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On a Path to Parity: Equity and Impact of Texas School Funding Policy for School Districts and Charter Schools

Jennifer O'Neal Schiess
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In alignment with national trends, Texas charter schools serve an increasing share of public school students, and currently enroll approximately 6 percent of public school students in the state. Also in alignment with national trends, public discourse about the role of charters in Texas’s public school system can be contentious – and one primary point of contention has been around differences in public funding for Texas school districts versus charter schools. 

With recent changes to school finance policy in Texas, particularly under House Bill 3, 2019 (86th Legislature) effective for the 2019-20 school year, the overall equity of Texas’s school funding among districts and between districts and charter schools has improved, particularly funding for school operations. However, differences remain, and while statewide averages across districts and the charter sector show near parity between sectors, comparisons of funding available to local district schools and the charters that serve students within those districts can tell another story entirely.

This analysis aims to do three things:

  1. Build or clarify understanding of how Texas’s funding formula works, in the context of recent policy changes.
  2. Illustrate how the funding formula plays out for districts and for charter schools at the local level, across several representative Texas locations.
  3. Highlight key takeaways and emerging policy considerations for how to minimize funding disparities among districts and charters in Texas.

Through case study analyses of eight comparisons of local school district funding with that of a charter school serving students within that district, we found variation in whether the district or the charter receives more revenue per student. After adjusting for differences between student populations and other factors between the comparison school systems that Texas funding policy “weights” more heavily to account for associated increased instructional costs, we found that most differences in operations funding were driven by the districts’ access to local revenues, a function of their property tax rates and local property values. Higher taxing districts and/or those with higher property values were able to access more revenue per student for operations than the charter schools. On the flip side, charter schools operating in lower taxing districts and those with lower property values were generally able to generate more revenue per student than their district counterparts.

Facilities funding remains a significant area of inequity between districts and charters, despite the recent introduction of the Charter Facilities Allotment. While there may be good reasons not to fund charter facilities at similar levels or through similar mechanisms as district schools, facilities funding for charters likely does not come close to covering costs, requiring charter schools to use operations funding to secure and maintain instructional space.

Key takeaways from the analysis include:

  1. Texas has made strides to ensure  equity in operations funding across the state, generally and specifically between school districts and charter schools. In particular, the portion of the formula providing over 90% of school operations funding (“Tier 1”) delivers funding very equitably between districts and charters, and also between districts with more or less access to local revenues.

    Inequity remains in other parts of the formula, namely the discretionary “Tier 2.”

    The bottom line is that after adjusting for differences in student needs among districts and among districts and charter schools, inequities in school operations funding in Texas are primarily a function of local district property wealth and taxing decisions.
  2. Facilities funding remains a big opportunity to improve equity between school districts and charter schools and warrants further study to clearly understand differences in needs across the two sectors.

The analysis offers three considerations for policymakers seeking to further level the funding playing field between districts and charters, including: 

  • Considering tying charter school funding more closely to the decisions and characteristics of the local school districts in which they operate. 
  • Retaining or revising (but not eliminating) specific recent policy changes that have closed equity gaps across sectors. 
  • Reconsidering charter facilities funding structures to improve fiscal and structural equity.

Download the full deck here or read it in the viewer below.