How does school funding work?
Excerpt from School Funding 101

Introduction

Funding for Texas's public schools comes from three main sources: local school district property taxes, state funds, and federal funds. The majority of funding comes from local property taxes, which are collected by school districts, and state funding. The purpose of this document is to explain state and local funding of Texas public schools, as it is administered through the state's Foundation School Program.

Overview: What Is the Foundation School Program (FSP)?

The Foundation School Program (FSP) is the state program that establishes the amount of state and local funding due to school districts under Texas school finance law and that provides the state share of this funding to districts. The program is administered by the Texas Education Agency (TEA). The FSP, in its current form, is meant to ensure that all school districts, regardless of property wealth, receive "substantially equal access to similar revenue per student at similar tax effort, considering all state and local tax revenues of districts after acknowledging all legitimate student and district cost differences."

The FSP has two main components, operations funding and facilities funding, each of which is tied to the tax efforts of school districts. These components provide funding for school district operations and for school facilities. This overview briefly describes the main components of the FSP. Detailed information about the calculations involved in these components follows this overview.

• The operations funding component of the FSP provides school districts with assistance in financing their maintenance and operations based on the following three components:
• Tier I of the FSP provides school districts a basic level of funding with allotments for regular education; special education; compensatory education, including Pregnancy Related Services; career and technical education; bilingual / English as a Second Language education; gifted and talented education; and public education grants. This tier also includes allotments for transportation, new instructional facilities, and the Texas Virtual School Network as well as an allotment for specialized programs at the high school level. Additional compensatory education funds may be available to serve students who are military dependents.
• Tier II of the FSP is intended to supplement the basic funding provided by Tier I. Tier II guarantees a specific amount of funding per student in weighted average daily attendance (to be discussed later) for each penny of a school district’s tax effort above a specified level. The funding provided by this additional tax effort is also referred to as enrichment.
• Revenue at the compressed tax rate, provided for in the property-tax-relief law that was passed in 2006 and modified in 2009, guarantees school districts a set amount of funds per student in weighted average daily attendance (to be discussed later) to compensate for a mandatory reduction in, or compression of, their local maintenance and operations (M&O) tax rates from rates that were adopted in 2005. A district's revenue at the compressed (tax) rate is based on the state and local M&O revenue a district would have earned had it not lowered its tax rate. It is the sum of the state share of a district's Tier I entitlement and the revenue from the district's (compressed) M&O tax rate, adjusted for statutory minimum or maximum hold harmless provisions.
• The facilities funding component of the FSP provides school districts with assistance for debt service related to school facilities through the following two programs, which assist school districts in funding facilities by equalizing interest and sinking fund (I&S) tax effort:
• The Instructional Facilities Allotment program provides funding to school districts for debt service payments on debt associated with the purchase, construction, renovation, and expansion of instructional facilities. Districts use this funding to make annual debt service payments on qualifying bonds and lease-purchase agreements.
• The Existing Debt Allotment program provides funding to school districts for debt service payments on eligible bonded debt.