The Guests

David Anthony is the superintendent of Cypress-Fairbanks Independent School District, the third-largest ISD in Texas.

Bill Hammond is a former state representative and the president of the Texas Association of Business.

Louis Malfaro is the secretary-treasurer of the Texas chapter of the American Federation of Teachers, the country’s second-largest education union.

Scott McCown is a former district judge and the executive director of the Center for Public Policy Priorities.

Robert Scott is the commissioner of the Texas Education Agency.

Arlene Wohlgemuth is a former state representative and the executive director of the Texas Public Policy Foundation. 

The Discussion

jake silverstein, editor, texas monthly: We all know that Texas is facing a severe budget shortfall, and we know that some of the plans put forward this session include drastic cuts to education, anywhere from $4 billion to $10 billion. But I want to start by talking about how we got here. Judge McCown, you heard every school finance case from 1990 to 2002. Let’s hear your perspective on this.

scott mccown: Texas has always been a low-tax state, and yet it’s always been a state that believes in education, and I think that struggle has intensified because of the Great Recession, which is responsible for a portion of our shortfall. But it comes on top of the 2006 creation of a structural deficit,1 so it was a double whammy.


1In 2006, facing an order from the Supreme Court, the Legislature cut property taxes, one of the main sources of money for public schools. To cover the difference, it raised cigarette taxes and adopted a “margins tax,” which is a modified business income tax (this is also known as the “tax swap”). The margins tax, however, did not produce as much as initially estimated, leading to what many have referred to as a “structural deficit,” an ongoing gap between revenue and spending.


silverstein: Is that how other folks at the table see it?

david anthony: Well, one of the analysts for Standard & Poor’s in Dallas has indicated that the biggest problem in Texas right now is the property tax buy-down in 2006. Not the recession, even though the down economy certainly has an impact.

robert scott: But the scope of the problem is far beyond even those two items. It’s not just that the tax swap of 2006 failed to deliver. It’s not just that the Legislature didn’t appropriate enough. It’s that you also have growth of 70,000 to 80,000 students per year.

bill hammond: The shortfall established by the tax not producing as much money as the comptroller estimated it would is 20 percent of the problem. Everybody keeps talking about the structural deficit based on the franchise tax, but like the commissioner just said, that’s a relatively small part of the problem. You’re creating a new Fort Worth ISD every year.

mccown: I don’t think it’s 20 percent. I think it’s a full third. We’ve got a structural deficit that’s $10 billion; we’ve got a shortfall that’s $30 billion.

louis malfaro: It’s a $5 billion annual shortfall.

mccown: That’s the cost of maintaining current services.

arlene wohlgemuth: Well, that’s the cost of the LAR,2 but the Legislature has never funded all of that.


2Before a legislative session, every state agency and institution prepares a Legislative Appropriation Request, which outlines funding requirements and needs for the upcoming biennium.


mccown: No. It’s not the cost of the LAR, it’s the cost of what the LARs say they need to maintain current services. It’s not the wish list beyond that.

wohlgemuth: But even that has never been fully funded. Even in good years.

malfaro: I think Scott raised an interesting issue, this tension in Texas between wanting to be a low-tax state and wanting to be a leader in education reform. Look at the Quality Counts report that Education Week3 comes out with every year. In “Standards” they give us an A because we have built an academic system with high expectations. On “Implementation” we get a C because we’re not reaching those standards. On “Funding” we get an F, benchmarked against other states around the country. So clearly the funding is where we are falling down. A lot of us feel like for the money that’s being spent, Texas is actually doing fairly well. The problem is, we’re a laggard when it comes to real investment in education.


3Education Week is a national newspaper run by the nonprofit Editorial Projects in Education. It publishes an annual report card, known as Quality Counts, on the quality of education in all fifty states.


hammond: I don’t agree with that for a minute. In the first place, I don’t think there is any relationship between funding and academic performance. I don’t think anybody has ever shown that.

wohlgemuth: Not only that, but personnel has increased a little over 70 percent from 1989 to 2009, and enrollment increased only 44 percent. So we have some other problems in the local districts, in addition to what’s happening at the state level.

silverstein: Dr. Anthony, is there fat in the administrative positions that we need to look at in a budgetary situation like this?

anthony: You can cut anything. If you want cheaper education, you can get it. If you want quality education, you’ve got to pay for it. Is there any fat? I guess there is fat in everything, but when you look at our district, we have 106,000 students and between 13,000 and 14,000 employees—we cut 900 in four years. How many is enough? It’s like efficiency. We keep getting beat up with efficiency, but it’s kind of like a unicorn: We all have heard of it, but we have never seen one.

hammond: But aren’t you an example of it? You’re telling us that your district is doing a substantially better job financially than the vast majority of districts in the state. So why shouldn’t we set you as the standard?

malfaro: Yeah, but his reward for this is going to be a $400- to $1,000-per-pupil cut.

hammond: That’s not what we’re talking about. What we’re talking about is the fact that, over whatever period of time it was that ERG4 measured, you guys came up looking pretty good. So my question to you is, aren’t there a lot of districts that could take a lesson from you?


4In 2010 the Education Resource Group, a consultancy based in The Woodlands, named Cy-Fair the most fiscally efficient district in Texas.


anthony: I think it’s very difficult to have a one-size-fits-all model in Texas. I have a friend who is a superintendent in a high-target-revenue district,5 and they spend a lot of money, but they have 70 percent of their high school kids enrolled in AP courses. So is that not efficiency? When you spend more, you get more.


5The Legislature calculated “target revenue” figures for each district in 2006 to make sure the tax swap didn’t result in unfair funding cuts for any district. Generally speaking, a high-target-revenue district is one with high priority values and a greater ability to fund the local portion of a district’s budget.


scott: Let’s talk about efficiency as part of Texas versus other states. Our African American students on the NAEP6 exam for math tied number one with Massachusetts; our Hispanic students were fourth in the last math NAEP. This last science examination, our Anglo students were number two, behind only the Department of Defense schools. And we spend $2,000 to $3,000 less per student in aggregate public school expenditures. To me, that speaks to efficiency statewide. It’s local decisions made by a locally elected independent school board that drive a lot of these inefficiencies. I’ve gone into districts that are so far in the drain financially, and when I say, “You’re dying financially, you need to cut these programs,” they just resist, until I have to appoint a conservator. The political pressure locally doesn’t allow them to make some of those decisions.


6The National Assessment of Educational Progress is a standardized test administered by the U.S. Department of Education.


wohlgemuth: What I believe the people of this state don’t want is the current situation. We have as many support people and administrators as we have teachers, and the support people make more than the average salary of the teachers.

anthony: I’m glad you said that. Let me interrupt for just one minute. In our district, 89 percent of our budget is personnel cost, and that’s 68.75 percent to teachers, 3.2 percent to central administration, 5.8 percent to accounts administration, about 7 percent to student services—counselors, librarians, nurses, psychologists—5.7 percent to educational aides, and 9.4 percent to all of the auxiliary staff—maintenance, custodial, transportation, clerks, paraprofessionals. So 69 percent goes to teachers.

wohlgemuth: You’re speaking about one school district.

mccown: The numbers are no different at—

wohlgemuth: Oh, no, no, no.

mccown: I’ve got them right here. If you look, 60 percent of everybody in school personnel is teachers. Then you have teacher’s aides. You have nurses, diagnosticians, counselors—then you get up to 65 percent. Twenty-seven percent are bus drivers, cafeteria workers, and janitors. We feed two meals a day to this highly economically disadvantaged population, where over half qualify for free or reduced lunch. You break it down, only 3 percent of the personnel are in central administration and 5 percent are in campus administration. So this is a canard that is really misleading the public.

scott: Here’s what I think. And I’ve gone into districts where I’ve had to say, “You’ve got financial troubles. We’re going to have to appoint a conservator or an overseer and fix the problem.” And I get in there and find out that the secretaries have secretaries. The administrative staff has administrative staff. There are layers of government that build up over time.

mccown: We have 1,200 districts. How many districts have you had that experience in?

scott: I’ve had that experience over the years in a handful. But what people are looking for right now is to make sure we’ve evaluated everything and said, “What can we live without?”

mccown: But you’re talking, at best, hundreds of millions when what we’re short are billions.

scott: But I think that most people are looking just to make sure that districts have made that analysis. Every district is different, but the decisions are made by an independently elected school board. I challenge you all to look at the top districts in the state and the top superintendent salaries and look at the number of kids that they serve. There’s no rhyme or reason to it at all, but the locally elected school board decided to make that decision.

mccown: When you have local control, you have a certain amount of difference of opinion about what’s efficient and inefficient.

scott: Absolutely.

mccown: Are you recommending we do away with local school boards?

scott: Absolutely not. I think what you’re seeing at the legislative level is grasping for some mechanism to push financial efficiency, just to say, “Are we analyzing things? Are we looking under every rock?”

hammond: I think we can examine a lot of things that the state has mandated, like 22:1 in K through 47. It was a politically derived number, and I don’t think it gets you any gain and causes you a lot of pain and suffering. So let’s relax that, and let’s come forward with all the things that the districts think they should be released from.


7In 1984, as part of the landmark education reform bill known as HB 72, the Legislature mandated that class sizes in kindergarten through fourth grade could be no larger than 22 students per teacher. This has come to be known as “22:1.”


mccown: But this constant quarreling about efficiency over a few hundred million dollars when we’re short billions of dollars misses the point, in my judgment. I will concede to you that if we are going to cut $10 billion, then we are going to have to adjust class size. But that’s not the question that TEXAS MONTHLY is asking us. They’re asking us, “What do we want to do for public education going forward?” What I want to do is move from 22:1 to 18:1. I want to make an investment so that we actually increase our education achievement.

wohlgemuth: And I would like to know where the money is going to come from. What are you going to tax? What is going to happen to job creation?

mccown: I don’t share your theory about how a state creates wealth! The Federal Reserve has done a study that shows that high per capita income is most directly a function of how well your population is educated and how many patents come out of your state. I want to have a strong educational system that produces folks who can be entrepreneurs and small-business men and get out there and make money. If we make the wise investment now, we come out ahead. So I’d expand the sales tax base with some way to deal with regressivity. I would expand our business tax and fix the structural deficit. And in the long run we need personal income tax in this state.

silverstein: Bill, I want to throw that to you. Obviously having a highly educated workforce is one of your goals. So where, if anywhere, do you part ways with Scott?

hammond: Well, I don’t think it’s a matter of more money. I think it’s a matter of expectations and a better accountability system. I think actually that the establishment in Texas, the business and civic leadership, does not understand what’s happening to low-income Texans in terms of getting educated. I think the number one public priority is to get more minorities into and out of high school with a diploma that means something, and I think a lot of people who look like me, quite honestly, don’t get what’s going on. Murdock8 said it the other day: At the rate we’re going, 30 percent of the adults in Texas in a few years will lack a high school diploma. That is scary.


8Steve Murdock, the former Texas state demographer (and current professor of sociology at Rice University), famously warned Texans of the dire implications of the “achievement gap” between Anglo and minority students in his 2003 book, The New Texas Challenge.


nate blakeslee, senior editor, texas monthly: And what do you think the level of funding that is currently in House Bill 1 would do to our efforts to close that achievement gap?

hammond: I think it would devastate them. I think it’s totally inappropriate. We need to spend the Rainy Day Fund and we need to do smoke and mirrors, so that at a minimum we get to a level of spending in the next biennium roughly equivalent to the current biennium. That does not fund growth, but at least it gives the districts a fighting chance.

silverstein: But even that is a prescription for more spending than you would approve of, right, Arlene?

wohlgemuth: Well, you are assuming that next session we’re going to be in the sunshine again and out of the rain, and I think we end up in a worse situation next time if we spend all the Rainy Day Fund. We’ve got to look at ways to change the dynamic.

anthony: Texas is going to have to make a decision at some point. There’s got to be another revenue stream. We’re going to grow 800,000 kids in the next ten years. I mean, it’s not going to be status quo. We’ve got to work together in business, community, taxpayers, and understand that if we don’t invest in public education, Murdock’s picture and projections are going to become a reality.

wohlgemuth: But we are investing more. Accounting for inflation, we are investing more per pupil than we were twenty years ago. Why is it that we have to exceed the growth in student population so dramatically?

mccown: Well, let me offer you a reason. Twenty years ago we were educating a much simpler demographic, and we were undereducating even that demographic. What’s changed is, we have higher aspirations and we’ve actually addressed the equity problems we had. A big difference between now and twenty years ago is that we’ve put money in to bring our bottom schools up toward our top schools.

wohlgemuth: You’re making my point. We are investing more money.

mccown: We are, but that doesn’t mean that it’s adequate. We’re still forty-seventh in the country in spending per pupil.

silverstein: Bill, can you speak to Judge McCown’s idea that we have a taxation problem?

hammond: I think the people of Texas have made a decision that the level of taxation is appropriate, based on the fact that they send legislators back to the Legislature. I think there is a tacit approval on the part of the people that this is an appropriate level, and like everyone under the sun, they want more services and lower taxes. I mean, that is a given. That’s what everyone wants. That’s your starting point.

mccown: But the voters have basically been lied to. In 2006 we had this tax swap. We funded it the first biennium after that with one-time savings, and we funded it the second biennium with the Federal Recovery Act. Nobody ever told the voters that this tax cut was going to result in these cuts to education.

anthony: And every time you put an undereducated class out on the streets you’ve got a bigger tab coming down the line, because there’s nothing they can do. It’s going to be unemployment or social services or a lower-paying job. It’s going to be lower taxes paid.

wohlgemuth: Are you saying that all of the school districts in this state have done the best job that they possibly can for the taxpayer? And that there is no fat at the local level and that there is nothing that can be done to change that dynamic?

anthony: Well, I’d be a fool if I agreed to all of those no ways, alwayses, and nothings!

wohlgemuth: So the only thing to do is to raise taxes to put more money in the schools, because they’re doing everything perfectly?

anthony: I didn’t say any of that! I don’t know who you were listening to. I expect accountability. But I think the vast majority of the school districts are doing what their communities expect.

hammond: No, I disagree with that. Because, with all due respect to my friend the commissioner, I think that we’re telling the people of Texas through our accountability system that everything is rosy, and it’s not.

blakeslee: Can I take another stab at the “What’s at stake” question? It’s been suggested that we might do some long-term damage to our public education system if House Bill 1 is adopted. So do we risk “damaging the brand” of public education in Texas? People with the means to get out of public education can do it. Middle-class people can put their kids in private schools, for example. Are we risking accelerating that? And if we do, what happens to an institution that doesn’t have a middle-class constituency?

mccown: Well, you’ve put your finger on the goal of the far right, which has been to destroy public education. To undermine people’s confidence in it so they won’t support it and it will implode. So they can keep low taxes. That’s the goal.

wohlgemuth: I could not disagree more! What has been demonstrated in places like New Zealand, when the schools are opened up to competition9, is that the entire system improves. What you are proposing is that it’s only through maintaining the monopoly that we’re going to get quality. We need to start talking about a totally different way to look at it, which would be to fund the basis of education, the core curriculum, from the state level and let the local districts decide how they want to enhance that.


9A series of radical reforms in the eighties in New Zealand eliminated most of the nation’s education bureaucracy and allowed state funds to be used to attend public and private schools alike.


malfaro: But what that says to me is, Plano’s going to have great schools and Laredo’s going to have lousy schools. And I think there’s just some basic values issues here—if we want to be a Third World country, a place where we’ve got islands of excellence and big swaths of people who don’t have access to basic services and education.

wohlgemuth: But the state fully funds that. That leaves all kinds of resources in the local community.

mccown: That’s true in your local community. It’s not true in a lot of local communities that have practically no tax base. And charters, choice, competition, vouchers—this is all a code for “We take the limited tax dollars we’re willing to pay to fund something that’s basic, we put our own private dollars on top of it so our kids get a great education, and we don’t have to pay for education for everybody else.” That is the game plan.

scott: Well, that argument completely breaks down when you go into the Valley and see schools like IDEA Prep, where poor kids of migrant farmworkers get an outstanding education and full-ride scholarships to college. That is not the evil intent that you just espoused.

mccown: That’s because the plan hasn’t been implemented!

scott: Look, we’ve spent a lot of time tonight talking about how bad things are, but you know there are wonderful success stories in our public schools. Go to the Texas Music Educators conference in San Antonio and listen to the All-State choir and band and orchestra. Every year those kids’ SAT scores—kids from all across the state of Texas—are three hundred and four hundred points above not the Texas average but the national average.

anthony: The problem is that with the House budget, that will be over. There won’t be kids at the TME, because even if you have the music, the choir, and the orchestra and symphony, you won’t be allowing your kids to travel, except those whose parents have a higher economic standing. Funding matters. I can tell you. And it’s not equitable, and it’s not equitable in my district, unless you have some oversight, because we’re 186 square miles and we have some schools in Houston, we’ve got some in far suburbia, with a variance of 85 or 90 percent in economic standing. If we didn’t work to make sure that we got needs met by district standards, we’d have a lot of kids migrating out of our district, and they’re not. So there is choice; there’s already choice. But you have to have a system that’s designed to meet the needs of all kids, rather than bifurcating your educational system and resegregating along economic lines.

hammond: There’s no choice for those who are economically disadvantaged.

anthony: There isn’t choice with current charters, even if you did vouchers.

hammond: What percent of the kids are in charters?

scott: It’s a little over 100,000 kids in charters, so I don’t think it’s that high.

wohlgemuth: So what’s the choice there?

anthony: Vouchers don’t work because they don’t serve just the lowest of the low, they serve anybody. Plus, you’ve got to be mobile, and a lot of economically disadvantaged kids who would want to take advantage of a voucher couldn’t because of mobility. So when you start talking about using vouchers to save kids, that is one hollow argument.

hammond: I disagree entirely. Look at what Dr. Leininger did in San Antonio.10 Did he not improve the school where the kids were left behind?


10James Leininger is a San Antonio entrepreneur and a prominent supporter of conservative candidates and causes, including school vouchers, which allow state funds to be used for private school tuition. In 1994 he began funding a voucher demonstration called the CEO Horizon Scholarship Program in Edgewood, a poor district in San Antonio.


scott: Edgewood became a recognized campus after the CEO program was instituted. So it did not have a negative impact on the kids who were remaining behind in that case.

malfaro: Right, but do you really believe that that school said, “Wow, we’d better do a better job or all our kids are going to go away. We’ve been slacking. We’ve got to get off our keisters”?

hammond: You’re damn right they did!

malfaro: Come on! Ed Fuller11 did research on high-performing middle school charter schools. You know what he found? Forty percent of the kids leave between the sixth grade and eighth grade. Where do they go? Back to the public school. So you know who has choice? The charter school operators have choice. The private school operators have choice. The choice isn’t for the kids, it’s for the schools. Public schools—we don’t have a choice. We take all comers.


11Ed Fuller is an education consultant and will be an associate professor at Penn State University beginning this summer.


silverstein: I want to finish with what expectations we have for what is going to happen this session and beyond.

scott: Well, I’m of two minds on it. Either we’re going to all come together on a funding amount that tries just to hold us above water, without any frills or additions, or we’re going to be here all summer long. The worst thing that could happen is to take our eyes off the ball. When I said “heart or lungs,”12 I was talking about two things. One was operation of the system in general, the basic Foundation School Program,13 but the other was keeping our emphasis on higher standards. It’s the heart and lungs. It’s not just operation but where we’re going, how we’re going to increase student performance. If you can fund at current biennium levels, fund the textbooks, and maybe some of the other components that do targeted interventions, and give districts resources to respond to the demands that we’re going to see in the new system, then, I think, yeah, we might survive for the next two years.


12On February 7 Commissioner Scott testified before the Senate Finance Committee that the TEA needed $6 billion more than was in the initial Senate budget. Choosing between cuts outlined in that budget, he said, would be like “asking a guy on the operating table if he wants his heart or his lungs back.”

13Established in 1949, the FSP is the primary source of state funding for Texas school districts.


anthony: The worst thing that can happen, if we want to set education back twenty years, is they can pass the House bill. That will be the beginning of the end. Hopefully Bill’s right, that it won’t be $10 billion. Robert’s been saying all along that he thought he could help them get it down to $5 billion or $6 billion, but even at $5 billion or $6 billion you’re talking about $1,000 a kid—$500 a year per kid—that you’re going to be cutting for districts.

scott: The substantive question of this session is not just the budget but the expectations we’re going to have in the near future with HB 3 implementation.14 As I have testified before the committees, are you prepared to cut funding but also increase expectations? When we went from TABS, TEKS, TAAS, TAKS, we jumped up one level in rigor. Going to end-of-course exams with STAAR is two levels, at least. So here’s what’s going to happen. Year two of the biennium, you’re going to get a brand-new set of scores coming out, and they’re going to plummet because it’s a new testing system. And his community [gestures at Anthony] is going to come to him and go, “What in the heck are you going to do about this?” And the normal response is “We’re going to do some interventions, we got this new strategy, we’ve got these resources, and we’re going to provide support for our teachers.” But they’re not going to have that. They’re not going to have any resources to do it.


14In 2009 the Legislature approved HB 3, which called for phasing out the much-maligned TAKS test in favor of a series of end-of-course exams called STAAR, which students must pass to graduate. The new testing regime is scheduled to begin in the next school year.


mccown: You have to look at this in terms of both 2011 and 2013. Before 2006, we had an underfunded system and an inadequate revenue stream. We cut taxes and now we’re going to cut spending to fit that inadequate revenue stream. We’re unwilling to do anything about it in 2011, and we’re going to be unwilling to do anything about it in 2013, and our problem’s going to get worse. We’ve got to have a tax bill, and if we don’t have it now, we’re certainly going to have to have it in 2013, and until Bill and Arlene are willing to talk taxes, we’re going to go straight into the toilet.

scott: We don’t want to end at the toilet!

silverstein: Bill? Arlene?

hammond: We are in tough economic times. Businesses and individuals and families are having to reduce their expenditures. They’re living on less, the cost of food’s going up, their budgets are hurt. So there’s going to have to be some pain and suffering on the part of government. I think if you fund at the current level coming into the next biennium, then you’ve reached a reasonable accommodation. There’s certainly not going to be a tax bill passed. That’s just not going to happen.

wohlgemuth: We need to start devoting more of our resources to the classroom, bringing it back to the fact that more money does not always equal an improved outcome to the student—there’s not a provable correlation there. We need to prioritize, and what’s important to me is teachers in the classroom.

anthony: You can’t run a hospital with just doctors.

wohlgemuth: How can you justify a 44 percent increase in student enrollment and a 71 percent increase in school personnel?

mccown: I don’t know where those numbers come from.

scott: Her point is that if you look at an employment system of over 600,000 people, and 330,000 of them are teachers, people say, “There’s one other person for every teacher.” But there are mandates in there. A lot of those teacher’s aides are in there because we have moved to mainstreaming special-ed kids in the regular classroom.

malfaro: And the characterization of this as a cut to government misses the point. This isn’t a cut to government. It’s a cut to students and to families. About 60 percent of our kids in the Texas public schools qualify for free or reduced lunch. And so we’re going to tighten the belt and the people who are going to get squeezed are the least among us. I mean, let’s face it, that’s who’s going to get hit.

mccown: I agree with you, Bill, that times are bad, but there’s a lot of wealth in this state, and we’ve been unwilling to tax that wealth when times were good, when times were middlin’, when times were bad. And the question is, are we going to step up and invest in our population and get it educated or not?

hammond: We have a representative form of government, and the representatives have decided not to do it based on them getting reelected.

mccown: The next election is always more important.