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On Schools, Straus Plays with House Money

In jab at Senate, House budget proposal makes $1.5 billion in property tax relief contingent on school finance overhaul.

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Speaker Joe Straus on Opening Day of the 85th Texas Legislature.
Photography by Bob Daemmrich

The only bill that must pass the Legislature is the two-year state budget, and more often than not it turns into a test of will between the House and Senate leadership—and if the preliminary budget proposals laid out by the chambers on Tuesday are any indication, the game is once again afoot. But this time House Speaker Joe Straus put pressure on the tax-cutting reputation of Lieutenant Governor Dan Patrick by including $1.5 billion in the House plan for potential property tax relief.

The catch? The money only becomes available if lawmakers overhaul the state’s clunky system of property tax recapture and redistribution, popularly known as Robin Hood. Straus wants to tackle the topic this session, but Patrick has said it is too complex and needs a special legislative session all its own.

Robin Hood is designed to take excess property tax money from wealthy school districts and give it to property poor districts to equalize education spending in the state. The problem is that rising real estate values have turned many school districts that once were in the middle of the pack into statistically wealthy ones.

That trend would allow the state to cut the money it is putting into public education over the next two years by $1.5 billion because it is offset by higher local property values. In other words, that cost of educating the state’s children is shifted from the state to the local taxpayers.

Faced with an overall budget shortfall, the Senate’s starting plan takes that $1.5 billion windfall and puts it back into the budget. The House plan, however, makes that reinvestment contingent on overhauling Robin Hood. The money would not necessarily result in a property tax cut, but it would relieve some of the pressure on local districts.

Putting school finance off to later this year might be fine were it not for several pending funding crises for some local school districts.

The first major problem is wealth redistribution among the state’s school districts. Austin has growing complaints that the city’s housing is becoming unaffordable. Austin’s wealth comes from rapidly rising property values in the city, not necessarily from a growth of income among its citizens. As a result, the state’s Robin Hood system, which looks just at property values, considers the Austin school district wealthier than it actually is. So Austin sends $175 million in much-needed local property taxes to the state for redistribution to other districts.

Houston Independent School District is facing a similar problem. This year it owes the state $162 million for redistribution. Houston voters last fall followed Mayor Sylvester Turner’s lead and voted against writing a check to the state for redistribution. Instead, the Texas Education Agency now will take high-dollar properties off the HISD tax roll and give it to another school district to tax. That means HISD not only will lose the property for maintenance and operations expenses but also for the taxes collected to pay off school construction bonds. Plus, the business property owners might face higher tax rates in another district. The point of the vote was to create a crisis that forced the Legislature to act before the property is transferred on July 1. Essentially, Houston voters took themselves hostage with a demand that the Legislature save them from themselves.

Former state officials, Governor Rick Perry and Speaker Tom Craddick, knew one way to bring property taxes under control, even if only for a short time, is to increase the state’s share of funding for public schools. When they passed their property tax overhaul in 2006, the state was paying only 34 percent of the cost of education, with local districts picking up the rest of the tab, but the state’s share rose to 48 percent after they used state funds to replace local property taxes. State budget cuts in 2011, drove the state’s share down to about 45 percent, but that is expected to drop even farther in the next budget cycle because the state funding formula reduces state spending due to robust property value growth in parts of Texas.

While Patrick and other Republicans might be inclined to cast a side eye on the Democratic strongholds of Austin and Houston, another part of the school funding scheme, known as Additional State Aid for Tax Reduction is set to expire on September 1 and will hit some school districts in Republican areas the hardest. This is money paid to school districts to make up for revenue lost due to the state-mandated property tax cuts. Frisco, in fast-growing Collin County, will lose $36 million in state funding, while another Collin County district, Prosper, will lose $15 million; Round Rock north of Austin, $17 million. And poor Austin, on top of the Robin Hood money it pays, will lose $12 million in state property tax offsets. Frisco voters in August rejected a local property tax increase to make up for the lost state money. The district already is looking for budget cuts for the next school year.

There is one other major difference in the base budgets of the House and Senate, though. The Senate version spends $103.6 billion of the $104.9 billion Comptroller Glenn Hegar has estimated that lawmakers will have to spend over the next two years. The House budget, though, starts at $108.9 billion. To balance the budget, the House would have to use accounting tricks such as deferring payments to the next budget cycle, make cuts or dip into the state’s $11.1 billion rainy day fund.

Both the House and Senate budgets outlines include substantial increases for Child Protective Services: $268 million in the House plan and $260 million in the Senate’s.

“We keep overall spending low while making investments in children and our future,” Straus said in a news release. “We put an emphasis on public education, child protection and better mental health care.”

A side-by-side comparison of the two plans was not immediately available, but Senate Finance Chair Jane Nelson said her plan will provide $2.65 billion to cover a projected student enrollment growth in Texas of 80,000 students, but the House plan released by Straus’ office showed an enrollment growth of 165,000 students.

“This base budget is a starting point,” Nelson said in her announcement. “I look forward to working with my colleagues to develop a balanced budget.”

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  • WUSRPH

    Maybe a complete explanation like this one will give the readers enogh background that will make the discussion more than the usual “the state does not spend enough” on one side and “it spends too much” on the other. Thanks for your complete briefing.

    • Gunslinger

      Do other states use property taxes to fund schools? It seems like a strange mechanism to me, but maybe it’s not that odd.
      What states do you think “get it right” on properly funding public schools? What do they do?

      • St. Anger

        State income tax

        • donuthin2

          It is really the only rational way to tackle the problem, but we have no record of being rational on the subject. Bullock tried and failed and then out of frustration advocated for a constitutional referendum against it, which easily passed.

          • WUSRPH

            Actually, at one point at least the constitutional referendum was part and parcel of a plan to pass the income tax and was not intended to be the barrier to an income tax most now think it to be. The tax and the amendment which dedicates two-thirds of the revenues to school property tax cuts were to be presented as a package deal. They were to be tied together so that you would get the property tax cut ONLY if you voted for the income tax. At least that’s how Bullock explained it to me.

            For various reasons–at least one of which still baffles me—that plan never got off the ground and the first part of the package–the income tax bill–was dropped. The result is a provision in the state constitution that now says we can only have an income tax (dedicated to property tax reduction) IF the voters approve it in a statewide vote. You—and others–see this as a barrier to ever getting such a tax. You may well be right.

      • WUSRPH

        Most states use some property taxes for schools but few put as heavy dependence on it. The problem here is that the lege. has put so much of the burden on the locals that it can not really reverse the ratio without billions in new state revenues. Replacing all local taxes would cost over 50 billion per year. This could require a sales tax increase of up to 9 to 20 percent depending on the base. Bullock propoosed an income tax with two/thirds dedicated to property tax relier but could not get the votes to implement it. It requires a vote by both the lege and the voters.

      • WUSRPH

        I’m not sure you can say which states “get it right”…..Quite a few (more than 30) spend more per pupil than we do….and most of the higher spenders have been test scores, etc. than we do. There are really two questions for Texas: Is our system “adequate” and “equitable” in that it provides the funds necessary to give all of Texas’ school children the quality of education they will need to thrive in the future? And, should it be funded by a more “progressive” statewide tax or continue to rely on the local property tax with all its inequalities and regressiveness? To date the legislature has ducked both questions…..while playing around with various ultimately ineffective “property tax relief” schemes to at least temporarily placate the local voters.

  • St. Anger

    i think it is important to keep separate the various issues that are all wrapped up together under the heading of school funding.

    there is where the money comes from, how is it assessed, as distinct from where it goes, how it is allocated. those are separate questions and can be answered independently of each other. keeping these separate issues separate in our discourse might make for more opportunities for a breakthrough, if only on one side or the other.

    we need a conversation about how the state gets its money. and we need a separate conversation about how it funds education from that money.

    here is an example from the article:

    “The first major problem is wealth redistribution among the state’s school districts. Austin has growing complaints that the city’s housing is becoming unaffordable. Austin’s wealth comes from rapidly rising property values in the city, not necessarily from a growth of income among its citizens. As a result, the state’s Robin Hood system, which looks just at property values, considers the Austin school district wealthier than it actually is. So Austin sends $175 million in much-needed local property taxes to the state for redistribution to other districts.”

    but since it is property tax dollars being collected, and the redistribution is on the basis of property tax dollars (i.e. not incomes or sales taxes or etc), there is no inconsistency there. austin pays its robin hood contribution with the same inflated property tax receipts that they collected in the first place.

    in other words, this particular point – that austin feels poorer than its real estate values and thus overtaxed – is not a criticism of robin hood, it is a criticism of the basic idea of property taxes.

    so tackle that, and the school finance question gets cut in half.

    • WUSRPH

      Doing away with Robin Hood without doing something about the over reliance on property taxes will just make the equity problem greater than it is. The whole system needs reexamination which would probably require something like the Select Committee on Public Education (Perot Committee) or the Jaworski Commission of the late 60s-early 70s and not cannot be done until the interim. Meanwhile, local taxpayers will continue to scream about high property taxes and legislators will listen.

      P.S. To put Robin Hood in more perspective…the $1.5 billion figure is ONLY the increase in the amount of Robin Hood transfers over the past budget. The TOTAL of Robin Hood tax money is more than $5.6 billion… That suggests that, even if the Straus idea is adopted, local property taxpayers in several hundred districts will still see more than $4 billion of their local property taxes being sent to Austin for redistribution among the remaining school districts.

      • SpiritofPearl

        Once again one asks why Texas has no state income tax. Property taxes and sales taxes are regressive.

        • WUSRPH

          The lack of 19 votes in the State Senate (the minimum number required to bring up a bill) and 76 votes in the House PLUS the approval of a majority of the voters in a statewide election….that’s all.

          • SpiritofPearl

            Texas has many great qualities, but often engages in self-destructive behaviors.

          • WUSRPH

            Public education in Texas has always relied on property taxes…either local ones or the one the State had at the time…..It was not until 1949 with the Gilmer-Akin Act that the State started putting in substantially more State revenues…..the State share has varied since then and is now down to the lower 40%age with the local tax paying for just under 50% of the cost, not counting local taxes for bonds, etc. which put the local share of the total program at more than 50%. Why no state income tax?…..The time to adopt one never came….Originally, oil and gas taxes provided the needed revenues but as the State grew new taxes were adopted. The real decision point of which way to go was probably in 1961 when the battle was whether to go with a sales tax or some other tax (including income)…..After a long and vicious fight, the sales tax was adopted……and it has been that way ever since.

          • SpiritofPearl

            I’m interested in how and when the initial decision was made. Was that when Texas re-entered the Union after the Civil War?

          • WUSRPH

            I know how much you want me to be able to say that Joe Smith did it on Feb. 12th….but, in reality, there has never been a day since 1839 when the Congress of the Republic of Texas first dedicated some of the income from state lands to public education when the revenues from fees, rents and taxes, or all three, on land have not been used to finance schools in Texas. For most of Texas’ history LAND was the only thing of value from which revenues could be raised….as such, it has been taxed from the very beginning. The question is not whether land taxes are used, but to what extent.

          • SpiritofPearl

            I don’t “want” you to say anything, just the facts.

            There is a property tax based economic model and an income tax based model for funding the state government. Indiana uses property taxes to fund schools, but income taxes for most other tasks of the state, so the burden doesn’t fall so heavily on property owners.

            As you must agree, TX has set aside vast revenue producing properties in order to attract businesses to the state. The upshot is that residential property owners are overburdened. Businesses are not carrying their fair share of the load.

          • WUSRPH

            Texas uses a combination of property taxes and state funds to finance public education; property taxes and, in some cases, a portion of the sales tax, to fund local governments; and primarily a sales tax to fund the State government. The only property taxes it gets are the those raised by the Robin Hood Tax, as I call it, on riche school districts.

            As to business not carrying its fair share of the load……it is going to carry even less if Dan Patrick has his way and continues to chip away at the so-called Franchise Tax which is the only general tax on business we have. It has been cut by each of the recent legislatures and, despite the tight budget, Patrick is pushing for another cut this session, eventually leading to its total repeal. You have to understand that these people DO NOT BELIEVE in taxing business. They think that hurts the economy……They, as former Gov. Preston Smith once put it, believe that “All taxes are eventually consumer taxes so why not do directly to the consumer.”

            Patrick’s friends at the TPPF want to do away with the property tax, especially the part paid by industry and business, and go to a straight sales tax. The problem is that that tax would have to raise more than $60 billion PER YEAR and would require a sales tax of up to 20% to fund, depending on the base on which the tax is applied. TPFF says the tax can be kept down to 9 to 11% but that requires us to tax everything being taxed by at least one other state—drastically expanding the base of the sales tax in the process. If would require at least a 20% rate if we did not expand the base.

            The problem is that my and other analyses demonstrate that the result would be that 80% of the tax payers of Texas WOULD WIND UP PAYING MORE TAXES after the property tax were repealed. You would have to have an annual income of more than $120,000 per year to get any benefit.

            The political benefit of substituting a sales tax for the property taxes is that most taxpayers would not notice it after awhile. It just becomes part of the total cost of buying something…whereas business and the more well-to-do property tax owners clearly know how much they are paying since they pay it once per year rather than at every purchase.
            Of course, Patrick also favors this plan..

      • St. Anger

        Ho-Kay.

        I wish you would stop saying this money is being sent “to Austin.” As I am sure you are aware austin isd pays into Robin Hood.

        You mean the money is being sent to the state government for redisbursement. Austin is a city. We are certainly not the state government.

  • John Bernard Books

    Time for dems to face facts
    “When President-elect Donald Trump replaces Barack Obama on January 20, the Democratic Party will find itself more removed from power than at almost any point since the party’s creation.
    Scorned by the same voters who once embraced the New Deal, built the Great Society, and put their hope in the nation’s first black president, Democrats are now locked out of power in Washington and out of two-thirds of state legislative chambers across the country.”
    http://www.nbcnews.com/specials/democrats-left-in-the-lurch

    Dem voters are fools….Straus will use dems because he doesn’t have republican support.

  • BCinBCS

    Austin is getting screwed by Robin Hood. Austin sends about $185 per person to other school districts while Houston donates only about $70. College Station transfers about $95 per person but they have an agreement with their sister city, Bryan, to send its money to them – thus benefitting the Bryan/College Station area as a whole. But Austin is really getting hit hard.

  • WUSRPH

    RG: You say the House can only balance its budget by using some of the by now traditional “accounting tricks” and/or tapping the Rainy Day Fund….BUT isn’t what Straus is proposing in reality just another accounting trick?

    The only way to truly provide “property tax relief” is for the State to replace local dollars with State dollars. The way you have explained the Straus plan it doesn’t do that. Instead, he would use $1.5 billion the state receives from Robin Hood—local property tax revenues—to provide “property tax relief”….No STATE dollars are involved. ONLY local tax revenues processed thru the state budget and sent back to local districts. Unless that “relief” is limited to the Chapter 41 Districts (those that pay the Robin Hood Tax to the State) this means that the people of Austin would be taxing themselves to provide at best a few dollars worth of property tax relief to themselves and other districts.

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    • BCinBCS

      W, thank-you for letting us know this. I am amazed at the sleights-of-hand that are employed by the legislature to dupe Texans.

      • WUSRPH

        This is nothing….You should read the section on “smoke and mirror budget tricks”, “the sweep” and the “Rainy Day Fund” in the draft of the 7th edition of my legislative training manual to see how good the Legislature is at sleight-of-hand tricks when it comes to “balancing” the budget.

        • BCinBCS

          Hey, go check your e-mail and send a reply.

  • John Bernard Books

    If we could just raise taxes, and spend more….sigh……

  • John Bernard Books

    Today is Prez Obama last day as prez Tx A&M recently rated him as the 5th best prez in our history
    https://uploads.disquscdn.com/images/70055bce69a953d975a63f0a43ceb082b51e7f9b7f24a312f474d460ec094d03.png

  • John Bernard Books

    ‘TWAS THE NIGHT BEFORE THE INAUGURATION:

    ‘Twas the night before Inauguration, and up in the tower
    The Donald reflected on his newfound power.
    The Deplorable masses had come out in force
    Delivered a victory that would chart a new course

    The snowflakes were shell-shocked with tears in their eyes
    The media had lied to them . . . ‘What a great surprise
    They had been promised a blowout a criminal Hillary win
    But instead ole criminal Hillary took one right on the chin

    From all corners celebrities took their far left cue
    Telling the deplorables we’re far smarter than you
    In their high-horse bubble, with no working-class clue
    They tell us all we must follow their out of touch view

    The fake news and ignorance came at a cost
    They can’t understand all the reasons they lost
    Blaming it on Comey and Russian excuses are sad
    Failing to acknowledge she was the one who was bad

    Yes, Hillary Clinton, in so many ways was flawed
    She couldn’t help exposing she was a lying fraud
    The campaign revealed her corruptness and greed
    Her speeches insulted deplorables’ votes she’d need

    Out in the city streets there arose such a clatter
    It was Soros-paid protestors…Black Lives Matter
    With businesses to pillage and windows to shatter
    Looting was their game knowing issues did not matter

    Eight years of Obama had given them plenty of cause
    To yearn for a replacement with another Santa Claus
    Soon the bottom-feeder criminals will all feel the pain
    When the wheels fall right off of their gravy train

    And now all the snowflakes are riddled with fear
    Upset the PC police will soon be out on their ear
    The cocoa and crayons will help them for a while
    But soon reality will creep in and cramp their style

    I would’ve supported any Republican that rose
    In the end I would vote for whoever we choose
    He wasn’t my first choice, but soon I would concede
    The one they call Trump is the one that we need

    I saw him on TV in front of a very large crowd
    He spoke about veterans, it made me feel proud
    He spoke about energy safety prosperity and jobs
    Taking this country back from the Washington snobs

    He was dressed in Armani, all tailored and neat
    The Bruno’s he wore made his outfit complete
    For a man of his vintage, he seemed rather fit
    And he looked presidential, I will have to admit

    His eyes glowed like embers, his smile the best
    His hair was the color of my old hunting vest
    His love for this country was on full display
    His actions spoke louder than his words could say

    He thanked all his voters, and before he was off
    Saved thousands of jobs while Obama played golf
    Fate of this country he leaves nothing to chance
    Filled out his superior cabinet weeks in advance

    The men he had chosen were of the same mind
    Let’s set the bar high, and not lead from behind
    He picked up his phone as he rose from his seat
    With a flick of his finger, he sent out this tweet

    “Now Mattis ‘Now Kelly ‘Now Sessions’ And Pruitt’
    On Perry’ On Flynn’ You’re the ones who can do it
    Start lifting those restrictions and building that wall
    Dash away ‘Mattis ‘Kelly’ and ‘Flynn ‘Dash away all!

    The roar of his audience rose from the stands
    He kissed all their babies and shook all their hands
    He answered their questions and calmed all their fears
    They knew it was going to be a productive four years

    He then jumped into his limo, and off to his jet
    A fellow that snowflake liberals won’t soon forget

    He sent one more tweet as the evening expired
    “Happy Inauguration to all, “OBAMA > YOU’RE FIRED!”

  • John Bernard Books

    Prez Trump landing in DC in YYYYYYYYYYYYUUUUUUUUUUUge Air Force 1

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