School finance lawsuit ruling has no short-term impact on Spring Branch

By Rusty Graham
Senior Writer, Spring Branch ISD

Just as Spring Branch ISD has decided that it can no longer wait on the Texas Legislature to reform public school finance, an Austin judge has ruled the school finance system unconstitutional and has given the Legislature until July 1, 2015, to fix the system.

The state has appealed, extending that deadline until the Texas Supreme Court hears and rules on the case, which historically has taken several years. The Texas Legislature meets in biennial session next spring but is not expected to take up school finance reform until the high court rules.
That’s not soon enough for Spring Branch ISD, which must balance its budget while facing ever-increasing expenditures. Couple that with a school finance system that takes away most local discretion over property tax rates and one that sends most of any revenue increase back into state coffers and you have the “train wreck” predicted by many.
Superintendent Duncan Klussmann said that the ruling will have no immediate impact on Spring Branch ISD, which is a plaintiff with the Fort Bend ISD group.
“There’s no (relief) in the short term - we still have to deal with the current reality,” he said.
That reality is that Spring Branch’s general fund rate has remained constant at $1.09 per $100 valuation since 2008. The district can increase the tax rate by up to 13 cents, but with a couple of caveats: only 2 cents of that 13 cents is not subject to recapture (Robin Hood), and any tax increase has to be approved by voters in a tax ratification election (TRE).
A Financial Advisory Committee of some 40 community members met several times over the summer and recommended a 2-4 cent tax increase, coupled with a continued emphasis on finding reductions and efficiencies in the system. Trustees concurred with the FAC’s recommendations, but postponed any consideration of a TRE until spring and any legislative action.
It’s the second time in two years that Judge John Dietz has found the system unconstitutional – he reopened the case earlier this year to hear new testimony based on the state’s implementation of a new testing system and the restoration of $3.7 billion to public education during the 83rd Legislature in 2013.
But the court found that, despite the Legislature’s action, the current funding system “still does not suitably, adequately or equitably provide the resources necessary to give all students a real opportunity to meet the state’s rising expectations,” according to David Thompson of Thompson and Horton, lead attorneys for the Fort Bend ISD plaintiff group.
While property values in Spring Branch ISD have increased significantly – some 12 percent this year alone – the district will see little of that increase. Of a $28 million increase in tax revenue over the previous budget year, about $9 million goes to recapture, another $9 million goes to benefit the state and the rest stays in Spring Branch.
“Our taxpayers will be writing larger checks to Spring Branch ISD and thinking their district has more money,” Duncan said. “But the reality is that most of that amount benefits the state.”
Spring Branch and other districts in the lawsuit contend, and Judge Dietz agreed, that creates in effect an unconstitutional statewide property tax.
The Legislature in 2006 – in response to a previous school finance lawsuit – “compressed”, or lowered property tax rates with the promise to make up the difference through a business franchise tax. But the franchise tax never generated as much revenue as expected, resulting in what Duncan calls a “broken promise” to school districts. Worse, the Legislature in 2011 reduced funding to public education by $5.4 billion, resulting in the elimination of roughly 350 positions – more than 100 of them teachers – in Spring Branch.
The Fort Bend ISD Plaintiff group consists of 84 public school districts, representing more than 1.8 million students. The group includes Houston ISD and most of the state’s suburban districts.

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