HISD may pay $60M more

Lower ‘recapture’ fee OK’d, but final bill likely far higher

Just weeks after voters approved a $77.5 million payment to the state in socalled “recapture” fees, the Houston school district could be stuck paying another $60 million after a judge’s ruling that the state improperly slashed the amounts “wealthy” school districts had to turn over to help finance poorer districts.

The ruling, by state District Judge Darlene Byrne in Travis County, temporarily halts an agreement by the Texas Education Agency that allowed the Houston Independent School District and other property-rich districts to reduce the amount of “recapture” payments required to fund public education.

Recapture is the process by which property wealthy school districts in Texas must surrender money to the state in order to buoy districts with lower property values and tax rolls. Houston ISD, now considered a “wealthy” district because of its fast-appreciating real estate base, was told last year that it must pay the state’s recapture fee for the first time in its history.

After school board trustees and district officials groused over paying the state millions, es-

pecially as the district serves a large number of economically disadvantaged students, about 62 percent of voters opted against paying the state’s fee in the November election.

But after the district and school board members told voters the recapture payment had been lessened to $77.5 million earlier this year under the agreement with the state, more than 80 percent of voters agreed in the May election to let the district pay the state.

The ruling issued late Friday throws HISD’s recapture bill back into question and could affect more than a dozen other property wealthy districts across the state, though no official list has been released.

“We understand the financial situation even wealthy school districts are in, which is why we’re pushing for school finance reform in the Legislature,” said Marisa Bono, southwest regional council for the Mexican American Legal Defense and Educational Fund, a civil rights organization that filed the suit.

“But the solution is not to give wealthy districts a tax break on the backs of property poor districts.”

Voters in HISD on May 6 approved paying the state a recapture fee of $77.5 million, after balking at approval of a $162 million payment in the November election.

Houston ISD officials did not respond to repeated requests for comment about the judge’s order. But HISD Trustee Anna Eastman, who supported paying the recapture fees, said she was not surprised by the injunction but empathized with voters frustrated by the changing numbers.

“Everyone feels like they’re suffering whiplash from this discussion going back and forth so many times,” Eastman said. “It’s a smaller price to pay when we write the check regardless, and I was glad when the district had to pay a smaller portion. But don’t think it’s all said and done yet.”

Two property poor districts — La Feria ISD and Joaquin ISD — joined with the nonprofit Equity Center in suing the state in April over the way TEA used homestead exemptions in HISD and other districts to reduce the amount of recapture the districts would owe the state. HISD is the most heavily affected because it has the largest tax base.

The agreement with the state was negoatiated in February, when TEA said it would give districts such as HISD credit for half of their local homestead exemptions, along with adjustments for student enrollment and property values, to cut the districts’ recapture bills.

The changes were outlined in a Feb. 1 memo penned by TEA Chief School Finance Officer Leo Lopez and were later incorporated into TEA’s recapture manual.

TEA officials at the time concluded the changes would result in “no fiscal implications to state or local government, including local school districts.”

But attorneys for the property-poor districts argued the state would lose $88 million in funding, causing significant financial loss to local governments.

In a ruling released late Friday, Byrne concluded that the reprieve granted by TEA was “inadequate, improper and invalid,” and that the TEA manual did not contain an accurate financial note describing the fiscal impact of the changes.

She granted a temporary injunction to halt the recapture calculations until the case can go to trial Aug. 11.

Unless the state works out another way to grant HISD and the other districts a reprieve, the district could be forced to pay $137 million.

The adjustments for enrollment and property values were allowed to stand, said Bono, the MALDEF lawyer.

HISD Trustee Jolanda Jones, a vocal opponent of paying the state’s recapture fee no matter the amount, said the district’s projections about the cost of recapture were fiction.

“It’s exactly as I anticipated — it was all smoke and mirrors,” Jones said. “That’s how they got people to vote for it. We may end up paying the $162 million anyway because the state did not have the authority to do this.”