Sit-Rep with TX Representative Terry Wilson
SCHOOLS AND ISDs
To gain a good understanding of the taxes Texans pay to support public education, it is important to begin at the beginning. When Texians laid out the Declaration of Independence in 1836 and itemized all of the things Mexico had done wrong to compel the territory to break away, they listed their grievances in order of importance. First on the list—even before the forcible military dissolution of the state legislature—was the lack of support and maintenance of a system of free and public schools.
As a result, Texas Representative Terry Wilson says, the real meat of our responsibility to our children and our state, has always been the general diffusion of knowledge and educating people.
SUFFICIENCY REQUIREMENT
Article 1 Section 1 provides for “knowledge essential to preserving the knowledge and liberty of the people.” In simple terms, public education in Texas is required to be sufficient such that every student in the state is either educated enough to have a job in a productive industry or area immediately after high school, or at the conclusion of their public education program; or is sufficiently prepared to go on to post-secondary, military, vocational, or other training. “This is the job of the legislature, before anyone else,” Rep. Wilson says. “We do not provide the education ourselves—it is our duty and responsibility to provide a mechanism for it, and facilitate it somehow.”
A LITTLE HISTORY
In the beginning, public education was managed in various ways by counties, cities, and other local agencies. In the 1940s, the ISD framework was created to create stability, consistency, and to make provisions to fulfill the duty via property tax. Rep. Wilson explains, “Property tax is the most dependable. Values do not fluctuate like sales or other taxes, so ad valorem provides consistency and stability moving forward. Originally, school taxes were a fraction of the cost because the state provided supplemental funding. Over time, property tax burdens trended upward to ease the burden on the State when times got tighter.”
Education is not about where a school is in Texas. it is a holistic approach that all of Texas meets the sufficiency requirement. the legislature uses property taxes as a mechanism to meet that responsibility to manage that statewide burden.
RECAPTURE
Recapture is sometimes referred to as “Robin Hood” tax, and is part of the efficient system that helps provide a consistent education experience in every ISD in the state, regardless of its size and tax base.
Rep. Wilson explains, “In GISD, the Maintenance & Operations (M&O) tax is $.978 per $100 of home value. In Georgetown, based on number of homes and home values, the ISD receives $119 million in revenue to pay for actual expenses required by the legislature; buildings, salaries, and materials. For FY2022, GISD property taxes will bring in 106.67 percent of what is needed to meet its full budget.
“In Buckholts, the ISD tax rate is close, at $.966, but there is not as much land value so their tax revenue is $398,500; just 19.94 percent of their budget. If the taxpayers in Buckholts were required to fully fund their ISD entirely, they would have to pay $4.85 per $100 to meet their full M&O burden. So, again, the efficient system keeps districts across the state within a certain range of each other on property taxes.”
The responsibility to distribute the cost burden at a state level, means the 125 students in the Buckholts ISD school building have the same diffusion of knowledge as the 11,946 students in Georgetown ISD without putting an untenable cost burden on the taxpayers of that municipality. “The necessary benefit of this kind of planning,” Rep. Wilson says, “is that smaller cities and towns are not without growth potential because education opportunities remain at the core of every community, regardless of size.”
Beyond M&O costs, the state provides aid to ISDs to help pay down interest and debt outside of voter-approved bond spending. These costs are based on other funding for special education programs, transportation, and expansion. Rep. Wilson says, “We do not aim for a surplus at the state level. We always have unmet obligations we need to buy down, so if the M&O budget is balanced, we focus on helping schools pay down interest and debt on projects and programs outside their voter-approved bonds. For instance, if a school district wants to purchased bonds to build an Olympic-size swimming pool, they are free to vote to spend their money in that way. The Legislature is merely guaranteeing that each school district has the funding it needs to also be able to pay down interest, debt, and cover the costs of bond programs, not the projects themselves.”
For FY2022, GISD will also receive $7.7 million in state aid. This formula is based on average daily attendance (ADA) and takes other factors; e.g., travel time, special education, Tier II programs, into account.
It is Texas’ responsibility to educate all of its kids. But we can not have a state-wide property tax—that is reserved for local government only. as a result, our school finance system is about making a square peg fit in a round hole.
KEY TAKEAWAYS
House District 20 has 33 ISDs and, with a few exceptions, without recapture and smoothing, most tax districts would be paying $2-$5 per $100 of home value. For those municipalities able to fund their budgets easily, that excess is shifted to other ISDs that need it, to maintain level education fields for the sake of all of Texas.
In the 85th Legislature, the tax rate for GISD was $1.08. The table above shows the current expected tax rate at $.97. This is a significant drop in our individual tax bills, thanks to the amount the state asked GISD to contribute via property tax collection. Because our property values increased in 2020, we were also able to “share” an additional $3.5 million to support other ISDs without paying more to do it.
Rep. Wilson says, “This allowed GISD to be a bit of a unicorn last year. The recapture went up but the rates are going down. The tax rate went from $1.08 to $1.00 and now to $.97 and we want to keep that going down as the state is able to pick up more and more of a share of this as we go.”
The legislature is always looking for the best ways to do this in an attempt to make the M&O tax get to zero. Rep. Wilson believes, while property tax is not the ideal mechanism, there is a good reason the state uses it. Property tax is entirely designed for the benefit of the local taxpayers, but because education is a state responsibility, there will continue to be changes and modifications to the laws that will provide benefits to the whole state.
To eliminate school tax completely and move that burden to the state level would require .03%, or $26 billion. At that point we could be rid of M&O taxes entirely and provide funds from the state level. That would allow complete flexibility for districts to pass their own bonds and charge property tax for local voter approval. It is truly the only place where government is administrating locally but the responsibility is from—and making it work for—Texas as a whole.
Next month, Rep. Wilson will take a look at new laws, proposed changes, and “what are we going to do about it.”