AUSTIN — Texas public school districts will face financial stresses in educating Texans to the level needed to sustain economic development, according to education officials and financial professionals at The Bond Buyer’s 16th annual Texas Public Finance Conference.

Tom Sage, a partner at Andrews Kurth LLP, said Monday that the 1,025 public school districts in the state are facing a $5.3 billion reduction in state aid to education in the 2012-2013 biennium, compounded by lagging property valuations that affect their tax base.

“Our clients are dealing with a lot of stress and difficulties,” he said. “They are trying to figure out how to provide educational services as the funding is going down.”

Sage said bond offerings by independent school districts in Texas have slowed recently because of changing demographics and a reluctance by local officials to take on more debt.

Much of the growth in student enrollment in many districts was predicted to come from students moving into the suburbs from large cities, Sage said, but that has slowed significantly since 2008.

“With the slowdown in population shifts, the suburbs don’t need as many schools,” he said. “The idea had been to build facilities ahead of the growth, but some districts have completed schools and now cannot fill them.”

Texas school trustees are wary of asking voters for additional debt authorizations, especially when that involves an increase in the local property tax dedicated to debt service, Sage said.

“There’s a real reluctance to raise taxes at all, even when the districts are feeling real needs for new or renovated facilities,” he said.

Texas school debt issuances will return eventually to more normal levels, Sage said, and that could be sooner rather than later.

School officials are feeling better about state funding than they did last year at this time, he said, when much more draconian cuts in aid were a common prediction. As severe as the funding cuts were, Sage said, they could have been worse.

“There is a lot of pent-up demand out there,” he said. “School districts can only go so long before they will eventually need to build new schools or rehabilitate the ones they are now operating.”

The Texas economy will not match its growth posted over the past few decades without a well-educated workforce, Steven Murdock said at Monday’s keynote address.

Murdock, a professor at Rice University who was the first official state demographer and a former head of the U.S. Census Bureau, said the state grew to 25.1 million in 2010 from 20.9 million people in 2000.

Over the same period, Murdock said, public school enrollment grew to 4.8 million in 2010 from 4 million in 2000.

At least 65% of the population growth over the decade is attributed to Hispanics, Murdock said. The Anglo population in Texas is getting older and declining in proportion to the Hispanic population.

“Education is the key to the future of Texas, and that future is tied to educating the non-Anglo population,” he said. “How well they do is how well Texas will do.”

“We have to change today to focus on that effort, or we will be in line for some tough economic times,” Murdock said.

Further or continued reduction in public school aid will undermine that effort, Murdock said.

“We cannot do to public education what we did in the last [legislative] session,” he said. “We cannot cut funding and expect to get the same result.”

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