Voters in the Houston Independent School District made history November 8 when they overwhelmingly rejected a ballot proposition that would have sent millions of dollars in school property taxes to the state as part of the "Robin Hood" school finance system.
To equalize public school funding throughout Texas, property wealthy school districts must share their revenues with less wealthy districts. Almost 250 Texas school districts make recapture payments to the state for distribution to other districts. This is the first time voters have refused to authorize the payment of recapture funds.
With rising property values, the Houston ISD became considered a wealthy property tax district this year. As required by state law, school districts whose wealth level per weighted average student exceeds certain statutorily defined amounts are required to take a wealth equalization action.
An election is required the first time a district owes recapture funds. Once approved, districts can continue to send in payments without future elections.
HISD trustees lobbied voters to reject Proposition 1 in hopes that the Legislature will make changes to the way Texas public schools are funded.
Earlier this year, the Texas Supreme Court ruled that while the school finance system is not perfect, it is constitutional. In its ruling, justices noted that the school funding system is "undeniably imperfect with immense room for improvement. But it satisfies minimum constitutional requirements. Accordingly, we decline to usurp legislative authority. Our judicial responsibility is not to second guess or micromanage Texas education policy."
Data from the Texas Education Agency indicates the Houston ISD owes $195 million of its Maintenance and Operations (M&O) tax collections to the state. Houston is second only to Austin in the amount of recapture funds owed.
Since voters rejected Proposition 1, the Commissioner of Education is now required to detach business property from the HISD, including real commercial, industrial, utility, and mineral property to forcibly reduce the district's property tax wealth. The real estate will then be annexed to another school district.
To bring the HISD into compliance, approximately 100 parcels worth $20.4 billion must be annexed by another district. An analysis by the Texas Taxpayers and Research Association (TTRA) shows the only eligible school district that can annex all the detached HISD property and still remain under the property wealth level that requires recapture is the Aldine ISD.
If HISD properties are transferred to the Aldine ISD tax rolls, TTRA figures predict a $0.09 tax increase for the detached properties. Also property that is not detached from the Houston ISD will be left paying higher debt service taxes due to the decrease in property values that service the debt.
If lawmakers fail to intervene, Houston schools stand to lose approximately $239 million in property tax revenue, which is more than the recapture payments owed to the state.