Texas School Finance: Doing the Math on the State’s Biggest Expenditure

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Published January 2019

IV. Cost Drivers and State/Local Shares

Texas school funding needs are driven primarily by enrollment, but other factors are important as well, including household income and inflation as well as various state and federal mandates.⁴⁴

Enrollment Growth

Today, the Texas public school system serves more than 5 million students.⁴⁵

Enrollment growth is a direct consequence of Texas’ rapid population growth. The state led the nation in population growth in each year between 2010 and 2016, adding more than 3 million residents in just six years.⁴⁶

Between the 1993 and 2017 school years, enrollment in Texas public schools rose by 51 percent or more than 1.8 million students.⁴⁷ The student count has risen by more than 519,000 since 2010.

Economically Disadvantaged Students

Household income is another factor driving school funding needs. The number of Texas students identified as “economically disadvantaged” — eligible for free or reduced-price meals — is rising (Exhibit 11), and many of them qualify for compensatory education funding and other resources.

From fiscal 2007 to 2017, the share of Texas students classified as economically disadvantaged rose from 55.5 percent to 59 percent. In this period, the number of economically disadvantaged students rose faster than the overall student population, by 24.2 percent versus 16.8 percent.

In fiscal 2017, the share of the student population classified as economically disadvantaged fell among African Americans, Hispanics, Asians and multiracial students, but increased for Anglo students.⁴⁸

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Inflation

Public education funding and expenditures are affected by inflation, the steady increase in prices of goods and services over time.

From fiscal 2000 to 2018, total per-student revenue for Texas public schools rose by 70 percent, from $5,711 to $9,694. Per-student revenue from state sources rose by 34 percent, from $2,605 to $3,488, while revenue from local sources rose by 100 percent, from $3,105 to $6,206 (Exhibit 12).

After adjusting for inflation, however, total and local per-student revenue rose by 16 percent and 29 percent, respectively, but state per-student revenue actually fell by 8 percent.

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Due to inflation, school districts have to spend more simply to provide the same resources to the same number of students. Exhibit 13 shows Texas school district operating expenditures per student from all sources for fiscal 2007 through 2017. In terms of current (2017) dollars, unadjusted for inflation, operating expenditures per student rose by 21 percent in that period, from $7,824 to an all-time high of $9,500. In constant 2017 dollars, however, operating expenditures per student rose by just 3 percent, from $9,239 to $9,500.

Fiscal 2017 spending was lower than in several previous fiscal years.

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State and Local Shares

In Texas, there’s a fairly common perception that the cost of public education is, or should be, divided more or less equally between the state and local school districts — even though the state share averaged 40 percent from 2000 to 2018. Due to the funding formulas, however, there’s an inverse relationship between state and local funding — as local revenue rises, state funding generally decreases (Exhibit 14). Between fiscal 2000 and 2018, the state and local shares of total education funding averaged 40 percent and 60 percent, respectively. During this period, the state’s share fell as low as 30.5 percent in 2006, the year of the HB 1 reforms.

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