A compromise on the public school funding formula and inaction on property tax reform left some local legislators, school districts and public education advocates disappointed that a bigger overhaul could not be achieved during a special session of the state Legislature this summer.   

When the Texas House of Representatives passed House Bill 21 on Aug. 4, it included $1.8 billion in additional funding for school districts, including millions of additional money for Humble and New Caney ISDs. However, the Senate’s version of the bill removed about $1.5 billion of the bill’s funding.

The House accepted the concessions on the bill, and it was signed by Gov. Greg Abbott on Aug. 16.

“We’ve already done our budget for this biennium, and $1.8 billion is just not doable at this time,” said state Sen. Larry Taylor, R-Friendswood, the chairman of the Senate Committee on Education.

Meanwhile, property tax reform died on the final day of the session after the House and Senate failed to reach a compromise on Senate Bill 1, which would have required voter approval for a city or county to increase property tax revenue by more than 4 percent in a given year.

State Rep. Harold Dutton, R-Houston, said public education funding and property tax reform are inextricably connected, with as much as 50 percent of property tax bills—between $20 billion and $25 billion annually—going to school districts for the maintenance, operations and debt service of school districts, according to state data.

“The state has to increase its funding [for public schools] to help taxpayers,” said Dutton, who serves on the House Public Education Committee. “Now you’ve got added pressure on financing public schools.”

Funding formula

As property values continue to rise across Texas, school districts receive more property tax revenue each year even if tax rates remain the same, state lawmakers said.

However, the state’s share of public school funding has decreased from
46 percent for an average public school district in 2012 to 41 percent for an average district in 2017 as the local contribution from taxpayers has increased, according to the Austin-based Center for Public Policy Priorities.

Taylor said he believes the school funding formula is so complex that increases in state funding do not lead to an equitable distribution.

The state contributed more than
$24 billion to education funding for the 2015-16 school year, an 82 percent increase from 2005, Taylor said. 

Since 2011, when the Great Recession led to budget cuts, Taylor said, “we have replenished that money. We’re spending more money on top of it, but due to the complexity of the system, we have 20 percent of districts below the funding level we had in 2011.”

Property tax reform

Since school taxes account for 46 percent of the average property tax bill in Montgomery County, any property tax relief local officials are able to provide is felt little by the average taxpayer, Montgomery County Precinct 2 Commissioner Charlie Riley said.

However, without taxing residents at the highest rate allowed by law, some districts may not receive sufficient funding to operate, HISD Chief Financial Officer Mike Seale said.

Both HISD and NCISD have maintenance and operation tax rates set at $1.17 per $100 valuation—the highest amount allowed by the state.

“When property [values] go up, it doesn’t really impact how much school districts receive; it impacts how little the state has to put into the system,” Seale said.

Officials agree school taxes are often the largest portion of a resident’s property tax bill; however, they are divided on how to provide taxpayer relief.

Sen. Paul Bettencourt, R-Houston, the author of SB 1 and member of the senate’s finance and education committees, said the state already spends more than half of its budget on public and higher education.

He said he believes tax reform is more pressing as municipal tax rates are increasing faster than the public school portion of a tax bill.

“From 2005-15, tax levy revenue for taxing entities other than school districts has grown two times faster than ISD tax levy revenue,” he said. “The data shows what Texans already know: property taxes are rising too quickly.”

Legislative efforts

SB 1 failed to get passed by the House during the Legislature’s special session that ended in August. HB 21 did pass this session, but experts said it provides little relief to public schools or taxpayers.

It provides more than $300 million in additional state funding to schools throughout the next biennium.

Funds are divided between charter schools, property-poor districts, geographically small districts, health care for retired teachers and grant programs for autistic and dyslexic students, said Chandra Villanueva, a senior policy analyst at the CPPP.

HISD will receive an additional halfmillion dollars this biennium because of the passage of HB 21, Seale said. However, the version authored by state Rep. Dan Huberty, R-Houston, would have provided $1.5 million, Seale said.

The pared down version of HB 21 will affect fast-growth districts, such as HISD and NCISD, more harshly said Guy Sconzo, executive director of the Fast Growth Schools Coalition, which lobbies for districts with growing populations in the state legislature.

“Fast-growth districts can’t wait another two years,” Sconzo said. “They can’t put growth on hold.”

The bill also creates a commission to study school finance and find a long-term solution to the problem, Taylor said. The committee will include Taylor and Huberty, the House Public Education Committee chairman. He also represents a part of the Lake Houston area.

Huberty declined to comment for this story.

Local challenges

Although taxable values have steadily increased for NCISD and HISD, district officials said inadequate state funding challenges district objectives.

Both HISD and NCISD are considered fast-growing districts in terms of student population growth, which requires them to incur more debt through bond referendums while building facilities.

HISD’s student population is projected to increase by nearly 10,000 over the next decade, according to projections by demographics firm Population and Survey Analysts. New Caney ISD is in the process of building two new schools approved by voters as part of a $173 million bond referendum in 2015.

NCISD Superintendent Kenn Franklin said the state’s funding formula for new facilities needs to be adjusted.

“Many school districts, including New Caney ISD, have urged the Legislature to establish an adequate, equitable funding system that accurately reflects the cost of education based on the needs of the student population being served,” said Scott Powers, NCISD executive director for public relations.