Sunday, August 26, 2001
School tax cap cuts deep
Services suffer as districts approach state’s maximum rate
By Joshua Benton
Mary Urquhart walked into Richardson schools’ planetarium as a fourth-grader whose learning disability made simple math maddening. She walked out with a plan for life.
“It was as if a whole universe opened up to me,” she said. “It was all so beautiful and so magical.” After getting a doctorate in astrophysics, Dr. Urquhart now researches Martian hydrothermal systems for NASA.
There will be no Mary Urquharts in Richardson this year.
As part of a districtwide cutback, Richardson ISD closed the planetarium this fall to save money. Officials cited a condition that is becoming more common across Dallas-Fort Worth: More than half the school districts in the area are at or approaching the state-mandated maximum tax rate of $1.50 per $100 of property
valuation for maintenance and operations.
Officials say the state is paying less of the education bill, and some districts are being prevented by law from making up the difference.
Last year, the rates in four districts – DeSoto, Burleson, Crowley and Wills Point – hit $1.50. Not all districts have set their tax rates for the fiscal year starting in September, but at least five more – Highland Park, Allen, Rockwall, Denton and Richardson – are expected to reach $1.50. Others, such as Irving at $1.495 and
Dallas at $1.478, are knocking at the door.
Perhaps most frustrating for districts that are up against the cap: Legislative changes that could help them are probably several years away.
“You have to make some hard choices,” said Daniel Allie, assistant superintendent for finance in Crowley ISD. “If your student population is stagnant and your tax base keeps going up, then you’re in a bind.”
Faced with the pinch, some district leaders say they have no option but to start cutting services. In Richardson, officials eliminated more than 125 jobs and moved some administrators back into the classroom. Then there was the planetarium.
“It’s so disappointing to see something that could influence so many children closed because of a money crunch,” Dr. Urquhart said. “It doesn’t make any sense at all.”
“I understand we need to be fiscally responsible, but this was a terrific learning tool,” said Jim McConnell, who ran the planetarium for years and is now an assistant principal at J.J. Pearce High School.
Coppell schools, which have a $1.45 tax rate, have eliminated elementary school Spanish classes, asked some parents to pay for their children to ride district buses and cut the middle school orchestra program.
That last cut pained parent Lori Larson. When her family was picking a new school district to call home last year, string sections mattered almost as much as test scores. Her son, Drake, was heading into the sixth grade, and she wanted to encourage his budding viola and bass playing.
They chose Coppell because of its middle school orchestra program, and it was everything they’d hoped. Drake improved rapidly.
“Then it was all taken away,” Ms. Larson said. “He had a complete turnaround in that one year. We could see the development. If we were moving now instead of last year, we definitely wouldn’t be moving here.”
“You expect the best of the best because of the taxes you pay here,” said Coppell parent Cindy White, whose second-grader would be taking Spanish if not for the cuts. “We moved here because of the schools, and I’m sure they’ll still rate very highly, but the extras aren’t going to be there.”
Normally, when school districts need to raise money, they raise property taxes. Homeowners might not like the larger bill, but for schools, it’s one of the few alternatives they have to keep pace with the rising cost of educating children. When rates reach $1.50, however, the option disappears.
Versions of the tax cap date to the 1950s. Back then, reaching the limit must have seemed a distant problem.
“Even back in the early 1980s, when I first started looking at the data, very few districts were even above $1,” said Joe Wisnoski, the Texas Education Agency’s managing director for school finance and fiscal analysis. “Now, because of changes in the state’s economy and the school finance structure, there are very few districts below $1.”
Attempts to equalize
The cap in its current form dates to the 1993 creation of Texas’ current school-financing system, which attempts to equalize the amount of money available to wealthy and poor districts. In essence, the system guarantees that districts will receive a set amount of money for each penny of tax it imposes – whether its property values are high or low. One side effect of the method is that districts don’t benefit from increases in property value.
“The state has relied on increases in property values to equalize the system,” said Lynn Moak, an Austin-based school finance consultant and former deputy state education commissioner who has worked for nearly every district in the Dallas area. “If property values go up in a district, it doesn’t help that district. It just reduces the amount of money the state contributes.”
That, coupled with increasing costs, has resulted in the state paying a lesser share of education costs. In 1985, state revenues covered 52.2 percent of education costs in Texas. By 1999, that had dropped to 45.6 percent.
“The system does not keep up with inflationary pressures automatically,” Mr. Wisnoski said. “If they want to keep up with the increasing cost, districts have to increase their tax efforts.”
During the last three years, the state’s average tax rate moved from $1.296 to $1.384. Over that same period, the number of Texas’ 1,000 districts hitting the $1.50 cap increased from 103 to 188. Last year, an additional 194 districts were at $1.45 or higher, and another 173 were at $1.40 or higher.
The result: Those districts feel squeezed, and they’re looking in different places for relief.
Highland Park is dipping into cash reserves, raising fees for playing sports and seeking money from private donations.
This month, Coppell voters approved a half-cent sales tax aimed at funneling money to local schools without it having to go through the state’s recapture mechanism. Richardson has changed some jobs previously financed by general revenue dollars to pay them through uncapped bond tax revenue. Several districts are pursuing grants and other income sources to support specific projects.
Catherine Clark, program director for research and policy at the Charles A. Dana Center at the University of Texas, said she expects districts will find even more creative methods, such as offering businesses tax abatements in exchange for direct payments to schools.
Wealthier districts, such as Richardson and Highland Park, blame the state’s financing system for their predicament. They are among about 100 land-rich districts in Texas that are required to distribute some of their property-tax revenue among poorer districts. In Highland Park, an extreme case, the district’s budget for 2001-02 is $37.1 million, but the district will send $52.5 million to the state.
Poor, moderate wealth
But most of the districts that are up against the $1.50 cap are not among the most property-wealthy. They’re poor or moderate-wealth districts that often have to raise taxes because their smaller tax base generates less revenue. DeSoto ISD, for example, has increased elementary class sizes and reduced teacher pay raises. A district official said the tax rate would need to be about $1.55 to provide the same level of service as two years ago.
“The problem is much closer to universal than just affecting the [property-rich] districts,” Mr. Moak said.
Leaders in Austin have said a newly appointed commission will consider ways to reform the school-finance system, but no change is expected until the 2003 Legislature. Even then, changes are far from certain.
Many of the possible solutions – most notably a state income tax – are sure to be unpopular politically.
Many districts still have one way to raise more money – reduce or eliminate the homestead exemptions they offer taxpayers. But such a move would be a hard sell.
“The law allows you to do it. We should be able to exercise it and shouldn’t be penalized for doing so,” Highland Park school board President Bob Dransfield said.
But in some ways, wealthier districts are in better shape than their poorer counterparts to navigate through the next few years.
“Districts in the metroplex can probably afford to bring in a good financial adviser to help them find a way to get more money,” Dr. Clark said. “But how do you get that good advice if you’re in Ozona, Texas? If your resources are that constrained, you could be in real trouble.”
Staff writers Lee Zethraus, Kristine Hughes, Leif Strickland, Katie Menzer and Michael Tate contributed to this report.