The funding model for Texas K-12 education relies heavily on the state energy sector and specifically on the Texas fossil fuel industry. However, a shift away from fossil fuels and toward low-carbon and renewable energy is currently underway, necessarily leading to a reduction in a key source of Texas K-12 education funding. In this report, we forecast the size of the projected Texas education funding shortfall from this sectoral shift through 2050, and we propose some possible policy solutions for shoring up this funding. Our main forecast findings are:
Although these shortfall totals seem large, they only represent between 0.5% and 3.0% of the total baseline K-12 funding over the next 30 years. We show that these manageable deficits can be offset by modest policy changes implemented in a timely manner.
A wide variety of tax or spending policy changes are available to replace the projected shortfall in Texas K-12 funding. In the last section of this report, we focus on the following three potential policy changes. The first source of revenue is a natural candidate for additional revenue, while the last two are sources of revenues in a number of other states, but would be new sources of revenue in Texas:
These revenue sources can offset the revenue shortfall while broadly maintaining the existing structure of the Texas tax system. Alternatively, the state legislature could consider a fundamental reform of the Texas tax system to address the revenue shortfall caused by the impending fiscal headwinds from declining oil prices.
