Sources of Revenuefor Public Education

Sources of Revenuefor Public Education

Prepared May 2011

Funding for Texas school district budgets comes from three sources: local funds, primarily local property tax revenues; state funds from a variety of revenue sources, including the General Revenue (GR) Fund, the Available School Fund (ASF), and other funds and taxes; and federal funds. For the 2009-10 school year, school district and charter school revenues totaled $51.3 billion from all fund sources. Average revenue was $10,635 per student. Of this amount, $308 per student came from one-time federal stimulus funds.

Approximately 46 percent of funds for traditional school districts and charter schools come from the property tax and other local sources ($22.7 billion), 42 percent from state funds ($21.1 billion), and 12 percent from regular (non-stimulus) federal sources ($6.0 billion). Federal stimulus funding added another $1.5 billion. Local, state, and federal shares shift over time, depending on resource availability and policy decisions governing school funding.

Local Funds

Local funds for Texas public education come primarily from property taxes. Districts adopt a maintenance and operations (M&O) tax rate and a debt service or interest and sinking fund (I&S) tax rate, if the district has debt. M&O taxes are now subject to a statutory maximum of $1.17 per $100 of taxable value. Districts may levy up to an additional $0.50 per $100 of taxable value for I&S taxes at the time bonds are issued.

State Funds

Most funding for education passes from the GR Fund through to the Foundation School Fund. The sales tax is the largest source for GR revenue. Other major revenue sources include funds set aside for property tax relief, revenues from the ASF, funds recaptured from wealthy school districts, a portion of the motor fuels tax, and lottery proceeds. A portion of the ASF investment proceeds is set aside to purchase textbooks and to fund a technology allotment. Lottery proceeds provide about $1 billion for education each year.

The table shows state appropriations for public education for the 2010-2011 biennia. Appropriated funds almost all go to the Texas Education Agency (TEA) for distribution to school districts.

• Most funds are distributed through the Foundation School Program formulas (described in Chapter 41 and 42 of the Texas Education Code).
• Some funds are distributed to help school districts pay for debt incurred to build school buildings. A formula in the law (Chapter 46 of the Texas Education Code) directs TEA in distributing these funds.
• The Legislature budgets money for grants for specific projects or services. Usually, a law describes how TEA is to distribute the grant funding among qualifying school districts.

Selected State Funds Appropriated to Public Education

Program / 2010-2011
Foundation School Program—Operations and Facilities Funding, including federal stimulus funds / $36,897,300,000
Instructional Materials and Technology Allotment / $1,097,300,000
Educator Incentive Pay Grants / $395,600,000
Prekindergarten Grants / $208,600,000
Student Success Initiative Allotments and Grants / $304,000,000
General Revenue for Other Programs / $877,800,000
Federal Revenue for Programs Outside the Stimulus Program / $8,868,900,000

Source: SB 1, General Appropriations Act. Article III, Education, May 2009.

Federal Funds

Federal funds represent the smallest of the three major revenue sources for Texas public schools. In the 2008–09 biennium, estimated federal funding was $81 billion. It increased to about $15 billion in 2010–11 with the inclusion of stimulus funds.

Typically, the federal government targets most education funds for special programs or services to specific groups of students such as students served in special education and low-income students. In most cases, federal funds are to supplement programs and cannot be used to replace state or local dollars. However, use of stimulus funds included both supplemental funding and replacement funding. In 2011–12, federal EduJobs funds are available to every district to pay for salaries and benefits of some instructional personnel.

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