In the 2012-13 school year alone, Texas public schools:

• Educated 5,058,939 students;
• Paid salaries and benefits for 327,420 teachers;
• Bused students a total of 335 million miles;
• Provided 890 million free or reduced price meals;
• Administered more than 10.6 million STAAR tests;
• Opened 192 new campuses.

All of this is paid for, ultimately, by taxpayers. A system of such scale and with such a varied set of responsibilities requires considerable resources — $62 billion in 2012-13, according to the most recent data available.

Additionally, these funds are then distributed through a numerous and complicated array of formulas, grants, allotments and programs. Campuses and districts are then held responsible for how they spend this money through another layer of reporting and accountability systems at the local, state and federal level.

This report provides a simple overview of public education finance in Texas — where schools get their money, what they spend it on and what is driving costs.

Funding

From federal funds to local property taxes, there are few public resources in Texas that are not heavily invested in the state’s public education system.

• At the state level, public education constitutes one of the largest categories of state spending, accounting for 29 percent of all state appropriations and 42 percent of all appropriations made out of general revenue during the 2012-13 biennium.
  
  The appropriation to the Foundation School Program — the primary vehicle through which state money is distributed to school districts — is the single largest item in the state budget. That’s not to mention the $30.6 billion state endowment designated solely for the benefit of Texas’ public schools.
• Public education also drives much local government spending — as Texas homeowners recognize when they pay their property taxes. In 2013, school district property tax levies totaled an estimated $25 billion — which represented 55 percent of all property taxes levied that year.
• From the federal government, 19 cents of every dollar Texas receives supports public education.

Texas public schools rely on all of these funding sources to cover the costs of educating their more than 5 million students. During the 2012-13 school year, school districts brought in $62 billion in total receipts.

State Funds

In fiscal 2013, Texas appropriated $19.7 billion of state funds for public education, almost all of which was sent to the Texas Education Agency (TEA) and then distributed to local school districts. This was financed through several funds, including the following:

• Foundation School Fund — the Texas Constitution dedicates 25 percent of all revenue from state occupation taxes (the oil production tax, natural gas production tax and others) to this fund, which also receives amounts transferred from state general revenue.
• Available School Fund — receives earnings from the state’s Permanent School Fund (PSF). The PSF is an endowment consisting of state-owned land and mineral rights, royalty earnings, stocks and bonds, and was designed to be a perpetual funding source for education. The ASF also receives one quarter of all revenue generated by the motor fuels tax. A portion of this money is transferred to the Instructional Materials Fund to fund textbook and related purchases.
• Economic Stabilization Fund — commonly referred to as the “Rainy Day Fund”, the ESF receives a transfer from General Revenue Funds equal to 75 percent of oil and natural gas production tax collections above 1987 levels. The fund also receives one-half of any unencumbered General Revenue Funds balance at the end of each biennium, as well as any other appropriation approved by the Legislature. This was a one-time transfer in FY 2013 to undo the Foundation School Program payment deferral approved by the 82nd Legislature.
• Lottery Proceeds — revenue from the operations of the state lottery.
• Property Tax Relief Fund — established by the Legislature in 2006, this fund consists of revenue gained from changes made to the state franchise tax, cigarette and tobacco taxes and the tax on the sale of used motor vehicles. These amounts were intended to replace revenue lost from M&O property tax rates that state law required school districts to reduce by about one-third.
• Other State Funds — includes other general revenue and general revenue-dedicated appropriations supporting specific grants and initiatives.

The state also appropriated $1.6 billion to the Teacher Retirement System in fiscal 2013 for teacher pension payments and retiree health benefits. Nearly all of this was paid out of General Revenue.

Local Funding

Local school districts also contribute a sizable portion of the total funding for Texas’ public education system. Districts raise local dollars various ways including the following:

• Local Property Taxes — the school district property tax includes two elements, a maintenance and operations (M&O) tax used to fund daily operations and an interest and sinking (I&S) tax used to pay debt service on any bonds issued to fund the construction of schools and other facilities.
• Local Bonds and Sale of Real Property — local revenue from the sale of bonds and real property and the proceeds of capital leases.
• Other Local Revenue — revenue derived from shared-services agreements, tuition and fees, facility rentals and other sources.

Local property taxes generate billions of dollars for Texas public schools. In 2013, out of the $45.3 billion in property taxes levied by local governments, school districts levied $24.9 billion.

Federal Funds

In fiscal 2013, the Texas Education Agency received $5.0 billion in federal aid through various grants and formulas, including the following:

• No Child Left Behind (NCLB) – Title 1 — distributes funds to support the education of disadvantaged students through a set of four different formulas based on the poverty rates within each district.
• Individuals with Disabilities Education Act (IDEA) — distributes funds through several different grant programs to support the education of students with disabilities.
• Child Nutrition Program — provides free and reduced price meals for qualifying students.
• Other — includes other formula grants, as well as the American Recovery and Reinvestment Fund and Education Jobs Fund.

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