What Is Target Revenue?

by Amanda McMullen

Most states fund their schools using money they collect from the public in the form of property tax payments, but each state has its own method for determining how to allocate the money. To ensure that schools receive sufficient funds, Texas uses the target revenue approach to distribute funding.

Texas Funding Formula

Before Texas implemented the target revenue funding method, it relied on a formula to determine how much money each school would receive. The formula involved three tiers of funding. The first tier of funding guaranteed a minimum amount of money to each school district in Texas. The second tier of funding provided additional funds only to schools in districts that chose to levy taxes using a higher rate. Finally, the third tier of funding provided additional funds only to schools in districts that levied special taxes for educational facilities.

Target Revenue

Texas enacted the target revenue approach in response to tax cuts that threatened to decrease the funding available to public schools. Under the target revenue program, schools are guaranteed to receive the same funding per student that they received in 2006. If the state's funding formula allots a school less than its target revenue, the state raises the funding to meet the guaranteed amount. However, if a school would receive more than the target revenue based on Texas' funding formula, the state decreases the amount of funding allocated to the school so that is only receives the target revenue.

Problems with Target Revenue

Because the target revenue system bases funding on the amount of money each school received during only one year, it leaves some schools at a disadvantage. If funding was uncharacteristically low for a school during 2006, the school now receives low funding every year. The target revenue system also fails to account for a school's changing financial needs or the effects of inflation.

Generating More Revenue

A school districts receiving a lower amount of funding than is necessary for operation can increase its revenue by asking local voters to approve a special tax levy for the school, or by increasing enrollment. It can also raise its income level by applying for federal grants or by asking the state to raise its target revenue to account for an increase in operating costs.

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