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Senate to begin studying school finance changes

We’ll see what this looks like.

Leaders in the Texas Senate are vowing to find ways to overhaul the state’s school finance system, saying a recent Texas Supreme Court decision granted them a prime opportunity to shake up the heavily criticized status quo.

On Monday, they announced the creation of a Senate budget working group — led by Friendswood Republican Larry Taylor — to tackle the issue. That group will work with the Senate Education Committee, which Taylor chairs, to propose replacements for the current school finance system.

“The opportunity is huge for us to get it right,” said Jane Nelson, chairwoman of the Senate’s powerful Finance Committee. “We need a whole new method of school finance.”

They’ll face an uphill climb in a session where legislators face several obstacles to major reform, not the least of which is money. The announcement comes a week after the Senate unveiled its preliminary budget, which did not include additional funding for public education.

During the Finance Committee’s first hearing of the 2017 legislative session on Monday, Nelson, R-Flower Mound, advised the newly formed working group to “start with a clean slate” in recommending a new school finance scheme. “It should be less complicated, innovative and should meet the needs of our students,” she added.

[…]

“We’re left with a question mark as to what this effort will mean by the Senate,” said Lynn Moak, a school finance expert at the Austin-based consulting firm Moak, Casey & Associates. The main question is “whether they’re trying to reform school finance within existing dollars or looking for possible additional dollars to fund the system.”

Nelson last week unveiled the Senate’s $213.4 billion two-year budget proposal, calling it a bare-bones starting point for financial discussions in what promises to be a particularly tight-fisted year. That proposal did not touch funding formulas for public education.

The House’s base budget — also released last week — included an additional $1.5 billion that could be spent on public education only if the Legislature reforms the school finance system.

Here’s the Chron story, which has the local angle.

In Houston, where voters last November overwhelmingly rejected having local taxpayers pay the state for $162 million in so-called “recapture” of school funds, HISD Trustee Jolanda Jones said the creation of the Senate group signaled that the message from the ballot initiative had been heard in Austin.

“They’ve done more with HISD pushing back than they have in 24 years of hearing school districts complain about it,” Jones, a vocal opponent of “recapture,” said Monday. “Recapture is based on the premise of Robin Hood, taking from the rich and giving to the poor, but that’s never what it did. It took from the poor and reallocated to the poor. Help me understand why 75 percent of our kids are poor, really poor, receiving free and reduced-priced meals, and you’re taking money from us? It makes no sense; we need more money, not less.”

Because the district will refuse to pay the recapture fee, the Texas Education Agency has threatened to remove commercial buildings from HISD’s taxing district this July so it can give the money to other “property poor” districts.

HISD Trustee Anna Eastman said she hopes lawmakers will act before the TEA takes the property tax revenue from local commercial properties, though she is not sure overhauling the school finance system can be done in one session. But she was heartened to see the Senate look at the funding system.

“School finance can’t be based on some kind of cryptic formula that makes it so kids in a certain pocket are getting lots of money and others are getting little,” Eastman said. “Areas such as ours shouldn’t be picking up all the slack for areas that can’t generate revenue off property growth. It shouldn’t be that big of a gap.”

In Pearland, where local schools receive $9,358 per student, the lowest share in the Houston area, Superintendent John Kelly said that if the state does not increase its share, his district may have to dip into reserve funds to provide any kind of an increase to employees or to meet rising costs. He said lawmakers have been disingenuous in saying they want to lower taxes while requiring districts to raise more local taxes.

“They talk out of one side of their mouth ‘tax cuts’ for people, but on the other side they’re confiscating the increase in tax values across the state,” Kelly said of the Legislature.

That would need to be a part of any overhaul for it to be worth the name. I’m more wary than optimistic. I fear what we will get will be another shuffling of existing funds that will mostly change who’s getting screwed less. I don’t have any faith that Dan Patrick’s Senate will put more money into the system, or that they will alter it in a way that allows for, let alone mandates, covering the costs of growth in a sensible fashion. Let’s not forget that at the same time this is going on, there will be a renewed push for private school vouchers, which will only drain more money from public education. They could surprise me in a good way, and I will reserve judgment until I see what they come up with, but I do not start out feeling very hopeful about this. The track record of the players involved argues otherwise. RG Ratcliffe, who also sees vouchers in this, has more.

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13 Comments

  1. C. L. says:

    Let me get this straight… To solve the problem (or as punishment) TEA is going to withhold Houston local commercial building’s school taxes from HISD et al, instead giving said school tax funds to other school districts ? I’m curious – at what rate are commercial buildings school taxed ? Is it at the same rate I, just around the corner from Kuffner, am being school taxed at ? Or is it, as I’m hoping to be wrong, a fraction of a fraction of a percent of what I pay as a homeowner ?

  2. Terrance Jewett says:

    The solution is an income tax and to gut the property tax. If we did that we would expand the tax base and make businesses pay their fair share.

  3. Ross says:

    @CL, all of HISD is taxed at the same rate, although residential properties may have a homestead exemption that lowers the appraised value, and thus the effective rate. However, if TEA takes commercial properties away from HISD and assigns them to other districts, those properties will be taxed at the rate assigned by those other districts. The 2016 rate for HISD was 1.2067. The rate for New Caney ISD was 1.67, Let’s take a building downtown as an example – 1000 Louisiana, which had an appraised value of just over $551 million. The HISD taxes for 2016 were $6,649,793.67. If that building had been assigned to New Caney ISD, the taxes would have been 9,202,913.26

  4. voter_worker says:

    To continue with the example Ross used of 1000 Louisiana St, there is one voter registered at that address. Does anyone know if that voter would still be eligible to vote in HISD elections if the property were to be assigned to New Caney ISD (or any other district)? Would that voter be eligible to vote in the newly assigned school district’s elections? This may seem like nit-picking, but let’s say the Harris County Tax/AC-VR removes HISD from the ballot style for that address, the voter presents to vote and doesn’t find the HISD election on the ballot, complains and is voted provisional. That would be an interesting scenario to resolve. I am doubtful that this possibility has been accounted for since the operating assumption is that voters register at residential, not commercial, addresses.

  5. Bill Daniels says:

    @Ross:

    Wow. Whichever properties get capriciously commandeered by a higher taxing district have a ready made legal argument against seeing their property taxes suddenly skyrocket. Why this property and not that property? Instead of putting the tax bite on every property owner in the same percentage, some property owners will take the whole burden themselves?

    I can’t even begin to say what’s wrong with that picture.

  6. Ross says:

    @Bill, the process to reallocate properties starts at the highest valued commercial property and then the next highest, etc until the requisite value has been reallocated. Property owners cannot protest their tax rates, just the appraised value assigned by the appraisal district. I believe the target is $18 billion of property value to be placed in other districts.

    @voter_worker, your point illustrates why we need voting registration reform. There’s no reason anyone should be registered to vote in a non-residential property. I presume it occurs because that’s where people get their mail, or because they don’t want anyone learning where they live.

  7. Bill Daniels says:

    By condemning a property to dramatically higher tax rates, in perpetuity, haven’t we just significantly lowered the value of that property? That’s the argument I would use if protesting.

  8. C. L. says:

    @Ross… makes sense, but what if 1100 Louisiana was assigned to a County who’s tax rate was $1.02 ? Wouldn’t 1100 Louisiana make out like a bandit ?

    @Bill… I’m in the mortgage appraisal business, and I’ve yet to see a (residential] report that has the appraiser adjusting for differing tax rates between the subject property and that of the comparables used.

  9. Bill Daniels says:

    @C.L.

    Have you had experience with something comparable to this? In the example given, 1100 Louisiana, let’s say 1102 Louisiana is substantially the same property, just valued at a dollar less, and thus, didn’t get shuttled to a new taxing district. Both properties share the same roads, fire department, police department, libraries, parks, etc., but one is taxed significantly higher than the other. If you were looking to buy a property, and all else was equal, which property would you buy, the high tax property or the low tax property?

    I also wonder how this works on a practical level. Let’s say 1100 Louisiana catches fire. It would be a misuse of City of Houston resources to send firefighters out to put out the fire, since the property owner didn’t pay any tax to the City of Houston. The firefighters would show up only to make sure the surrounding properties didn’t catch fire, while the New Caney FD rolls everything they have to downtown Houston.

    You know, the more I think about this, the more I think Houston did the right thing by forcing the issue, because the current tax scheme seems like Rube Goldberg invented it.

  10. voter_worker says:

    Bill, I think the taxes involved are strictly HISD. Taxes collected for all other jurisdictions applicable to the property would not be affected.

  11. Ross says:

    @voter_worker is correct. This is only for school taxes. Those properties will still pay Houston, Harris County, HCC, etc. so the fire issue won’t occur.

    @CL, in that case, the property owners would indeed be better off. However, HISD is one of the lower tax rate districts in the state, somewhere in the top 100 lowest, I believe.

  12. C. L. says:

    @Bill… Again, [in 28 years] I’ve never seen a residential appraiser make an adjustment to a comparable sale due to a differing tax amount/authority for the comparable sale[s] used. And having spoken to tens of thousands of homeowners over the years, I’ve yet to hear one say they’re going to buy this home over here but not that one over there because of/due to local Appraisal District tax rates.

    Most homeowners are buying the homes they’re buying because ‘that’s the one the wife likes’.

  13. Bill Daniels says:

    @Voter, Ross, and C.L. Thanks for the clarification that we are talking about school taxes only. That really shouldn’t have any impact on services, since presumably, there are no school aged kids living in commercial property.