On Aug. 22, 2005, Gov. Rick Perry issued an executive order directing Commissioner of Education Shirley J. Neeley to develop, as part of the financial accountability system, a requirement that districts expend at least 65% of their funds for instructional purposes as defined by the National Center for Education Statistics (NCES). Though the issues are far from resolved, the debate rages on.


During the regular legislative session that began in January 2005, as well as the two subsequent special sessions, legislators were unable to agree upon and pass a school finance/reform omnibus bill.  In each of these sessions, one lengthy and comprehensive bill covered numerous “reform” issues, as well as more standard school finance components.  First introduced as a floor amendment in the Senate near the end of the regular session, and included in subsequent unsuccessful versions of the bill, was a requirement that school districts expend 65% of their revenue on classroom instruction as defined by the NCES. 

On the Senate side, the amendment to establish this requirement was suggested by Sen. Jeff Wentworth (R-San Antonio), at the request of a constituent. However, the movement toward a 65% requirement has a national group of proponents called First Class Education, which is supported by the president of Overstock.com, among others. The goal of First Class Education, according to its Web site, is to establish this requirement in each of the 50 states by the end of 2008. All of the goals of First Class Education may not be detailed on its Web site; however in a widely publicized article, the Austin American-Statesman reported on a memorandum it had obtained from First Class Education that stated, in part, that this initiative also might serve to create dissension among education unions as “dollars flow from administrators to teachers…” Also troubling is the implied assertion that school funding woes may be solved by simply shifting spending priorities, without a much-needed increase in resources.

Though the Legislature failed to pass broad legislation to address this and other issues, Perry has revived the initiative in Texas via his executive order. Some school administrators have questioned the governor’s authority to direct the commissioner’s actions pursuant to the executive order, especially in light of statutes that grant school districts authority over items not specifically delegated to the Texas Education Agency (TEA) or the State Board of Education (SBOE).

However, the Texas Education Code also charges the commissioner with developing and implementing a financial accountability rating system for school districts. Depending on the details of the proposal and any sanctions accompanying failure to meet the 65% standard, litigation over which statutory provision trumps the other could ensue.

The NCES definition and current expenditures

The NCES defines instructional costs to include salaries and benefits for teachers and instructional aides, and general instructional supplies. Also included are the costs of athletics, music and art. Not included in the NCES definition, to the considerable concern of many, are library and counseling services, school nurses, security, transportation, staff development, food services and administration, including building principals.

Strictly applying the NCES definition, which may not be ultimately proposed by the commissioner, would result in 35% of a district’s operating expenses being available to handle all items other than those characterized as instructional costs. This prospect has caused concern among many librarians, counselors and school nurses, who fear that their important positions may be cut in order to ensure conformity with what is considered by many to be an arbitrary standard that lacks research showing it is likely to result in improved student performance. It should be noted that though NCES does have a definition for instructional costs and reports percentages expended by each state, it does not establish a standard for what is an appropriate allocation of resources to instructional costs.

The most recent available data from TEA indicate that 63.8% of operating revenue is expended on instructional costs statewide. TEA also reports that 418 of Texas’ 1,038 school districts were expending 65% or more of their operating revenue on instructional costs.

If the proposal is adopted, the 35% would need to encompass counseling (currently 3.43%), transportation (3.08%), general administration (4.25%), plant maintenance/operation (11.67%), and other noninstructional expenditures.

The 65% Task Forces

In response to the governor’s executive order, Neeley formed a task force comprising superintendents from varying sizes of school districts, along with a few regional education service center directors. Some commentators reacted by noting that exclusively assigning school administrators to address the perceived problem was akin to assigning the fox to guard the henhouse. Neeley subsequently appointed a “Citizen” task force to work with the original (now deemed “Educator”) task force to develop a proposed rule. The Citizen task force is composed of a few legislators, business people and leaders of conservative advocacy groups. TCTA was invited to participate as an ad hoc member of the Educator Task Force, and presented testimony at the first meeting.

As of late November, each task force had met once, hearing approximately five hours of testimony from members of the two task forces. Public testimony had not yet been taken, though there will be an opportunity for public comment after a rule is drafted and published in the Texas Register.

At the Oct. 19 meeting, TCTA testified in support of driving dollars to the classroom, since instruction is the primary mission of the public schools. We do, however, recognize differences among districts that will require some flexibility. Since part of the stated goal for the 65% initiative is to improve the “transparency” of district finances, we urged that the commissioner consider establishing the 65% as a target or goal, without penalties if it is not met. TCTA further emphasized that it is critical that the public and legislators understand that targeting resources will not solve or even meaningfully address the larger issue of inadequate funding for the public schools.

The Oct. 25 meeting included comments from House Public Education Committee chair, Rep. Kent Grusendorf (R-Arlington), indicating that the concept of a 65% rule has strong bipartisan support in both chambers of the Legislature, and that it should be a “no-brainer” to devote an adequate percentage of education dollars to educating students. He further noted that in House Bill 2, the school finance/reform omnibus bill, there were no sanctions attached to the 65% rule. Grusendorf indicated that he resisted the idea of sanctions for failure to meet the 65% standard, and that whether a district has accomplished the goal or not is something that should be explained to taxpayers at the local level.

Most of those who testified from the Citizen task force supported the 65% proposal, with some suggesting that 65% may be too low a standard to devote to instructional spending. One speaker noted that she was tired of the scare tactics used by districts in the form of threats to cut counselors or school nurses, for example, when instead they should be cutting the superintendent’s country club membership. One witness noted it seemed absurd to exclude counselors and librarians from the definition of instructional costs, while including football; the explanation offered by TEA staff was that the NCES definition of instructional costs includes those things for which you can receive course credit.

What’s next?

Neeley has indicated that now that the task forces have met, the TEA staff will draft a rule dealing with instructional costs. The proposed rule will be published in the Texas Register, at which time written comments may be submitted. A public hearing will be scheduled for January. It is not anticipated that the rule, in any form, would be applicable until the 2006-07 school year, and the proposed rule is expected to include a phase-in schedule to allow districts time to meet the new standard (requiring 50% to be expended in 06-07, 55% in 07-08, 60% in 08-09, and 65% from 2009-10 forward has been discussed.)

TCTA will continue to update you via our Web site and publications as developments occur and the opportunity for comment arises.


The Classroom Teacher, Winter 2005-06

Archive of other TCTA Publications

THE CLASSROOM TEACHER (ISSN-0279-2494) is the official publication of the Texas Classroom Teachers Association (TCTA), providing news and opinions in the interest of education excellence. All contents are copyrighted and may not be reproduced without the publisher’s permission. The views and opinions contained in this publication are not necessarily those of the publisher. Copyright © 2005. Publication schedule is quarterly. Annual membership dues for TCTA are $110, $5 of which is allocated to a one-year subscription to THE CLASSROOM TEACHER. Subscriptions for nonmembers are available for $10 per year.