School funding
There are other ways to help poor districts besides crippling Houston ISD.
Houston ISD’s Proposition 1 didn’t draw the attention of a presidential race, but it’s arguably poised to have the most local impact of anything on the ballot.
Effective July 1, the Texas Education commissioner will detach valuable commercial properties from Houston Independent School District’s tax rolls and assign them to a property-poor district for taxing purposes.
The commissioner’s action could affect scores of high-profile properties, including downtown’s Houston Center, Pennzoil Place and Chase Tower. Depending on the tax rates in the recipient districts, owners of these properties could experience a hike in their tax bills. Property owners of the affected buildings — paying a higher tax rate than their neighbors — could face an unfair competitive disadvantage.
Mayor Sylvester Turner, HISD trustees and this editorial board in “Robbing HISD” (Page A35, Sept. 25), urged a “no” or “against” vote in hopes the Legislature would use the time to fix Texas’ school finance system. Those hopes largely were buoyed by the Texas Supreme Court’s May finding that the system was in need of top-to-bottom transformation and only minimally constitutional.
Others urged a “yes” or “for” vote — some because they lack faith in the Legislature to act. Systemic reform is necessary and would be an ideal outcome. But the Legislature could take a less comprehensive route to avoid foisting draconian budget cuts on HISD and the other 237 “property wealthy” districts around the state that are forced to forfeit local tax revenue under the “recapture” process. Fixes that lawmakers should consider include:
• Recalibrating the state’s funding method, which does not take homestead exemptions into account. Most districts grant tax relief in the form of a homestead exemption. The exemption offered by HISD and neighboring Spring Branch Independent School District, also a district under recapture, is 20 percent of appraised value. Homeowners count on that exemption to take some of the sting out of their annual tax bills.
But for purposes of recapture, the school funding calculus takes into account the full value of property on a district’s tax rolls. The net result is that HISD, SBISD and other districts must pay recapture on value that draws absolutely no revenue. That’s sloppy tax policy.
If the Legislature would stop penalizing schools for granting homeowners tax relief, then HISD’s recapture bill would decrease by around $125 million and SBISD’s by around $18 million, according to school finance experts.
As most legislators support property tax relief, it’s illogical — and hypocritical — that they would support penalizing districts that offer reasonable homeowner exemptions. Fixing this formula would help HISD, SBISD, Austin ISD and other districts, where home appraisals are growing every year.
• Adjusting the formula to restore transportation funding to districts in recapture. Under the present school funding law, the state does not provide transportation funding to districts in recapture. Yet most students, especially those in large urban settings, need transportation to safely arrive to and from school. This is particularly true in a sprawling district like HISD, which has embraced school choice. The Legislature has been behind giving parents and students educational choice, but a district that provides geographically disbursed options must provide reliable transportation.
HISD transports about 36,000 students a day and SBISD, 11,000. Twelve million of the $162 million that Texas is attempting to pocket from HISD taxpayers and $1.5 million of the $66 million from SBISD taxpayers is a result of this rule that requires schools in recapture to forfeit transportation funding. The Legislature should change the rule and allow all districts in recapture to receive transportation funding.
• Another common-sense fix involves pre-K. Both HISD and SBISD provide full-day pre-K to respectively 15,000 students and 1,400 students. Yet, for purposes of computing recapture, the Legislature only allows HISD to count half of those students. Remedying this inequity would reduce HISD’s recapture bill by about $40 million and SBISD’s by about $4.2 million.
HISD’s situation is unique. The commissioner has never relied on detachment as a tool to collect recaptured funds, leaving its constitutionality an open question. Litigation would cast a light on a little-known aspect of recapture: The recaptured funds that the state collected from the 238 districts, which is topping $1.5 billion this year, do not increase funding to education. Recapture is a disguised state property tax, with its proceeds ultimately benefiting the state’s general revenue fund — not poor schools.
Although the tweaks to the funding formulas aren’t the best solutions, perfection shouldn’t be the enemy of the good. The Legislature must act. More Band-Aids are better than no aid at all.