How does the money get Spent? The Texas Budget: K through 12 Public Education

So what do we spend money on in the State of Texas?  The approved budget for the 2010-2011 biennium was $182 billion.  About 36% of that money comes from the federal government, 47% from general revenue funds (taxes, fees, etc) and about 16% from other sources. By state law the budget has to be balanced, no deficit spending allowed.  The chart below shows that the bulk of the budget is spent on K-12 Education, Health and Human Services, Higher Education, Business and Economic Development, and Public Safety and Criminal Justice.

Based on figures from the Fiscal Size Up done by the Legislative Budget Board (LBB)

By far, the biggest expense in the Texas budget is K-12 Education.   The state will receive $9.077 billion directly from the federal government and another $5.875 billion through the American Recovery and Reinvestment Act to help cover this expense.  The rest of the money ($37.77 billion) comes from the General Revenue Fund and other funds.  An interesting side note to all this is that even though expenditures for All Funds (Federal Funds, General Revenue Funds and Other Funds) has gone up by 24% since the 1996-97 biennium, General Revenue Funds expenditures, where our taxes and fees go, after being adjusted for population increases and inflation, has actually dropped by 1.4%.   Also, according to the Fiscal Size Up (by the LBB) even though spending on Education (Pubic and Higher Ed) has risen from $45 billion in 2000-01 to $75 billion in 2010-11, its share of the revenues has actually dropped 3.2% since 2000-01.

The Texas school population was predicted to rise by 14% by 2008 back in the late 1990s.  But in actuality, between the 1996-97 school year to the 2008-09 school year the number of students in Texas schools rose by 24%, from 3,838,975 in 1996-97 to 4,749,571 in 2008-09. So part of the dramatic rise in school spending is due to population increases.  But, according to the Financial Allocation Study for Texas (FAST) per pupil spending has also increased dramatically. In the 1998-99 school year, Texas spent an average of $7,095 per pupil, by 2008-09 an average of $11,564 was spent per student, a rise in per pupil spending of  63% over 10 years.  Inflation during this period would make $7095 in 1998 dollars be equivalent to $9331 in 2008, so even accounting for inflation school spending went up by over $2,000 per pupil ($1520.57 in 1998 dollars).

There are legislators who believe spending for Public Education needs to be cut.  They point to efficiencies that would lower costs and not hurt education.  Some, like Rep Warren Chisum R-Pampa, who is running to replace House Speaker Joe Strauss R-San Antonio, says that over the years we have doubled money spent on education and gotten poorer results.   But even though spending on public education went up by $15.3 billion between 2006 and 2009 to $75 billion (or 44% of the State budget) Texas still ranks 43rd in the nation in spending per student.  Also, according to the Texas Sunshine Review site, even though schools ranked academically unacceptable went up 4.4% between 2008 and 2009, the number of recognized schools went up by 10.4% and the number of exemplary ranked schools went up by 6%.

In order to evaluate public school spending and academic performance, the Texas Legislature commissioned the Comptroller (through HB 3) to 

identify school districts and campuses that use resource allocation practices that contribute to high academic achievement and cost-effective operations.

The Comptroller Office responded with the Financial Allocation Study for Texas (FAST).  Now of course, not all school districts spend the same amount of money per pupil, so the FAST study looked at each school district individually and scored them based on a three-year average of math and reading scores with a three year average of operating expenditures.  In order to determine the spending index for a school district 

• Texas districts and campuses operate in a variety of “cost environments” —socioeconomic and geographic characteristics that influence the cost of education and are often beyond a school district’s control.
• The research team evaluated financial data for each district and campus by comparing them to “fiscal peers” — districts and campuses that operate in similar cost environments, are of similar size and serve similar students.
• To ensure the validity of financial comparisons, the research team employed a technique called propensity-score matching to identify up to 40 peers for each Texas school district and campus, based on common cost factors such as wages, school district size and geography and student demographics.
• After a group of fiscal peers is identified for a school district, the district is then assigned a “spending index” based on its spending relative to its fiscal peers.

When spending was compared to academic achievement some school districts fared better than others.  In San Antonio, the highest scoring school district was North Side ISD with four stars for high academic acheivement and average spending.

The FAST study identified several strategies that school districts used to reduce spending.  Some reduced staffing (60% of most school budgets) through attrition and staff consolidations.  The FAST Study identified many efficiencies used by the highest rated school districts from online education classes, to refinancing bond debt, to transportation coops and facility sharing, to architectural prototypes for new schools and energy efficiencies.

Based on these efficiencies and other FAST Study findings, the Comptroller has made the following recommendations to the Texas Legislature and the Texas Education Agency:

1. Eliminate the 22-student limit for each K-4 classroom and institute an average 22-student class size instead.
2. Instead of rewarding teachers for years of service or advanced degrees, teacher salary schedules should reward teachers based on performance.
3. The Legislature should amend state law to facilitate the dismissal of ineffective teachers.
4. Study patterns in school district administrative staffing. From 1998-99 to 2008-09, the number of teachers in Texas rose from 256,276 to 325,809, a 27.1 percent increase. During the same period, the number of administrators rose from 18,531 to 25,130, a 35.6 percent increase.
5. Ensure that teacher preparation programs produce high-quality teachers.
6. Reduce barriers to on-line course work.
7. Require book publishers to provide textbooks in a format compatible with common electronic reading devices.
8. Standardize the reporting of campus financial data.
9. Include questions in the State of Texas Assessments of Academic Readiness (STAAR) that evaluate high-performing students.
10. Integrate education and work force data into TEA's database.
11. Allow school districts and other local governments to publish public notices on their websites instead of requiring newspaper advertisements.
12. Assist school districts in placing their financial records and budgets on their websites to increase transparency.
13. Continue to update the FAST study data and use it to identify school districts that deliver quality education in a cost effective manor and to target LBB school performance reviews. 
14. Take advantage of the Comptroller's Purchasing Cooperative so that school districts get the best prices possible.
15. Encourage shared-service arrangements.
16. Create an efficient strategy for organizing transportation cooperatives.
17. Use architectural prototypes in new construction.
18. Maximize the use of school facilities.
19. Take advantage of opportunities to manage energy costs more effectively.

Just the savings from going to an average class size, statewide, of 22 could save an estimated $557.5 million annually.

So, can we save money in K-12 Education?  Yes, but remember, Education is one of our most important resources.  If Texas wants to be The financial powerhouse of the 21st Century, it is imperative that we have a well educated workforce.  If the FAST findings are followed in an efficient, careful and unpolitical way, I believe we can achieve this goal and save some money at the same time.