Friendswood ISD anticipates it will lose $232,367 in state funding for the 2016-17 school year due to the district’s reclassification as property wealthy by the state, district officials said.
The reclassification—and loss of funds—comes after Friendswood residents approved a 9 cent increase to FISD’s tax rate last year. The district called for a special election in September, saying it was necessary to pay a competitive wage to teachers, recruit talent and retain its employees, who were being poached by neighboring districts that offered more enticing salaries.
“We made some drastic cuts when the Legislature cut [funding] in 2011. We hired back most of the teacher spots but not the administrative and specialist spots,” FISD Superintendent Trish Hanks said. “Our students were suffering. Our schools were suffering. We wanted to be competitive; we were losing teachers to other districts.”
However, the Texas Education Agency took note of the increased tax generation. Because the district crossed a cost-per-student threshold, the state’s wealth equalization plan, known as “recapture” or the “Robin Hood” tax, will kick in this year.
State funding cuts
Every school district in the state has two budgets with separate tax rates: a maintenance and operations—M&O—budget and an interest and sinking—I&S—budget. Friendswood residents approved a tax ratification election in September to specifically increase the district’s M&O tax rate from $1.04 to $1.13, which funds everything from employee salaries and health care plans to school textbooks and office supplies. I&S funds are used to pay down debt.
By raising M&O rates by 9 cents, FISD officials expect to generate more than $2.2 million in the 2016-17 school year over the previous year. However, after the state recaptures some of its funding, FISD will see a net increase of about $2 million.
FISD expects to lose state funding every year following the election due to recapture.
“We calculated all of that for the [election],” FISD Superintendent Trish Hanks said. “We knew that we would probably have to pay a penny’s worth of that increase back to the state. That’s why we raised it the amount that we did.”
Hanks said the district made the decision to hold the tax ratification election—also known as a TRE— after taking into account a variety of factors, such as federal and state funding, tax rates and teacher salaries. She said, as a property wealthy school district, FISD has to find creative ways to balance the budget.
Prior to the TRE, the district said more than $2 million collected for 2016-17 would be used specifically to increase teacher salaries, along with around $700,000 for capital improvement projects.
“It definitely made a difference this year, and will help to make a difference in the future, as well,” Hanks said. “But it is not the permanent solution, at all, as the funding system is written today. We will still have challenges. We will still have to be an efficient district.”
The process of recapture is outlined under Chapter 41 of the Texas Education Code. Recapture was first created in 1993 as a way to divert tax revenue from districts deemed property wealthy to those deemed property poor in an attempt to even the scale for public school students across the state.
Comparing local districts
Recapture was established after a 1989 Texas Supreme Court ruling found the existing school funding system to be unconstitutional. Fast-forward to the 2016-17 school year, and 379 school districts across the state are considered property wealthy and are expected to send more than $2 billion in total to the state, according to the Texas Education Agency.
La Porte, Sheldon and Spring Branch ISDs were the only school districts in the Greater Houston area that paid recapture in the 2015-16 school year. Sheldon ISD, which had 8,477 students that year, paid $1.8 million and La Porte ISD, with 7,753 students, paid $24.5 million.
In Galveston County, both Galveston ISD and Texas City ISD paid out $13.2 million and $1.4 million in 2015-16, respectively.
According to Hanks, each of these districts has one key difference from FISD.
“The difference in all of those other districts is that they are heavily industrial,” Hanks said. “The big difference with Friendswood is that we do not have that kind of profile. We are property wealthy only because our [property] values keep going up and we’re building more houses and some commercial, but we’re not growing in student [enrollment].”
Changes from the legislature
Although the 85th legislative session is underway and would give legislators the opportunity to amend the state’s funding formula, FISD officials do not expect much change.
“I’m not expecting any change this session. I don’t think they are far enough along to do that,” Hanks said. “I haven’t read anything that has been a serious proposal coming out of the Legislature.”
While tweaks to the formula may be more difficult to achieve, the House-proposed 2018-19 biennium budget includes an additional $1.5 billion of public school funding, or a 3.5 percent increase from the last biennium.
House Speaker Joe Straus, R-San Antonio, said the increase is contingent upon a reduction in recapture.
“Our school finance system may meet the legal definition of constitutional. But parents and taxpayers know something different,” Straus said on the session’s opening day. “They know that the system is broken … and they know that it’s our job to fix it.”
Chandra Villanueva, senior policy analyst for the Austin-based Center for Public Policy Priorities, is skeptical recapture would be reduced with a funding increase that size. She said the House budget bill does not adequately raise a district’s basic state funding allotment, which is the starting point for campuses’ funding.
“The easiest way to meet those stipulations is to increase the state’s basic allotment,” Villanueva said of reducing the need for recapture. “When that allotment goes up, recapture goes down because schools are able to keep more.”
All districts receive a basic allotment from the state, but only property poor districts receive money from recapture payments.
Friendswood ISD Chief Financial Officer Connie Morgenroth said the district must keep any potential legislative changes in mind when forecasting the future.
“It’s hard to forecast way into the future,” Morgenroth said. “You can try, and I go out two or three years, but I have to assume the formula is not going to change when I make those assumptions, and nobody knows what’s going to happen.”