On Monday, Feb. 11, the Senate Finance committee heard testimony from the state agencies affected by Article III, the education portion of the state budget. Excluding those representing higher education, the committee heard from representatives of the Texas Education Agency (TEA) and Teacher Retirement System (TRS).

Chairwoman Jane Nelson (R-Flower Mound) opened the hearing with the Legislative Budget Board (LBB) layout of the TEA budget for fiscal years 2020 and 2021.

Sen. Nelson's budget bill, Senate Bill (SB) 1, proposes approximately $6 billion in the TEA portion over current formula funding, including $3.7 billion for an educator pay raise and $2.3 billion for property tax relief.

Several members of the committee voiced displeasure with what they view as a mischaracterization by many in the public that the state's share of education funding has fallen to 38 percent. The members noted that this figure only represents the state’s share of Foundation School Program (FSP) funding and that there are other state dollars being spent on public education outside of the FSP. To be fair, it is true that the 38 percent figure specifically refers to the state’s share of FSP funding and that the state also pays into other sources of school district funding, such as for facilities and TRS. However, the local share of facilities funding, for example, is much greater than the percentage that local districts pay toward FSP funding. Also, educators and school districts pay a significant percent of the money going to TRS for pension contributions and health insurance costs.

Senators also pointed out that they don’t control local property tax rates or rising property values, which under current law have pushed state general revenue funds out of public education. Both of these facts are true, but again, lawmakers have failed to modify existing formulas to drive increased state spending above what current law requires. This effectively starves public schools, leaving locally elected school boards little option but to maintain or raise their local property tax rates.

Following testimony of the LBB, Commissioner of Education Mike Morath walked the committee through the TEA presentation. The commissioner highlighted agency funding requests to deal with school safety and the agency's special education corrective plan. The latter was necessitated by recent enforcement actions by the U.S. Department of Education and a ruling out of the U.S. Fifth Circuit Court of Appeals, both highlighting our state's failure to properly address the needs of its special education population.

The commissioner's testimony included a lengthy back and forth discussion with committee members on Monday. Chairwoman Nelson engaged Commissioner Morath on the topic of third-grade reading, an emphasis in the final recommendations of the Texas Commission on Public School Finance. Responding to questions about STAAR and third-grade retention, Morath pointed out that grade retention, which is no longer a mandatory result of failure to pass STAAR in the younger grades, is neither an efficient expenditure of money nor a particularly effective remediation tool.

When asked about the dual management of the Permanent School Fund, which has recently resulted in a feud between the Texas Land Commissioner and the State Board of Education (SBOE), the commissioner indicated that the current set-up probably costs the fund around $200 million a year in lost investment opportunities. Finally, in an exchange with senators about boosting performance among the state's low socioeconomic student population, the commissioner touted the benefits of funding pre-kindergarten and Dallas ISD's ACE model.

Next in the committee, TRS Executive Director Brian Guthrie laid out his agency's presentation on the budget. He covered the TRS board’s action in lowering the pension fund's assumed rate of return and the need for increased contributions to bring the fund back into near-term actuarial soundness. He also covered state cost issues related to TRS-Care and the educator affordability issues related to TRS-ActiveCare. Guthrie reiterated his agency's request for additional staff, some of whom would be used to increase TRS customer service, while other positions would be used to bring additional investment management tasks in-house, for a projected savings of $1.4 billion over a five-year period.

Sen. Joan Huffman (R-Houston), who in addition to serving on the Finance Committee chairs the Senate State Affairs Committee, had a lengthy discussion with Mr. Guthrie. She covered last session’s TRS-Care bill, which she authored in the Senate, as well as the need for additional funding in the current budget and the need for continued reform to prevent the state from being right back in the situation it was in last session with runaway costs. Huffman then turned her attention to the pension system and discussed her plan to pass legislation that would increase contributions to the fund over a number of years. Her plan would reduce the funding period of the pension from 87 years down to 24 years and bring the plan back into a condition of actuarial soundness by 2020. Currently, the plan will not reach actuarial soundness or be able to offer retirees a cost-of-living adjustment for approximately 57 years.

After the committee concluded hearing testimony from the invited agencies, public testimony was entertained, including from ATPE Senior Lobbyist Monty Exter. Exter's testimony focused on funding teacher compensation, the TRS pension system, and educator healthcare. He concluded by encouraging the committee to focus on equity when addressing new discretionary spending and deciding how best to go about reducing recapture and property taxes. Exter's full testimony can be seen here (at the 2:40 mark in the broadcast).