Texas continues to make do with a broken but legal school finance system

As the Texas Legislature searches for a solution to the state’s persistent school finance problems, the Houston school district is asking voters to reconsider its property tax policy, and Austin ISD is warning voters that a big chunk of their school tax dollars aren’t going where taxpayers might think they’re going.

It’s a confusing time in school finance — a system that is broken in every way but the most important one: It remains, according to the Texas Supreme Court, constitutionally sound.

Many lawmakers and school districts had expected — some in hope, others in dread — that this would be a legislative session focused on building a new school finance system for Texas. They thought the court would force lawmakers to set things right.

Maybe the session will turn out that way without the court’s help. The Senate Finance Committee has dispatched a team led by Sen. Larry Taylor, R-Friendswood, to try to rewrite the whole thing.

A bona fide remedy designed by a committee with a short time frame and no legal ax over its head would be unprecedented.

Until that or another effort changes the system, districts around Texas are wrestling with the current school finance system.

Austin ISD pays more into the state’s “Robin Hood” system than any other district in the state.

That’s the system that has property-rich school districts — places where the real estate is worth a lot of money — shipping property tax proceeds to property-poor school districts.

Paul Cruz, Austin ISD’s superintendent, sent a letter to property taxpayers late last year explaining a most painful part of their property tax bills:

“Currently, more than 35 cents of every AISD [maintenance and operations] tax dollar collected is kept by the state because AISD is considered property-wealthy under the state’s recapture law, which is also known as Robin Hood,” he wrote. “In other words, the district has been told it MUST pay in fiscal year 2017 an estimated $406 million of your property tax dollars to the state of Texas. The number of districts that are paying Robin Hood is higher than ever, and recapture has grown to a $2 billion revenue stream for the state.”

Consider that: $2 billion of the money schools get from the state is money that the state gets from schools.

The state’s share of public education spending has dropped over the past decade; in fact, Texas is spending about $339 per student less this year than it did in 2008, according to the Legislative Budget Board. Local spending rose $990 per student over the same period.

That explains some of the upward pressure on school property taxes. The state is spending less, forcing local districts to spend more to keep up — and to cover inflation themselves.

Which is frustrating for Cruz and his taxpayers — a lesson Houston ISD is learning.

This year, the state’s largest district joined the “recapture” districts — the ones that, like Austin and a few dozen more, have to send part of their property tax revenue to the state.

New entrants to this gloomy club have to ask their voters whether they’d like to participate or not. If they say yes, their district starts writing checks to the state, like Austin does.

If they say no — and Houston voters said no in a November referendum — the state takes the most valuable properties in that school district’s tax rolls and gives them, for tax purposes, to a poorer district.

You can’t move the toniest shopping center or the tallest building in Houston to another city, but you can assign them to pay taxes to another school district — even one with a higher tax rate.

Houston’s school board decided last week to call another vote on the same question, and if voters go along on May 6, that would leave the property owners alone and make HISD, like AISD, one of the big districts sending checks to the state.

The districts hope to see something from Taylor’s school finance rewrite— or someone else’s. They were among those hoping the Texas Supreme Court would declare the current system unconstitutional and force lawmakers to remake the formulas.

“We know there are districts throughout the state that need additional funds to educate their students, but it is the duty of the state — not local taxpayers — to provide those funds,” Cruz wrote in that December letter to Austin taxpayers. “We ask for your support as we approach the legislative session and implore Texas lawmakers to keep local dollars in local schools.”

That will be a hard sell. To differing degrees, the proposed budgets from the Senate and the House take advantage of increasing local property values to lower the amount the state will spend on public education over the next two years.

That’ll keep the upward pressure on property taxes and on the Robin Hood payments local districts make to the state, but it’ll make it easier to balance the next state budget.

This story was originally published February 15, 2017 at 3:14 PM with the headline "Texas continues to make do with a broken but legal school finance system."