State benefits from quirk in funding formula; When property values rise, districts’ gains offset by loss of aid

By Joshua Benton
Staff Writer

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If property values in North Texas have soared over the last 20 years, and if money for schools comes mostly from taxes on property value, then school districts are bursting with money, right?

Not exactly.

A quirk in the state’s funding formula has given the benefit of rising property values to the state – not local taxpayers and not local schools. It helps explain why the state’s portion of the tab for education has shrunk and why the funding system is in crisis.

In 1983-84, the state provided $42 of every $100 that Irving schools spent. Today, it provides $29.

“The state isn’t doing nearly as much as it used to,” said Debbie Cabrera, Irving school district’s executive director of finance.

Ever since the Texas Supreme Court decided that school funding must be equalized across district boundaries, state budget makers have used a concept known as “guaranteed yield.”

The idea: Every school district should be able to generate a roughly equal amount of money per pupil for each penny of property taxes it charges.

A property-wealthy district must ship some of its money back to the state for redistribution – the so-called recapture process, or “Robin Hood.” Property-poor districts get money from the state to make up the difference.

Either way, the state promises to provide districts that guaranteed yield.

OK, so say a district’s property values go up – as they did in most of North Texas through the 1990s – meaning each penny of tax levied brings in more revenue.

The district benefits from that increase – but only for one year.

The next year, the state updates its records of district property values. If tax revenue increased by, say, $10 million, the state’s budget formula reduces the amount of state aid the district receives by $10 million.

The district will never see any benefit from that increase in property values again.

The net result is that districts with rising property values see a corresponding drop in the amount of state aid they receive. Between 1995 and 2003, for example, property values per pupil nearly doubled in the Frisco school district. In 1995, 28.5 percent of Frisco’s revenues came from the state. Last year, 6.5 percent did.

“If you’re a state budget writer and you see property values going up, you think, ‘Hey, what a deal!'” said Dick Lavine, senior fiscal analyst for the Center for Public Policy Priorities, a group that advocates higher levels of education funding.

“You think, ‘I don’t have to pay districts quite as much as we used to. I’ll go spend the money elsewhere.'”

And that’s how property owners across the state came to be carrying more than 62 percent of the overall costs of public education, and why districts allege in a lawsuit set for trial in July that the state isn’t living up to its obligations to schools.