Skip to main content

Analysis: A state school finance system that can choke a city’s growth

A state that wants to grow by freeing economic engines from regulations and taxes is throttling its cities and school districts with regulations and taxes.

Lead image for this article

Editor's note: If you'd like an email notice whenever we publish Ross Ramsey's column, click here.

Texas is run by people who hold economic growth up as a kind of secular sacrament, whining against the regulations and fees that throttle businesses and cost jobs and whatnot. It’s a reliable line of attack in the state Legislature, used for a range of issues, like tort reform, environmental regulation and who should use which bathroom.

So why did lawmakers devise and refine a school finance system that relies on some of the economic impediments they regularly wail against?

At the moment, top whining rights belong to property owners in the Austin Independent School District, which pays more in “recapture” payments than any district in Texas. Recapture is the term for the money the state collects from “property-rich” districts for distribution to “property-poor” districts.

In Austin’s case, recapture throttles one of the state's economically thriving cities with a special state tax that sucks more than $400 million out of the taxpayers who are trying to keep their education system up to the standard that will keep that economy thriving. For AISD’s fiscal 2017, the amount is $406.1 million; the district projects it will pay $533 million to the state in fiscal 2018. Without that recapture, property tax rates in the state’s capital would drop 35 cents.

Austin is the biggest fish in this net, a liberal city being milked to avoid state spending by a parsimonious Legislature. Houston is joining the club this year. Dallas is close behind.

If the state were doing this to an industry, legislative lips would quiver with rage. But the state is doing this to AISD or, more accurately, to the property owners and taxpayers in AISD.

Austin is the biggest fish in this net, a liberal city being milked to avoid state spending by a parsimonious Legislature. Houston is joining the club this year. Dallas is close behind.

The state’s school finance scheme has been tagged as “Robin Hood” — a balancing mechanism that takes money from districts with more valuable property and gives it to districts that have less valuable property. The idea is to make sure each district has enough money to provide every kid in Texas with the same quality of education.

Everything in the previous paragraph has been argued in the state’s courts for years, and one need not employ an oracle to find out whether those arguments will continue. They will; this is about money, after all.

But Robin Hood is only part of the mechanism. Local districts put up some money for public education — that’s where the biggest chunk of your rising local property taxes goes. The federal government puts up a chunk. The state government puts up a chunk.

Generally speaking, the Robin Hood money balances the local funding differences between districts. The more dependent the overall system becomes on local financing — and local property taxes — the more money the rich districts pay to the poor districts.

Within reason, that’s no different than any transfer of wealth. The residents of some states pay more in taxes than they receive in benefits; some of the state’s counties send less money to the state than they receive in services, and so on.

That’s how this deal works. But in school finance, the subsidies get bigger when the state’s share of public education spending drops. And one effect of that — when property taxes are a big a part of the mix as they are in Texas — is that the state puts the arm on its boomtowns. 

Texas would still have Robin Hood if the state government spent more on education, but Robin Hood wouldn’t be nearly the size it is now. Ten years ago, the state paid about 45 percent of the cost of public education — the same share paid by local school districts. The federal government, as it still does, paid the remainder. But the state’s share has dropped to 38 percent, shifting more of the load to local school districts. And because those local school districts don’t raise the same amounts of money even when their tax rates are equal, that increases the load on Robin Hood.

Property owners in the property-rich districts pay more so that the property-poor districts can keep up — a job made more difficult when the state cuts its share.

State officials will tell you — correctly — that the state is spending more money on public education now than it did 10 years ago. It’s just not spending as much per student. Somebody has to make up the difference.

More columns from Ross Ramsey:

  • The state has a Rainy Day Fund with billions of dollars in it, but Texas lawmakers would rather use accounting tricks to balance their next budget.
  • The death of a teen on the run from the state's foster care system stirs deeper questions: Why aren't these programs working, and who will be held to account for that?
  • You might rejoice or bewail the death of a piece of legislation, but remember this time-proven adage: Nothing is really dead while the Texas Legislature is still in Austin. 

Texans need truth. Help us report it.

Support independent Texas news

Become a member. Join today.

Donate now

Explore related story topics

Public education State government 85th Legislative Session School finance Texas Legislature