HISD challenges tax system
The Texas Supreme Court in May told more than 600 school districts that the state’s current funding system is constitutional, despite legal challenges from school districts arguing otherwise.
State Supreme Court Justice Don Willett wrote that “despite the imperfections” of the state’s system of education funding, imperfection “does not mean imperfectible,” leaving the door open for the legislature to make changes.
Now, in a controversial ballot measure gamble, the state’s largest school district is hoping to add some pressure for the legislature to do just that.
Voters in the Houston Independent School District are being asked on the November ballot whether they approve of a plan to send $162 million in local property tax revenues back to the state for redistribution.
Part of the state’s recapture or “Robin Hood” plan, the redistribution of local tax revenues is meant to level the playing field between propertywealthy districts and property-poor districts. But for the first time this year, Houston is considered a property-wealthy district, triggering the recapture payment that the district says will cause a $95 million deficit in the 2016-2017 school year.
The trouble is, the district’s students are overwhelmingly, economically disadvantaged. So even as property values are rising locally, roughly 76 percent of the student body qualify for free or reduced lunch, according to the Texas Education Agency. “HISD paying recapture is proof that the system is broken,” said school board member Mike Lunceford, testifying before a joint meeting of the House of Representatives’ public education and appropriations committees.
Houston joined nearly two-thirds of the state’s districts in the recent lawsuit against the state, challenging its funding system as inadequate and unconstitutional after the legislature cut more than $5 billion in funding in 2011. The plaintiffs also argued that, despite a ban against a statewide property tax, chronic underfunding from the state forces many districts to set local property taxes at or near the limit — essentially creating a de facto state property tax.
Lunceford and others are hoping to see reforms to the Robin Hood system. But Houston voters aren’t actually being asked to weigh in on any of those proposals.
Instead, when they head to the polls in November, they’ll have a choice. With a “yes” vote, next spring they will send $162 million in HISD property tax revenue to state coffers. With a “no” vote, they would allow roughly $18 billion-worth of the district’s wealthiest commercial properties to be reassigned and taxed in another school district through a process called “detachment.”
Either way, the district will lose out on some tax revenue, but it’s a gamble several school board members — along with the Houston Federation of Teachers and the city’s education czar, Juliet Stipeche — support. The hope is that by detaching some of those wealthy commercial properties — which will likely pay higher taxes in another district — the businesses may push for school funding reforms. Such a move would be unprecedented, and advocates hope it would garner attention from the legislature.
But not everyone thinks the gamble is worth it.
“The legislature is just as likely to either put more money into the system, or not to, regardless of whether HISD is sending money or instead having property detached,” said Scott Hochberg, an education finance expert and former state representative.
Every district that has had the same choice as HISD has opted for recapture — swallowing a bitter pill and making the payments, but Hochberg said the risk of sending the property to another district is that the transfer is permanent.
Detaching could also mean higher taxes for homeowners to pay for future bond measures since its tax base would be reduced.
“Once the property is gone, it no longer is part of the base for future bond issues, meaning we all pay a higher tax rate on any future bond issues,” Hochberg said.
HISD board president Manuel Rodriguez Jr. said he believes legislators are committed to reforming the system and is “hoping the legislature can see what’s happening finally and find a resolution.”