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Analysis: Texas’ most persistent policy problem

You wouldn’t be out of line wondering why Texas school finance didn’t get fixed in 2017. Or 2015. Or 2013. But it’s because this is a hard policy problem and a harder political one. The prompt now is that property taxes have gotten so far out of hand that lawmakers have no choice but to act.

State Sen. Larry Taylor, R-Friendswood, l, chats at the lunch break with chairman Justice Scott Brister at the Texas Commission on School Finance meeting on Jan. 23, 2018. 

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 You can’t untangle school finance in Texas unless you do one of three politically dangerous things:

  • Cut spending on public education.
  • Raise local property taxes to keep up with growth and rising costs.
  • Raise state spending (and state taxes) to keep up with costs while keeping local property taxes down.

State lawmakers cut spending in 2011. Texans didn’t like it much, and the state has, to this day, never recovered the even balance of state and local spending it had set just five years before those cuts.

High and rising property taxes have become — for understandable reasons — a major concern for voters and, in turn, for the people who rely on voter favor to stay in office.

And the current crop of state officials elected by a price-sensitive electorate — you might remember that the now-assimilated TEA Party movement was an acronym for Taxed Enough Already — isn’t in the mood for a sudden increase in state spending, for education or anything else.

That’s the minefield the state’s latest school finance reformers want to cross. This week, the Texas Commission on Public School Finance started work on one of the state's most intractable problems, hoping to come up with remedies in advance of 2019’s 86th legislative session.

You wouldn’t be out of line wondering why this didn’t happen in 2017. Or 2015. Or 2013. But it’s because this is a hard policy problem and a harder political one. The prompt now is that property taxes have gotten so far out of hand that lawmakers have no choice but to act.

The governor is in on this, too, recently unveiling his proposal — a worked-over version of legislation that fell short last year — to limit increases in local property taxes without voter approval. The governor’s plan doesn’t call for lower property taxes and, in fact, in a detailed version of the proposal from Abbott’s political campaign, he makes the case for higher state spending on public education.

“A major effect of capping the growth of local property tax collections will be to reduce the extent to which local revenue for public schools is able to grow,” the proposal says. “The state must therefore be prepared to increase its share to the extent necessary to ensure that public schools have access to the funding they need.”

Declining public education spending by the state puts pressure on local school districts to raise property taxes to compensate. It’s not the only reason taxes rise: Overall spending per student has risen, too. But the state’s share of the costs of public education dropped to about 38 percent in 2017 from about 45 percent in 2007, according to the Legislative Budget Board. The local share — reliant on those rising property taxes — rose to 52 percent from 45 percent. (Federal funds accounted for the remainder.)

During that period, overall spending rose about 25 percent; adjusted for inflation, it fell almost 6 percent. State funding rose, but not as fast as the student population; the result was a per-student drop in state spending and a local increase in per-student spending.

That shift to local funding increases Texas public education’s reliance on “recapture” — a formula that balances differences in local property values by taking money from property-rich school districts and distributing it to property-poor districts. That redistribution is built into the state system, but when Texas cuts its share of the total, it increases the load on local property taxpayers — both for their own schools and for recapture.

Abbott contends his limits would also limit recapture but also says it would increase pressure on the state to put up the money to equalize spending across school districts.

“It is difficult to estimate the exact amount of funding that the state would have allocate for this purpose, though it is worth noting that a revenue cap would not likely eliminate the entire $1.7 billion in annual recapture payments,” the governor’s proposal says. “The state has, for too long, relied on the rapid growth of school district property tax collections to fund increases in public education spending.”

The governor, like the legislators who make up a good part of the new school finance committee, is on the ballot in 2018, and he’s clearly siding with property taxpayers. That built-in nod to increased state spending can wait until the Legislature comes back — or until the new committee starts crunching the numbers.

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