May 12, 2008, 1:54AM
Schools say inflation puts them at risk
To protect jobs, campuses, Texas' funding system needs to be revamped, educators say


By GARY SCHARRER
Copyright 2008 Houston Chronicle Austin Bureau

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Blogging Houston education AUSTIN — The school funding system approved by Texas lawmakers two years ago provides no new money to cover rising costs — especially for fuel, utilities and health insurance — and officials warn the plan's tax revenue straightjacket will allow inflation to push some school districts into bankruptcy.

At-risk districts, generally, will find a way to make it for the next school year, but many face horror situations in a few years unless legislators dramatically change the school funding system again, and soon.

Take the Houston-area Spring Branch Independent School District. Its budget projections show the district's current $58 million reserve fund will slide $68 million into the red within four years.

Unless a fix is enacted during next year's legislative session, school districts will be faced with difficult choices, including closing campuses and firing teachers, said Mike Falick, president of the Spring Branch school board.

"It's an untenable system. No business in the world would be able to survive with fuel, health insurance and salary increases and a flat revenue source," Falick said. "It's not sustainable.

Some school districts eventually will face "insolvency, some in a shorter time than others," he said.

Humble Independent School District is about two years away from insolvency, Superintendent Guy Sconzo said. It will cover a $7 million budget deficit this year and a projected $23 million deficit next year by dipping into its $53 million reserve fund.

Humble ISD has cut spending by $17.5 million since 2002, Sconzo said, but is struggling with inflation and enrollment growth. Each new student costs the district about $6,800, but it gets only $4,937 from all sources to educate that student, he said.

"As we reduce more, we get on the road of becoming Minimum ISD. We will be able to comply and meet state laws and regulations, but we can't do anything more than that because we can't afford to," Sconzo said.

State leaders defend the current system but will consider the school districts' complaints. The 2-year-old reforms achieved unprecedented funding equity for Texas public schools while shifting about a third of the tax burden away from local property taxpayers, said Allison Castle, spokeswoman for Gov. Rick Perry.

"It is important to remember that school districts and school boards have local control over setting their own budgets," she said. "It is up to the local school boards and districts to determine how best to spend the funds."


Options limited
House Speaker Tom Craddick, R-Midland, said inflation has had a significant impact on public schools in his home district, especially in transportation and energy costs.

"For more than 60 years we have generally required school districts to cut spending or raise taxes to deal with inflationary pressures," he said. "I continue to believe that a long-term solution for public school finance will require updating the distribution formulas and re-evaluating these long-standing practices."

Craddick appointed a special legislative panel to explore education problems and said he expects they will be a high legislative priority in 2009.

Responding to a Texas Supreme Court order to reduce the system's reliance on school property taxes, the Legislature created a new business tax, paid for a teacher salary increase and financed a school dropout program.

The new system allows school boards to raise their maintenance-and-operation tax rates by 4 cents per $100 property valuation and to ask voters for an additional rate increase — up to 13 cents per $100 — for discretionary expenses. But school officials say they need the extra money to cover basic expenses, such as soaring gas prices.

Money for public schools is pegged on what districts were getting per student in 2006, called "target revenue" in school finance jargon, and officials complain those amounts are arbitrary, punishing some districts and rewarding others without rhyme or reason.

School officials also are miffed that the state benefits from rising property values. Instead of school districts keeping extra revenue from appraisal increases, the state subtracts that amount from its education funding to those districts. The only extra money for school districts goes to cover student enrollment increases.

Developing a permanent cost-of-living index to help schools cope with annual inflation will be a top priority next year, said Rep. Dan Branch, R-Dallas, chairman of the House Select Committee on Higher and Public Education Finance.

Lawmakers also will consider allowing tax revenue from property value increases to stay in school districts, he said.

Some school officials contend the state should spend at least $4 billion of a projected $10.7 billion budget surplus next year on public education.

Perry's spokeswoman declined to respond. A spokeswoman for Craddick said budget priorities wouldn't be established until January, when the surplus is more certain.

Last year, 107 school districts succeeded in raising their tax rates in elections, of 132 that tried, Smith said. Many went up to the maximum $1.17 per $100 tax rate. It's only a matter of time before school districts run out of capacity again, making those tax rate elections "a short-term buying of time," he said.

Houston ISD officials "are finding a way to make it" through the 2008-09 budget, district chief financial officer Melinda Garrett said.

"We need the school finance formulas updated to reflect the actual cost of educating students in 2008 to include increased costs for inflation (to cover) fuel, gasoline, health insurance and for increased academic expectations, programs needed to close the achievement gap," Garrett said.


HISD must share revenue
Houston ISD recently became a property wealthy school district, which requires it to share its tax revenue with poor school districts. That obligation will be an ongoing concern, Garrett said, because "as our wealth continues to grow, our recapture will increase."

Schools are being reimbursed "on costs that reflect 1987 prices," said Houston school board member Manuel Rodriguez Jr.

Houston's Cypress-Fairbanks is also on the ropes. Its $4,489 per student revenue target is the lowest in the Houston area — and nearly $800 less per student than what the Katy school district gets.

Superintendent David Anthony said it must cut $23 million, which means dropping at least 350 employees ranging from assistant superintendents to teacher aides, and creating larger class sizes in some schools. The district's fuel costs have jumped from $3.2 million last year to a projected $6.8 million next year.

"I'm very anxious about it," Anthony said, noting that Cypress-Fairbanks teachers, students and parents have worked together to produce significant gains in test scores and academic achievement.

"And now I'm having to dismantle the very thing that resulted in those gains. That's what is extremely frustrating," Anthony said.

gscharrer@express-news.net


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