Reformation in three steps

by John C. Goodman

There is a reason legislators in Austin are having so much trouble solving the school finance problem. They insist on taking one giant step instead of three smaller steps.

There are three separate questions to be asked and answered:

  • How much should the state of Texas spend on primary and secondary schools?
  • How should it allocate that spending among the state's school districts?
  • How should the state fund the amount it spends?

The answers to these questions are completely separable. In fact, if we could get legislative agreement on two of any three, we would be ahead of the game. By dividing the task into three bite-sized pieces, there is a good chance that all three can be resolved.

Are we spending enough on our schools?

Many people sincerely believe the answer is no. But years of study by competent academic researchers suggests that the burden of proof is on those who want to spend more.

Harvard education expert Carolyn Hoxby estimates that teacher-oriented schools should spend no more than 25 percent of their non-facilities budget outside the classroom.

In Texas, the average district spends 41 percent -- much of it on bloated bureaucracies -- with some schools reaching as high as 69 percent. We could spend millions more on classroom instruction, including raises for our best teachers and bonuses to draw burnt-out, dropped-out teachers back into the classroom. All we have to do is re-order our priorities.

There is other evidence that the schools are far from needy. Just in case you were thinking the schools have too little money to spend, the Houston Chronicle has identified 20 high school "gridiron cathedrals," complete with such extras as luxury suites and instant replay scoreboards.

Then there is the problem of inefficient use of resources, even when they are concentrated on the classrooms. Study after study, decade after decade, has come to the same sad conclusion about our public schools: There is no relationship between what we spend and what we get. In fact, there is no relationship between any input (class size, days of instruction, etc.) and any output.

To put this finding in perspective, note that for there to be no relationship between inputs and outputs, you can't be just a little bit inefficient. You have to be hugely inefficient. And given so much inefficiency, it would appear that there is ample room for achieving more with the dollars we have.

How should the state distribute the money it spends?

Many people mistakenly believe that the Texas Supreme Court in its Edgewood decision required that funding per child must be equal across the state. In fact, the court explicitly rejected that idea. Instead, the court ruled that it's unfair that some districts have more property than others and ordered the state to conduct its affairs to reduce the disparity.

There is a mathematical formula that can be used to allocate state dollars to satisfy the Edgewood ruling: Districts would be free to choose their own property tax rate, but if any two districts choose the same tax rate, the state ensures that they have the same amount to spend per child.

In applying the formula, about 10 percent of the districts don't fit. They have so much property that the appropriate state subsidy is zero. Nothing in Edgewood requires the state to confiscate revenues from these property-rich districts or to prevent the parents who live there from spending more money on their own children. These unfortunate products of "Robin Hood" finance needed to be ended immediately.

There will always be a temptation in Austin to manipulate spending formulas -- to try to get an advantage for one district at the expense of others. We will do better if we resist such temptations. Instead, satisfy the Edgewood requirements to the tee -- with no ifs, ands, buts or other exceptions allowed.

Finally, how should we fund the amount we choose to spend?

Whatever the unfairness of property tax, substituting a growth-depressing income tax is not an improvement. If we need more money, a consumption tax is better than an income tax. And it needs to be broad-based: with an equal levy on all consumption goods rather than the current system of exempting or excluding about three-fourths of everything we buy.

John C. Goodman is president of the National Center for Policy Analysis, a Dallas-based think tank.