According to updated estimates released by the Texas Education Agency, the state share of the school finance system has dropped to nearly 30 percent.
This is largely due to lower-than-normal enrollment growth coupled with unprecedented levels of property value growth. The Comptroller’s preliminary 2022 PVS results show an almost 20 percent increase in statewide values over the prior year.
For those new to school finance, M&O refers to Maintenance and Operations funding, which is used for things like salaries and educational materials. I&S refers to Interest and Sinking, which includes payments districts make on their bonds. Bonds are a form of debt that school districts and other governmental entities issue to finance the construction/renovation of capital projects like new school buildings.
The Texas school finance system is dependent on funding from local property taxes levied by school districts, as well as an assortment of taxes levied by the state government. The system first looks to local property taxes to pay for the cost of public education in the state. As a result, in years where values grow rapidly, this can lead to a reduction in state spending that is needed.
Recapture refers to a system in state law that equalizes funding for all school districts in the state. If a particular school district has high property values, state law requires that the district send part of its local tax collections to the state. This money is then redistributed to other school districts with smaller tax bases. While TEA often characterizes recapture as state funds, we believe it is best categorized as local funding.
M&O + I&S Funding
| Funding Source | 2022-23 Amount |
|---|---|
| M&O Funding + I&S Funding | |
| Foundation School Fund | $ 20,038,060,161 |
| Available School Fund | $ 3,124,098,939 |
| I&S State Aid | $ 476,223,891 |
| Recapture | $ (4,206,501,555) |
| Total M&O + I&S State Funding excl. Recapture | $ 19,431,881,436 |
| Local M&O Taxes | $ 32,563,744,338 |
| Local I&S Taxes | $ 9,901,065,529 |
| Total M&O + I&S Funding | $ 61,896,691,303 |
| State Share of Total M&O + I&S Funding excl. Recapture | 31.4% |
M&O Funding Only
| Funding Source | 2022-23 Amount |
|---|---|
| M&O Funding | |
| Foundation School Fund | $ 20,038,060,161 |
| Available School Fund | $ 3,124,098,939 |
| Recapture | $ (4,206,501,555) |
| Total State M&O Funding excl. Recapture | $ 18,955,657,545 |
| Local M&O Taxes | $ 32,563,744,338 |
| Total M&O Funding | $ 51,519,401,883 |
| State Share of M&O Funding excl. Recapture | 36.8% |
Back in 2019, the state share dropping below 40 percent prompted many state leaders to call for increased public education spending, ultimately culminating in HB 3.