On Oct. 19, the Plano City Council and the Plano ISD board of trustees held a joint work session during which they shared their goals for the upcoming legislative session.
The meeting came nearly a month after one trustee testified in Austin and four trustees testified in Plano to express their desire to create more transparency to show how much of PISD’s tax revenue is sent to the state. The idea is to give property owners a better understanding of how their school tax dollars are being used, particularly by the state, PISD board President Missy Bender said.
PISD has been reaching out to legislators to bring school funding to the forefront of the rising property values discussion. News of rising home values, sale prices and property taxes has reached state lawmakers, who want to find a way to curb the financial burden on property owners.
But the cost of complying with a Texas law that requires certain school districts to share their property tax revenue with less affluent counterparts is increasing for PISD. A court ruling this year over the state’s educational funding system has brought new calls for reform.
PISD officials have long been frustrated with its distinction as a “property-wealthy” district under the Texas Education Code’s Chapter 41, commonly referred to as recapture or the “Robin Hood” law. This law requires the district to send a portion of its annual property tax revenue to the state to bolster districts deemed “property-poor.”
Recapture proponents said the philosophy has been invaluable in the effort to lessen historical funding inequities among Texas school districts. But as Plano’s property values continue to rise, recapture has placed an increasing burden on PISD as it and districts statewide see cuts to state funding, PISD Chief Financial Officer Steve Fortenberry said.
“[Recapture payments] just keep ratcheting up,” Fortenberry said. “In the long run, the only way that we get to retain any more money for operating costs is if we get more students, which we haven’t been, and if we would get more students, we get more operations [expenses].”
PISD projects during fiscal year 2016-17, it will pay the state more than $102 million. That annual expense is expected to continue to increase over the next several years, Fortenberry said.
Calls for educational reform
Increases in property taxes do not necessarily mean more money for school districts, Bender said.
“We get funded by enrollment based upon the number of students we have. We collect all of this money and there’s a calculation in the background, and based upon the increasing [home] values, we have a larger check to pay for recapture also,” she said.
Debate over recapture reignited this year after the Texas Supreme Court in May ruled the state’s school funding system was constitutional but urged lawmakers to consider reforms, describing the system as “meeting minimal standards.”
The issue is expected to come up during the Legislature’s 85th session, which begins in January. Speaker of the House Joe Strauss, R-San Antonio, issued an order to study ways to improve the school funding system, including possible recapture reform.
Although money collected through recapture goes toward school funding, the more school districts contribute, the less the state pays, Bender said.
The Texas School Coalition contests that state funding for education is not keeping pace with the rate of inflation and population growth.
“[Additional] transparency is a big part of what we need to do to help taxpayers understand how the system works and how imperfect the system really is,” said Christy Rome, executive director of the Texas School Coalition. “The state needs to reinvest in pubic education. Right now, we’re giving the state more room in its general budget.”
While the state’s Legislative Budget Board projects public educational funding from all sources—local, state and federal—in the 2016-17 biennium will be the largest amount ever on public education at almost $51 billion, the state itself will spend $795 less per student than it did in 2008 when inflation is factored in, Fortenberry said.
The local share of education spending from property taxes has grown from 44.8 percent in 2008 and is projected to grow to 51.5 percent in 2017, according to LBB data. Chapter 41 school districts are beginning to feel the pinch of this growing disparity, Rome said.
“I’ve seen schools having to increase class sizes, cut programs, cut summer school or after-school offerings [to offset recapture payments],” she said. “Those are important. We need those kinds of extra services.”
Exploring funding options
Another issue for PISD is its projected enrollment, which is expected to stay relatively flat for the next several years. Because of this, the district must purchase enrollment credits in order to bring its wealth per student down to a fair wealth per student level. The purchase of these credits is considered a recapture payment.
Over the summer, PISD sent a letter to State Sen. Van Taylor, R-Plano, outlining the dilemma in which the district finds itself. The letter included three budget scenarios: maintaining the current property tax rate, decreasing the rate to offset increases in property values, and increasing the homestead exemption. All three scenarios resulted in an increase in recapture payments and a decrease in the amount of funds available to educate Plano’s students.
Taylor said he was appreciative of PISD’s letter and is working on several solutions to empower local districts to cut property taxes.
“Having great schools and reigning in the skyrocketing property tax burden are not mutually exclusive,” Taylor said. “Our current property tax system offers local governments unhinged power to grow as the political elites see fit without a mechanism for the people to check its power.”
Plano City Manager Bruce Glasscock said lawmakers are only picking at the edges when it comes to property finance reform and that they need to also look at the appraisal system to see how it can be reformed.
Glasscock also said local taxing entities are not “running rampant.” On the contrary, he said the city has been praised by the state for its operations and has been used as a model for other taxing entities.
“We would love to reduce the tax rate just like [the city of Plano] would like to reduce their tax rate,” Fortenberry said. “If [the state] really wants to maximize property tax reduction, they can’t do it without also addressing school finance.”
Evan Marczynski contributed to this story.