Trustees approved a total tax rate of $1.1164 per $100 valuation during an Aug. 17 virtual board meeting, a decrease from the previous year’s rate of $1.13 per $100 valuation.
Despite an overall lower tax bill, a proposed golden penny election could keep the district in good financial standing by restructuring the tax rate formula, according to Chief Financial Officer Chris Scott.
Under House Bill 3, a school finance bill passed by the Legislature in 2019, districts can obtain a maximum of eight golden pennies, which are pennies within the maintenance and operations, or M&O, tax bill that fund an ISD’s day-to-day operations.
EISD Superintendent Tom Leonard previously told Community Impact Newspaper that because those pennies are not subject to recapture payments, they are very valuable to the district.
Texas’ recapture system was enacted in 1993 in part to equalize funding throughout the state. Districts with a value per student higher than $6,030 are required to contribute payments based on their taxable value, according to The Texas Education Agency. That money is collected by the state’s education fund and redistributed to less-affluent districts.
EISD currently holds six golden pennies—the full amount permitted prior to HB 3—which represent $0.06 of the district’s total 2019-20 tax rate of $1.13 per $100 valuation.The board of trustees unanimously voted Aug. 17 to obtain an additional two golden pennies, which will increase the district’s M&O rate to $0.9964 and consequently trigger a Nov. 3 tax rate election.
Trustees also passed a resolution outlining the district’s intention to utilize what is referred to as a “penny swap and drop.” The resolution states that EISD will increase its M&O rate by $0.20 while lowering the interest and sinking rate, or I&S, rate by the same amount, resulting in no change in the overall tax bill.
The I&S rate is used to pay down debt. Because EISD is successfully paying off debt from previous bond elections, district officials are able to make the proposed shift in the tax rate formula.
“The purpose of this [resolution] is really just to ensure the public that we still intend for them to see the full compression of the tax rate,” Scott said.
If a majority of voters approve the swap, Scott is projecting a budget surplus of $400,388 for the 2020-21 school year as opposed to a more than $2 million deficit, which would have the largest impact on staffing rates and compensation.