Dallas / Fort Worth Local News

APRIL CASTRO, Associated Press Writer
AUSTIN (AP) ― With budget problems mounting for many Texas school districts, the next governor is likely to inherit a funding system that experts say has become a legal and financial quagmire.

As the state's top executive officer, the governor will guide the $35 billion public school system and its 4.4 million students, which experts say needs a major overhaul to make sure schools are getting enough money to keep pace with costs and to avoid another lawsuit.

"I think that the situation will manifest itself or start manifesting itself in 2011 in an extreme way," said Joe Smith, a school consultant and former superintendent. "There's going to be a whole lot of districts that are going to be up against the wall."

It's been just a few years since Texas lawmakers, facing a court order, undertook a massive overhaul of the school funding system. But booming enrollment, higher costs on such necessities as utility bills and a public reluctance to pay higher taxes have left many districts in a fix.

"It looks like the state may be walking itself right into another lawsuit," said David Hinojosa, an attorney for the Mexican-American Legal Defense and Educational Fund (MALDEF), which was part of the most recent school finance lawsuit against the state that resulted in the 2006 changes.

Texas schools are financed with a mix of local property taxes, a state business tax and cigarette taxes. In some cases, the struggles are exacerbated by a provision in the 2006 law that froze state aid to districts at the rate it would have been that year, without allowing for the costs of changing demographics or inflation.

Opponents say that provision, which was intended to keep wealthier school districts from taking a hit in the amount of state aid they receive under revised funding formulas, has built arbitrary winners and losers into the system, violating a requirement that school funding be largely equal among districts.

"It's going to be a significant issue for the next governor. I just don't see any way it can't be," said Richard Kouri, a lobbyist for the Texas State Teachers Association.  "It's moving into the crisis phase."

The issue has been a grievance since the battle of the Alamo, when Texans complained that Mexico had failed to establish a public education system. Since then, the state has been in and out of court over school funding, most recently in 2006. That's when a court order forced Texas to act or face statewide school closure.

The 2006 plan was designed to shift the burden away from local property taxpayers, replacing a portion with revenue from a revised business tax and higher cigarette taxes, among other things. The new business tax has not generated as much money as expected, and voters in many districts are rejecting tax hikes.

In Bryan, schools are operating under a deficit for the second year in a row. They've already cut staff and will likely make more cuts after voters there rejected a tax hike last month, said Amy Drozd, the district's chief financial officer.

"The funding formula froze us to the revenue we were getting three or four years ago," Drozd said. "They did add for teacher raises and a few things they mandated, but there's nothing in the formula, no mechanism for inflation."

Superintendents say they're digging into reserves and cutting basic programs and staffing just to keep up with rising costs.

Still, Gov. Rick Perry, who is running for an unprecedented third term in 2010, won't say that Texas schools need more money.

"I think trying to make that statement with almost 1,100 school districts is pretty hard to do on its face," he said. "There may be some school districts that, for differing reasons, do" need more money.

"When you've got almost 1,100 school districts that you have to deal with in this vastly diverse state, I think it's hard."

Perry said his office has been working with the Texas Education Agency to free up money that can be funneled to districts where enrollment has been growing particularly fast.

His chief opponent in the GOP primary, Sen. Kay Bailey Hutchison, initially suggested schools should do more to trim costs. She later acknowledged the current system is not a permanent solution.

"While there are no easy solutions, as governor I will work with educators, the business community, and local taxpayers to find a stable, reliable source of revenue to pay for our children's education needs that does not increase the tax burden on Texans," she said.

As the next Legislature convenes in 2011, the state is projected to be slammed with a multibillion budget shortfall that will further complicate school finance deliberations.

"The governor who enters is going to have to truly become a leader in education," said Hinojosa, of MALDEF. "You can talk all you want about rising standards, but if you don't have the resources to help students meet those standards they're not going to do it."

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