DALLAS — Texas schools are waiting to see how deeply the Legislature cuts their funding before seeking more bond authority from taxpayers, finance experts say.

With available revenue falling $27 billion short of what state agencies say they need to handle growth, lawmakers are expected to sharply reduce education funding. Public education represents the largest portion of the two-year state budget.

Under the House’s budget proposal, public education funding would be reduced by $3.1 billion, or 9.1%.

The Senate’s proposed budget would provide more.

“Texas funding per student is already near the bottom when compared to all other states,” said Gwen Santiago, executive director of the Texas Association of School Business Officials. “There are indications that there will be cuts of $9 billion to $10 billion in state aid with no additional funds, even though Texas typically gains more than 70,000 students each year.”

To improve funding levels for maintenance and operations, school districts can seek a higher tax rate through a tax-ratification election, or TRE. This year, with funding levels unknown, districts must decide to hold a TRE or ask voters to approve bonds for facilities. Property tax revenue and rates for bonds are separated from taxes for operations.

“Do they keep the lights on and pay the teachers or do they go out for bond elections?” said Ron Caloss, managing director of Morgan Keegan & Co. and a former Texas school superintendent. “You can’t fight a war on two fronts.”

Caloss and Santiago will serve as panelists on the school finance issue at The Bond Buyer’s Texas Public Finance Conference in Austin Monday. Others include Steven Bassett, chief financial officer of the San Antonio Independent School District; Nicole Conley-Abram, CFO of the Austin Independent School District; and Ricardo Villasenor, senior vice president of Cabrera Capital Markets.

In Austin, a task force will meet with the school board on Monday to present a plan for more efficient use of schools. Previous efforts to close schools have met strong protests from citizens, and the Austin ISD has never attempted multiple closings.

Superintendent Meria Carstarphen has said up to three schools or facilities may need to consolidate or close due to a potential $113 million shortfall in 2011-12, about 16% of the estimated budget.

“Closing schools is one of the most difficult political challenges encountered by any school district,” TASBO’s Santiago said of the Austin situation. “It is wonderful that communities love their schools so much, but you cannot have a lot of very small neighborhood schools and be efficient from a cost standpoint at the same time.”

Other large systems such as the Dallas Independent School District and San Antonio’s Northside Independent School District are considering mass layoffs of teachers and ending programs.

“People don’t see the impact yet,” Caloss said. “We’re looking at a worst-case scenario.”

A poll commissioned by the Texas Association of School Boards last October showed that 86% of Texans agree that public schools need more state money, a 12-point increase from 2004.

For the current legislative session, TASB submitted its own budget proposal with a single-tier, single-guaranteed yield funding formula that would replace the current two-tiered system.

“TASB has never proposed its own school finance plan, primarily because it is almost impossible to come up with a model that is viable and meets the approval of every school district across the state,” said outgoing president Sarah Winkler.

“What is different now is that all districts can agree that our current system for funding public education is broken — it’s too complex, too unfair, and not keeping pace with the educational needs of our students.”

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