How Texas’ School Funding Scheme Contributed to Austin ISD’s Massive Budget Shortfall

AISD’s budget problem is much worse than the district initially predicted (Art by Zeke Barbaro (Photos by Jana Birchum / Getty Images))

“One thing that I’m noticing after three and a half years on this board is that many of the crises that we live under are crises manufactured by the state,” Austin ISD Trustee Kevin Foster said at a recent meeting of the district’s board of trustees. “We are living under a crisis 100% manufactured by the state. We have enough money to run two school districts this size, if the state didn’t rob us.”

Foster was lamenting the state’s role in AISD’s spiking budget deficit. The 2024-25 deficit shot from $60 million to $89 million in April after the district lowered its projections of revenue from property taxes and student attendance. But Foster and his colleagues don’t blame the district. Rather, they see the deficit as the result of choices by Texas politicians who don’t value public education or are openly hostile to it.

The most recent and momentous of these choices is Gov. Greg Abbott’s refusal in last year’s legislative session to increase the “basic allotment,” the funding formula the state uses to provide money to districts per student and per hour of attendance. Chandra Villanueva of Every Texan told us the refusal to increase the basic allotment has created deficits not just in Austin but in districts across the state. (Last week, Abbott addressed school funding crises statewide in an interview, saying, “You’ll be shocked to hear this, but it’s not me that’s responsible for this.”)

Villanueva disagrees. She said the basic allotment needs to be adjusted for inflation. “And it needs to be set at a realistic amount, because it’s a completely arbitrary number. It’s not based on costs or anything at all, it’s completely made up and adjusted at the whim of the Legislature.”

Because the basic allotment doesn’t automatically adjust for inflation or operating costs, educators are forced to beg politicians for more money at every legislative session. With the basic allotment having been left unchanged since 2019, they were optimistic about an increase in the 2023 legislative session, particularly with the state sitting on a $33 billion budget surplus. By the end of the session, lawmakers had agreed on a modest boost. But at the last minute, Senate Republicans tacked a school voucher plan onto the bill at Abbott’s insistence. (Vouchers divert public school funds to pay for private school tuition.) Anti-voucher Republicans and Democrats in the House rejected it, saying it was better for schools to go with no new funding than adopt vouchers.

At the same time Abbott was refusing to provide money for public schools without vouchers attached, he and his allies were reducing property taxes, one of the main sources of funding for Texas schools. Republicans passed cuts in the summer of 2023 that lowered taxes on homeowners at a cost to the state of $13 billion.

Because of Texas’ so-called Robin Hood system of “recapture,” Austin taxpayers helped finance the tax cuts. Recapture is the equity tool Texas uses to balance school funding across the state, so there isn’t a wild difference between how much rich and poor districts can spend on their students. It works by taking tax revenue over a certain threshold from rich districts and placing it in the fund allocated to schools statewide. Recapture constituted about 11% of this school budget pie in 2022-23 but the amount has been growing every year.

Austinites love to complain about recapture because our district’s property values are the highest in the state, and our payments to that fund have doubled over the last decade. Next year, Austin ISD expects to fork over half of the property taxes it collects to the state – $940 million will go to other Texas schools, $925 million will stay in the district.

Texas law mandates that the $940 million be used on public education. But like everything else in our school funding system, it’s more complicated than that. That’s because the total amount that can be spent on schools in any biennium is fixed by the Legislature at the end of a session, so as the public school fund receives more money from recapture, the state contributes less. It can then put more money it would have spent on schools into the General Revenue Fund.

“Think of all the bad things the state does with our money,” Laura Yeager of Just Fund It TX said. “Did they build a wall? Did they kill people in the river? People think that the taxes they pay for public education all go to public education – and they should go to public education. But they don’t because of the way we fund our schools. To me, that should just piss people off.”

This is the dynamic that Trustee David Kauffman referred to at a board of trustees meeting in late April, when he questioned whether Austinites would approve an election to increase school taxes if they knew that most of the money raised would be sent to the state. However, Yeager and Villanueva both stressed that recapture is not the villain in this scenario, but a necessary tool to end the gross disparities in what rich and poor districts were able to spend before the provision was written into law in 1993.

“The leaders who don’t value public education are counting on us fighting, large vs. small, urban vs. rural, rich vs. poor,” Yeager said. “Our message should be that we are going to stop fighting over scraps and focus on getting the state to fund schools so all will have enough.”