Some experts and legislators believe the 85th Texas Legislature did little to help public schools and taxpayers despite meeting for a special session this summer and passing education funding legislation.

The main attempt to reform the property tax system this session came from Senate Bill 1,
which sought to lower the cap on property tax revenue growth for cities and counties. The bill—one of Gov. Greg Abbott’s top priorities—died after the House of Representatives adjourned from the special session without addressing the bill.

Legislators did approve $300 million in public education funding for the next biennium by passing House Bill 21. However, local municipal and school district officials criticized efforts to reduce property taxes levied by cities and counties, arguing high property tax bills are a result of decreasing public education funding by the state—which has led to increased reliance by school districts on property taxes.

“They are talking out of both sides of their mouth,” Willis ISD Superintendent Tim Harkrider said. “The state is trying to hide behind and throw school districts and counties under the bus when in the end they created this mess.”

House Bill 21

On Aug. 16, Gov. Greg Abbott signed HB 21, which provides more than $300 million in state funding to schools throughout the next biennium.

However, the initial version of the bill drafted by the House proposed $1.8 billion in additional funding while lowering recapture payments from property-wealthy school districts, said Chandra Villanueva, senior policy analyst for Austin-based Center for Public Policy Priorities.

“Every time the revenue picture is good, [legislators] prioritize tax cuts over investing in our schools, and that’s just the wrong approach,” Villanueva said.

Sen. Larry Taylor, R-Friendswood, chairman of the Senate Education Committee, said HB 21 is only a short-term fix for an issue that has become too intricate for one bill to solve.

“We have a system that was put together in the 1940s,” Taylor said. “It is so complicated and it wasn’t designed by any one person or one group.”

Funding reductions

State education spending—including higher education costs—grew
82 percent overall between 2004-05 and 2015-16, according to the Texas Education Agency. However, the state’s share of funding for an average public school district has decreased from 46 percent in 2012 to 41 percent in 2017, according to CPPP research.

Additionally, increasing property tax revenue from growing tax bases does not equate to additional revenue overall every year because of the state’s funding formula, Villanueva said.

“Every time you put a new local dollar in your bucket, the state takes away a dollar, because the state fills up that bucket if you can’t fill it yourself,” Villanueva said. “[The state is] shifting the reliance on funding our schools to local [residents].”

MISD, for example, is receiving $9.1 million from the state in the 2017-18 school year, compared to $13 million in 2016-17, officials said. WISD also saw a reduction of about $2.2 million in state funding, Harkrider said.

“If they ever decide to make a legitimate formula to properly fund school districts from the state, then I think property taxes will take care of themselves,” Harkrider said. “Right now, the more money we raise from local property taxes the less money they give us.”

Conroe ISD officials said state funding for the district has also decreased. The district anticipates $99 million in state funding this year compared to $121 million in 2009-10, CISD Chief Financial Officer Darrin Rice said.

“If we were funded at the same level [this year], dollarwise, that would be about $25 million in addition to our budget,” Rice said. “If we were funded at the same percentage it would [have been] $80 million in additional dollars.”

Despite receiving $22 million less from the state, CISD’s student population has increased by 11,731 students, or 23 percent since the 2009-10 school year.

“That’s a huge disparity,” CISD board President Melanie Bush said. “We have everyone across the board asking for property tax relief, but that needs to come from the state. We need true public education finance reform at the state level.”

Concerns about Robin Hood

Recapture, commonly known as the “Robin Hood” plan, is a process implemented by the state that requires property-wealthy school districts–including MISD–to make payments to the state from local property tax revenue that is distributed to districts with low tax revenue. Recapture payments are calculated from the amount of property value in a district per student.

This year, MISD was forced to postpone the opening of Lincoln Elementary School after being notified it would have to send about $3.5 million to the state for recapture.

“The lack of public education funding in the state of Texas impacts fast-growth school districts the most,” MISD Superintendent Beau Rees said.

Since school districts cannot raise their maintenance and operations taxrates beyond $1.04 without having an election, Rees said most districts have not raised tax rates enough to offset the state’s declining share of public education funding. To make up the difference in expenses, the district has cut major projects and initiatives, and increase teacher-student ratios at the secondary level, he said.

Additionally, WISD—a school district where 58.6 percent of students are economically disadvantaged—has also been notified it is now considered a property-wealthy district and could be subject to recapture payments as of the 2017-18 school year.

Harkrider said he is concerned about funding for his district, which expects rapid population growth and property value increases from incoming developments like The Woodlands Hills.

“My hope is that in the next legislative session that they can fix school funding, and this ‘Robin Hood’ concept disappears,” he said. “It is a terrible system. It really is.”

Property tax reductions

While the special session continued in Austin, many local entities spent the summer working on their own local budgets, including setting local tax rates that will be charged to area homeowners.

Montgomery County Commissioners Court cut its annual budget by
5.5 percent to accommodate a 20 percent homestead exemption intended to offer property tax relief.

However, Montgomery County Judge Craig Doyal said he believes most of the relief will be offset by high tax bills from school districts.

“We can do a 20 percent homestead exemption on the county portion; we can’t affect the school portion,” Doyal said. “That’s what I think a lot of people may not realize. So the impact [the exemption is] going to have on the average homeowner is not going to be that great.”

Doyal said the court has called on legislators to ask for school funding reform rather than working to limit property taxes elsewhere as SB 1—authored by Sen. Paul Bettencourt, R-Houston—proposed to do to local cities and counties before it ultimately stalled in committee.

The bill would have required cities and counties to hold an election if property tax revenue increased by more than 4 percent from the previous  fiscal year. SB 1 was passed by the Senate but went no further.

Bettencourt said although school taxes are high, districts statewide have maintained steady tax rates.

“Depending on where you live, it is generally true that school taxes are the largest portion of your property tax bill but not always,” Bettencourt said. “However, local ISD revenues have been the slowest-growing portion of tax bills over the last decade.”