Austin, Texas
April 3, 2017

Honorable Dan Huberty, Chair, House Committee on Public Education
Ursula Parks, Director, Legislative Budget Board
HB21 by Huberty (Relating to the public school finance system.), Committee Report 1st House, Substituted

The bill would make formula and structural changes to the Foundation School Program. The bill contains a number of elements that would be anticipated to improve equity among Texas school districts relative to current law.  The bill would also provide a formula-based hardship grant award that would flow primarily to school districts in the two highest quintiles of wealth per WADA.  The hardship grant award mechanism would expire at the end of fiscal year 2019.
The bill would repeal several funding streams that either flow outside the Foundation School Program's (FSP) equalized system or are not fully realized by all school districts. Among these provisions are: aid provided for the purpose of paying nonprofessional staff wage supplements which currently flows entirely outside the equalized system; the high school allotment which is codified as a Tier 1 FSP allotment but, per statute, flows outside of the operation of the Tier 1 equalized system; and the transportation allotment which also is codified as a Tier 1 allotment but stops short of functioning fully since its lack of inclusion in the calculation of weighted average daily attendance (WADA) prevents a reduction in recapture similar to that experienced for standard Tier 1 allotments, such as the regular program allotment. Flowing similar or increased levels of funding through the basic allotment in place of the existing structures would move the revenue inside the equalized system of the FSP.
The bill would repeal statute that results in a higher equalized wealth level for certain districts based on the district's 1992-93 revenue per student plus the indexed change between the current equalized wealth level and the level established in 1993. Having a higher equalized wealth level allows a district to keep more revenue per WADA than an equally wealthy district that is held to the statutory equalized wealth level. The repeal of Section 41.002(e)-(g), Education Code, proposed under the bill would eliminate this access to additional unequalized revenue by ensuring that the standard equalized wealth level applies to all districts.
Beginning in fiscal year 2018, the bill would provide increased FSP entitlement of $1.64 billion through the equalized FSP formula system to about 96% of school districts and more than 98% of students.

The bill would provide a program of hardship grant awards on a formula basis for fiscal years 2018 and 2019.  The formula would provide aid for changes in the statutory structure of the FSP that occur after January 1, 2017.  Under this language, the formula for grant awards would recognize effects related to the expiration of Additional State Aid for Tax Reduction (ASATR) and effects resulting from legislation enacted during the 85th legislative session affecting Chapters 41 and 42 Education Code.  Hardship grant awards would primarily flow to school districts in the two highest quintiles of wealth per WADA. Current estimates for CSHB21 indicate $115.9 million of $125 million (92.7 percent) in fiscal year 2018 and $68.6 million of $75 million (91.5 percent) in hardship grant funding would flow to districts in the two highest quintiles of wealth per WADA.

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LBB Staff: