School Finance 101

The Texas public education system is the second largest in the country, and funding Texas public education is a complex subject. Our diverse state includes 5.5 million students, 1000+ school districts, 8600 campuses, 375,000 teachers, and roughly the same support staff and administrators (think principals, teacher aides, bus drivers, cafeteria, and custodial workers). Thoughtful planning and adequate funding are essential to make this system work for every Texan. But in the 88th Legislative Session in 2023, legislators did not act or fund our schools. School districts must dig into their savings accounts as they face new challenges in funding new school safety mandates and demands from the STAAR test. Now is the time to adequately fund our Texas schools.

How are public schools funded in Texas?

In Texas, we have an equalized system, meaning that if a local school can’t generate tax revenue enough to give them what the legislature sets as the per-student funding amount, the state comes in to support it. Its primary sources are local property taxes and state funds. The Texas Legislature decides how much money schools will receive to educate each student, but this amount can shrink or grow. The amount available to any school district across the state depends on the state legislature, not local school boards or superintendents. 

The building block of how Texas funds students and schools and pays for teachers, as well as the operations of everything that goes on within a campus and a school district, is known as the basic allotment. The Texas legislature arbitrarily sets this per-student amount, which has been $6,160 since 2019. Schools receive additional funding based on specific student demographics – such as special education needs, qualifying for free or reduced-price lunch, or being in the bilingual program – and district characteristics, like small or midsize districts. Local school districts add to their budgets using the money raised from local property taxes–called an M&O tax. This revenue is for operations–day-to-day expenses, such as transporting kids to and from school, keeping the lights on and the classrooms clean, and providing quality teachers. 

A school district can get voter approval for another tax, an I&S or a debt service tax, to fund new facilities and renovations. However, school districts cannot use this tax to fund day-to-day expenses.

State funds, which come from sales taxes, business taxes, and lottery proceeds, are also added. The amount of money the state contributes is directly influenced by the local property taxes generated by a school district. After the state determines the amount each district should receive, local funding is used first to try and reach that amount. If more money is needed, the state will kick in the rest. This means districts with higher property values get less state funding, while those with smaller property tax bases receive greater state support. However, the overall funding levels do not change based on the source of the money.

Considering all these different funding sources, the average school district in Texas receives about $10,000 per student per year. This figure aligns with the amount that flows to school districts for day-to-day operations. The TEA annual report may show a higher per-student amount. Still, this figure includes additional sources such as the TEA budget, federal funds, debt service, and TRS dollars, which are not part of the day-to-day operational budget.

Do Texas Schools Keep
All the Money When
Property Values Go Up?

If more money is needed, the state kicks in the rest. In Texas’ complex school funding system, local schools do not receive more funding when local property values and tax collections increase. Instead, the state contributes less money, even though more funds were originally budgeted and intended for public education.

School districts sometimes raise more money via local property taxes than the state allotted for public education. In these instances, the state collects those overflowing funds in an account that holds general revenues for the state. Every legislative session, the state saves billions from local home and business property value growth. The state uses its newfound billions to pay for other items in the state budget or simply holds on to the extra revenue.

How Does Texas Compare to the Rest of the Country in Funding?

Despite our thriving economy and dramatic population growth, Texas ranks in the bottom ten states nationally for state spending on education, trailing the national average by over $4,000 per student. The long-lasting impact of underfunding our public schools is profound, affecting the quality of education and the future of our students.

According to the Quality Counts 2019 report, Alabama invests $1,700 more, Louisiana $3,700 more, Michigan $4,300 more, and New York spends over $11,000 more per student than Texas. Even California, the only public school system larger than our own, spends $1,600 more per student than Texas. We compete with these other states for qualified teachers, exceptional workforce programs, and college readiness — and we are falling behind.

Investing in Texas public education and our students will result in better results for kids, including academic outcomes. According to the NAEP (National Assessment of Educational Progress), a national test that students across the country take, the top 10 states in per-student funding tend to outperform Texas, specifically in 4th and 8th-grade reading. More importantly, and beyond test scores, we should invest in our schools because student success in and outside the classroom is important. Texas students deserve positive, meaningful experiences that prepare them for the future.

How Texas Spends Its Funds

A good way to understand how school districts allocate their resources is to examine how each dollar is spent in our schools. Right off the top, over half of every dollar covers instruction and paying teachers – the backbone of our public schools. School districts must stretch their limited resources to educate the state’s 5.5 million public school children in safe, enriching school environments. Two-thirds of every dollar is used for instruction and keeping campuses clean and updated. The remaining third has to be split up and used across many areas needed for well-run schools, such as campus leadership, feeding students, instructional support, counseling, district leadership, transportation, extracurriculars, IT and technology, safety, and health. There isn’t much room to trim.

Rising Pressure
in Public Schools

The rising cost of operating public schools and educating Texas children presents an urgent challenge that the state legislature must address. Our current school funding system doesn’t account for inflation, and school districts have tightened their belts like the rest of us. According to the Bureau of Labor Statistics, school districts are essentially operating with $1,076.55 less in a basic allotment today than they were in May 2019. Inflationary pressure is one of the largest issues facing schools, but there are a lot of other unique budget pressures facing our public schools.  

With less buying power, all schools will struggle to retain high-quality teachers, maintain safe and efficient campuses, and preserve programs that our kids and families care about. Every public school student suffers when inflation rises without sufficient additional support.

Invest in The Future of Texas

Investing in public school students should be a priority every session because the future of Texas depends on well-funded public schools. Tell Texas lawmakers we must do better. Public schools and students are vital to the success of our state. Find out who represents you, get in contact with your local Regional Advocacy Director, and make your voice heard.

Throughout the 2022-23 school year, Texas school districts faced budget shortfalls, affecting school safety, special education programs, and staff.

Despite these growing issues, during the 88th Legislative Session and four subsequent special sessions in 2023, the Texas Legislature failed to support school funding and pass much-needed public education funding. Now gearing up for the 89th Legislative Session in January 2025, the Texas Legislature has an estimated $20 billion budget surplus, yet school districts across the state are running out of funds and filing deficit budgets for the 2024-2025 school year. 

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