FORT WORTH - Texasschool districts face myriad financing challenges and legislative changes are necessary, according to a panel at the The Bond Buyer's Texas Public Finance Conference yesterday.
Last summer, the Legislature reduced the maintenance and operations tax the state's 1,031 school districts can levy to $1 per $1,000 of assessed valuation from $1.50 previously.
The compressed M&O tax rate tightens school district budgets and presents financial conundrums for officials. Some have questioned the constitutionality of the rollback and the limited tax rate, saying it creates both a floor and ceiling and doesn't give districts meaningful discretion to set an appropriate rate.
"They froze this dollar figure at a single point in time ... but it can't be one shoe fits all," said Mike Jolly, vice president with RBC Capital Markets. "We need to fix it so we provide funding to the schools to meet their individual needs."
Two business officials from rapidly growing districts echoed Jolly's opinion.
"If the Legislature does nothing, programs will be dropped ... electives will be dropped," said Wess Robinson, associate superintendent of business at North East Independent School District. "And while I believe in the 360-degree education and believe fine arts and athletics are valuable, these things will have to go eventually. I'm waiting for the first school district here in Texas to say it's going to drop football. Something's got to give. We can't maintain the same programs with the same level of funding."
Since 1995, his San Antonio district has sold more than $1 billion of debt to fund expansion as it averages 3% annual enrollment growth. The district has a total student population of 62,000.
"Unfortunately, legislators look at us like we all have the same problems and same issues," Robinson said. "The primary goal of HB1 [the legislation passed last summer] wasn't to resolve inequalities among the school districts, but to reduce property taxes and then lower them further. And the second purpose was to do away with recapture."
Texas school districts that are designated property-wealthy send a percentage of collected taxes back to the state, which then sends that revenue to the property-poor districts. Robinson said the wealthier districts have sent $81.4 billion back to the state under this program begun in 1993.
In August, Standard & Poor'ssaid"property tax reform may come at a price for Texas schools and their constituents." Citing the comptroller's office, analysts said the new tax structure may lead to state budget deficits totalling $14 billion through 2009. A projected surplus of $8.1 billion may offset the shortfall through the end of fiscal 2008, according to analysts. And a new 1% business gross-receipts tax is also expected to cover possible shortfalls.
Jon Graswich, chief financial officer of the Northwest Independent School District, said school funding "is a dirty little secret" here in Texas. His Fort Worth district is averaging 13% to 17% annual enrollment growth. Projections have the nearly 12,000-student population doubling in five years with as many as 93,000 students by 2027.
Graswich said the budgetary problems of a growing district are obvious.
"When's the next lawsuit?" he asked, noting that multiple lawsuits have been brought against the state over the past 20 years regarding the level of funding school receive.
"There's a need to account for the rising fuel costs, health care costs, and utilities costs. The current system does not provide adequate revenue and it won't be long before the funds run out," Robinson said.
Jolly implored the financial advisers, bond lawyers, and bankers attending the conference to get involved.
"We all need to work together as education in the U.S. is for the common good," he said. q
