No foolingthe robin hood school-finance law has got to go. But can anybody fix it? Here's how.
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ANYONE WHO HAS SEEN A CINEMATIC version of the story of Robin Hood knows the ineffectualness of the Sheriff of Nottingham. The sheriff puts a price on Robin’s head, lures him into traps, and has him cornered and hopelessly outnumbered—but catch him and kill him he cannot. A modern version of this ancient tale is onstage daily at the Capitol during the current legislative session, where the roles of the sheriff and his henchmen are being played by the state’s new GOP leaders. They have sworn an oath to run a sword through the Robin Hood school-finance law (so named because it takes from the rich and gives to the poor), but just as in Merrie Olde England, they can’t do it. Some of their own troops in the Legislature come from poor areas in the countryside, where Robin Hood generously bestows money. The modern sheriff is having no more success in getting rid of Robin Hood than the original did.
I don’t much care for Robin Hood myself. I live in Austin, a school district that the state considers rich, and I have seen the property taxes on my home go through the roof while the revenue is grabbed by Robin Hood and redistributed to poor districts. Don’t misunderstand: I want a school-finance system that’s fair to the poor. But I also want one that is fair to everybody else.
The trouble is that the sheriff is going about this thing all wrong. There is, I propose, a simple way to get rid of Robin Hood, reduce property taxes, and put an end to decades of litigation over school finance: Pass a state income tax. Not only is this the best solution, it's also the only solution. Don't take my word for it. Testifying before the House public education committee in February, a school-finance expert with impeccable conservative credentials recommended a flat tax of 2.25 percent on taxable income to fund public schools.
I know that an income tax is heresy in Texas—but the property tax is worse. It is an outmoded and inefficient means of raising money. It harkens back to the days when wealth in Texas came out of the ground, either from oil or agriculture or development. Today, wealth in Texas comes out of people's minds—as entrepreneurs, managers, and providers of services that require a high degree of expertise. The fatal flaw of the property tax is that it is unrelated to the ability to pay. So is the sales tax, for that matter, but rising sales taxes can't force you to sell your home. Rising property taxes can.
Texas relies on a mixture of state and local funding to pay for its schools. The state provides only 42 percent of the money; the rest comes from local property taxes. But there are huge disparities in property values—and, therefore, in the ability to raise money—among the state's 1,034 school districts. Boles, the poorest district in Texas, has just $12,000 of property value per student. Kelton, the richest, has $3.1 million. This gap means that the have-nots (school districts where property values are low) perpetually seek equality with the haves (where property values are high), producing political class warfare.
Before the late eighties, rich districts like Highland Park, a superaffluent enclave in North Dallas, were free to augment state aid with local tax dollars. They could attract the best teachers by offering high salaries and provide special features, like a planetarium at Highland Park High. And they could do it with low tax rates because their property values were so high. But in property-poor districts, even a high tax rate would not yield much revenue. (Think about it: Would you rather have 10 percent of $10 or 50 percent of $1?) This fundamental inequity—low rates, high yields in rich districts; high rates, low yields in poor ones—led the Texas Supreme Court to throw out the state's school-finance system because it did not meet the constitutional requirement of "an efficient system of public free schools."
The Legislature's solution was to tie funding to tax rates. It required wealthy districts to tax their property owners at far higher rates, and it put a ceiling on how much of this money they could keep. The excess must be shared with poor districts across the state: Robin Hood. Meanwhile, poor districts raised their tax rates too, because the higher their tax rate, the more money Robin Hood helped provide. The gap between the haves and the have-nots has been greatly reduced as a result. The extra money has, by all accounts, improved academic performance in the have-not districts. But now wealthy districts must deal with bulging classrooms, shrinking budgets, and overburdened taxpayers, just as poor districts have had to do all along.
In mid-February I decided to visit the state's poorest and richest districts, Boles and Kelton, respectively, to see how the Robin Hood law worked in practice. I could see why Boles, a rural district about an hour's drive east of Dallas, is so poor. The housing options range from modest to mobile, and not a single business is located in the district, not even a convenience store. Before Robin Hood, Boles was so destitute that warm-up drills for home football games took place in the dark because the district couldn't afford to turn on the lights until game time. Today, thanks to Robin Hood, Boles receives more than $3 million a year from Richardson, a property-wealthy district north of Dallas. Equalization has worked so well that Boles spends just $10 less per pupil than Richardson's average of $6,116. It is now such a desirable place to go to school, in fact, that more than three hundred of its five-hundred-plus students are transfers from neighboring districts like Greenville and Quinlan. One attraction of Boles is that it is able to offer small classes—an average of eleven students per teacher. Another, perhaps, is that some white parents in Greenville might prefer to have their children in a district that is 88 percent white rather than one that is 54 percent white. The Robin Hood law provides an incentive for Boles to accept transfers, because the more students it has, the more money the Robin Hood formulas provide. Meanwhile, back in Richardson, the district is strapped for funds. Because it is in an affluent metropolitan area, its costs are higher than Boles's—the starting salary for teachers averages $10,000 higher. To make ends meet, Richardson has had to increase the size of non-core classes like art, music, and PE to as many as fifty students.
Except for the pump jacks nodding in the eastern Panhandle pastureland, Kelton, the richest district in the state, looked poorer than the poorest. The Baptist Church was closed, the Methodist church had been moved, two long-defunct stores, one with vintage Conoco pumps, were decaying into ruin. I counted fewer than ten houses, most of which were smaller than anything I had seen in Boles. All the wealth lay deep underground in the gas reserves. I spent some time talking to Jay Watson, the superintendent, whose office is in the school building, which dates back to 1907. "Our people aren't wealthy," he said. "When you figure in homestead exemptions and agricultural exemptions, there are just three houses in the district I can tax." Kelton has 64 students in grades pre-kindergarten through sixth, only 17 of whom live in the district; the rest are transfers from Wheeler or Shamrock. Its annual budget is $750,000, and it antes up an equal amount for Robin Hood. Watson is worried that if the state makes even minor changes in its funding formulas, it could force Kelton to consolidate with Wheeler or Shamrock. "When I took this job, I promised the school board I'd stay for the one hundredth anniversary of the school, in 2007," he told me. "I'm worried we're not going to make it."
Robin Hood's days are probably numbered: If the GOP leadership can't get the votes to kill it, the Texas Supreme Court likely will. This spring the court will hear the latest challenge to the constitutionality of the school-finance system, brought by rich districts. They contend that the Robin Hood system has caused so many districts to adopt tax rates at or near the highest level allowed—$1.50 per $100 of value—that it amounts to a statewide property tax, which is prohibited by the Texas constitution. The all-Republican court is likely to be sympathetic. Then the Legislature will have no choice but to devise a new system, and the place to start is with a state income tax dedicated to public schools. Even the Sheriff of Nottingham ought to be able to figure this out.