Texas School Funding Debate Raises Controversial Issues

On February 7, 2002, a Texas legislative committee charged with issuing a report on the state's school finance system by November 15 of this year, held one of a series of planned hearings in the state capitol. Two of the issues raised at the hearing were a proposal to move away from an "equity-based" funding system to one requiring "adequacy" and the potential need for increased taxes.

Texas developed its current school funding system in 1994 after property-poor districts successfully challenged the enormous disparities in per-pupil funding among districts that existed at that time as unconstitutional under the state constitution. In response to the state supreme court's ruling in favor of equity, the legislature developed a school funding system that uses partial recapture. Specifically, the state's 84 wealthiest school districts (out of 1,000 districts statewide) share some of their local tax revenues with poorer districts. (For more background, see Texas.

Now, it appears, the finance system requires some adjustment because a number of school districts are reaching a state-imposed cap on property tax rates. Educators in these districts assert that they need to tax above the cap to address financial pressures caused by increased enrollments, inflation, and higher academic standards.

At the hearing, some legislators recommended changes to the funding system that would maintain "equity" and drive more money to local school districts. However, one legislator suggested following states that use "adequacy-based" funding. In states where courts have upheld an equity standard for funding, such as Texas, adequacy could be a step backward for low-wealth school districts. It might allow large funding disparities to grow anew.

Educators' arguments for more money to meet educational needs raised the difficult question of whether a tax increase might be necessary. Potential sources of revenue for education will be discussed at a hearing next month, according to one of the committee's co-chair.

For more background on equity and adequacy lawsuits, see Finance Litigation.

Prepared February 7, 2002.