even if it doesn’t get you to where you’re going.”

The new funding amounts, frozen at 2006 levels, quickly became irrelevant to actual costs. The amounts—now called “target revenue”—were based partially on how much a school district received in formula funding in previous years, but they also took into account how much a district could raise in its own tax base. That heavily advantaged wealthy districts. The result, five years later: While some districts get upwards of $8,000 per average attendee, others make do with less than $5,000.

“We supported the bill with the understanding that it was a first step,” said longtime education consultant Lynn Moak, whose firm, Moak Casey, represents some of the biggest school districts in the state. “We could see pretty clearly that the bill was going to have major problems in the future.”

The future turned out to be pretty near.

Again, read the whole thing.

It’s not just about cutting public education funding

Abby Rapoport explains one of the potential long term consequences of the violence that’s being done to public education funding this session.

For over 60 years, Texas has treated education differently than the rest of the budget. In funding most state agencies, lawmakers first see the state has in the bank and then determine which requests they’ll fund. Agencies don’t know what they’ll be getting until the end of the budget process. But we take a different approach with school districts. Rather than funding schools based on how much we have, we’ve given schools money based on how much we say they need. While many would say the state underfunds education and funds it unequally, but we’ve been reliable, nonetheless. Districts have known ahead of time roughly how much they’ll receive from the state, and school administrators could count on the state to deliver. With this budget cycle, that entire system may be out the window.

“We’ve given up automatic financing,” explains education consultant Lynn Moak, one of the gurus in the field. “For 60 years, schools have been able, fundamentally and with only minor exceptions, to rely on current law as being fully funded.”

The “automatic funding” system was part of the Gilmer-Aikin reforms in 1949, says David Anderson, an education lobbyist at HillCo Partners. The entire package meant to ensure education for the baby boomers. Since then, if the state has fallen short one year, we’ve made it up to school districts the next. “We largely held on to that concept for many many many years,” Moak says.

Whether or not cuts to education wind up as big as the House version or as small as the Senate’s, both Anderson and Moak said this year’s funding approach likely marks a significant departure from that philosophy. Already, school districts are scrambling to figure out their budgets for the next school year—without knowing how much they’ll get from the state. Teachers are getting pink slips from districts based on the hunch that the state isn’t going to provide. The planning process for school districts is “significantly screwed up,” Moak says. From a district level, no one really knows just how dire the situation will be—just that it won’t be good. “That gives me a great deal of concern about the long term future,” Moak says.

Maybe this is just a one-time blip, and we’ll look back in 2013 and think “thank God we’ll never have to do that again”. And maybe this is the new normal, and we’ll go 60 years before any significant changes are made. Which outcome would you bet on right now?

Meanwhile, Martha has been busy tracking all of the school district layoff stories that have come out lately. A hundred jobs here, two hundred more there, it all starts to add up. But don’t worry, I’m sure David Dewhurst and Rick Perry and Joe Straus will explain to us that if we’d done something to fix the structural deficit it would have forced other people to get laid off somewhere else. I think it’s a little-known corollary of the conservation of mass principle.

What the funding cuts to public education will mean to your school district

Read this and see.

Summary of HB 1 (Public Education Reductions)

The House introduced its initial version of the General Appropriations Act (House Bill 1) for the 2012-13 biennium on Wednesday, January 19. While it is the first draft of the state budget with many hearings and floor debates to come, it does indicate that substantial budget reductions to public education are likely.

In addition to eliminating almost all discretionary grant programs ($1.3 billion in General Revenue over the biennium) in this first draft, HB 1, as filed, reduces the Foundation School Program by $10 billion below what was requested by the Texas Education Agency. Some of the grant programs that were eliminated in the 2012-13 biennium include: the technology allotment ($270.9 million), New IFA ($52 million), property value decline protections, ADA decline provisions ($22 million), DAEP funding, the Reading, Mathematics, and Science Initiatives ($16.1 million), the Early High School Scholarship Program ($43.2 million), the Pre-Kindergarten Grant Program ($223.3 million) , all of the grant programs funded under the Student Success Initiative ($293.2 million) , the High School Completion and Success Initiative ($86 million), the LEP Student Success Initiative ($19,4 million), the DATE program ($385.1 million), science lab grants ($35 million), middle school PE grants ($20 million), virtual school network ($20.3 million), the steroid testing program ($2 million), school bus seat belt program ($10 million), the optional extended year program ($14.1 million), teen parenting ($19.7 million), and the AP Incentive Program ($28.4 million).

I confess, I don’t know what a lot of that alphabet soup means, but it doesn’t matter. After the brief intro, which lays out three different possible ways that the $10 billion reduction might be distributed, is a table of each school district, listed by county, and the amount that it would lose under each scenario. As daunting as $10 billion sounds, seeing the individual reductions for each ISD makes it even scarier. The firm that put this together is the source of that 100,000 teacher layoff figure I keep harping on. As you see stories like these two appear over and over across the state, you’ll know where they’re coming from.