Wealth equalization legislation in Texas and its impact on property wealthy districts' financial health from 1993-1994 through 2002-2003

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2005-05

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Abstract

The 73rd Legislature passed Senate Bill 7 in 1993 that became known as "Robin Hood." This piece of legislation is the foundation for this study. The funding mechanism in this bill served to equalize the wealth between and among school districts by allowing the wealthy districts to keep local tax dollars only up to a certain property wealth, while equalizing the poorer districts up to another, but lower property wealth in an attempt to achieve equity. This study is about the impact that this and subsequent wealth equalization legislation had on property wealthy school districts' financial health from 1993-1994 to 2002-2003. Additionally, district performance indicators were analyzed to begin to establish a link between finance and performance. Districts chosen for this study were considered property wealthy in both 1992-1993 and in 2002-2003; therefore, this study analyzed the whole population and did not require any sampling.

To determine the impact to the wealthy school districts' financial health, five financial indicators were analyzed: maintenance and operations tax rates, interest and sinking tax rates, comptrollers property tax division (CPTD) property values, audited fund balance and recapture amounts. Each of these was compared over time to determine trends, and t tests were done to determine if any significant changes occurred. Pearson correlations were computed on each variable to determine if any significant correlation existed between these five variables.

Five performance variables were analyzed as well. Student/teacher ratio, teacher turnover rate, accountability ratings, Texas Assessment of Academic Skills (TAAS) reading scores, and TAAS mathematic scores were analyzed in similar fashion to the financial variables. Additionally, Pearson correlations were computed on these variables with the finance variables to attempt to determine if there was a link between the two sets of variables. This study also stratified the wealthy districts by size and growth.

There were significant changes in four of the five financial variables with recapture amounts being the one that showed no significant change. In the performance variables, again, four of the five showed a significant change, as teacher turnover rate showed none. The study showed a correlation between most all the financial variables, but interestingly enough, maintenance and operations tax rate showed no correlation to any other financial variable. On the performance side, TAAS reading and mathematics scores and accountability ratings were correlated with one another, but the only performance variable correlated to the finance side was student/teacher ratio. When the study split the districts by size and growth, it did find that the smaller districts had declining property value, which lessens their revenue.

There were four conclusions drawn from this study: (1) wealthy districts earned more money, retained more money, and sent more money away at the end of this study than at the beginning, while at the same time, student performance improved indicating no negative impact on these districts; (2) as the financial variables increased over time, the number of students per teacher went down, indicating additional staff were hired as the other financial variables went up; (3) districts with fewer than 2000 weighted average daily attendance (WADA) seem to have been less stable than larger districts with regard to their financial health; and (4) there was no significant link found in this study between finance and performance.

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