School finance expert David Thompson addressed a room full of superintendents and City leaders Tuesday afternoon with a simple analogy: School finance is like a water bottle.
Holding up the bottle, Thompson presented basic principles of Texas public school finance to members of City Council’s Intergovernmental Relations Committee and educational leaders.
Councilman Rey Saldaña (D4), who chairs the committee, opened Tuesday’s meeting by explaining the purpose of the gathering: to get City Council and local education leaders on the same page prior to Texas’ 86th legislative session.
San Antonio needs to do everything it can to “get its skin in the game to support our school districts,” Saldaña said.
The committee plans to meet throughout 2018 to strategize on how the City and school districts can present a united front on school finance and property tax reform. The goal is to propose a legislative agenda in the summer that summarizes potential solutions and priorities discussed in the meetings.
Thompson’s presentation was the first step in the process, explaining the basics of school finance so everyone could start with a mutual understanding.
The bottle, Thompson posited, represents all moneys going into public school districts. The State sets the size of the bottle and the amount of funding appropriated per student. Local districts are the first to fill the bottle with revenue from property taxes, with districts with higher property values contributing more than those with lower property values. The State fills in whatever is left vacant, meaning districts with low property values require more state support, while districts with larger property values receive less.
Sometimes, Thompson said, districts’ property values are so high that collected taxes “overfill the bottle” before the State can contribute. That surplus, commonly referred to as “recapture” or “Robin Hood,” goes back to the State.
“Good to see you, Kevin,” Thompson said, addressing Superintendent Kevin Brown, who oversees the wealthiest district in the area. Alamo Heights Independent School District has made recapture payments since 1996.
Alamo Heights ISD was one of 60-some districts throughout Texas that paid recapture at the time. In its first year, Alamo Heights paid roughly $6 million back to the State, which collected a total of $265 million from districts in recapture payments in 1996.
Now, Brown said, the district is one of several hundred districts deemed “property wealthy” and will pay more than $40 million in recapture in the coming year. In 2016, the State collected more than $1.5 billion in recapture from 380 districts.
When taxpayers look at their school taxes, Brown said, they assume all of it goes directly to funding their district. This is not the case.
Thompson noted that not all funds sent to the State are dedicated to public education expenditures. Instead, they go into Texas’ general fund and can be allocated for other expenditures, such as health care or transportation.
Each year, the State budgets for increased property values. In 2017, the State factored in an estimated increase of 7.04 percent for tax year 2017 and a 6.77 increase for tax year 2018.
Higher property values mean greater property tax revenue, resulting in more money going back to the State. Thompson said greater property values in 2015 resulted in about $1.4 billion in recapture, without a commitment to be used toward education.
Alamo Heights ISD is one of the few San Antonio area districts to remit payments back to the state, but Northside and North East ISDs both have property wealth values that put them close to the threshold.
Superintendents on Tuesday agreed unanimously that school property taxes should contribute to funding public education.
State Rep. Diego Bernal (D-San Antonio) serves as vice chair of the House Public Education Committee. He attended the Tuesday meeting, sporadically chiming in with observations from his experience at the state level.
Following Thompson’s presentation, Bernal questioned another dimension of the debate, beyond the ratio of state and local contributions: How much does an education really cost?
“Is the funding sufficient?” Bernal asked.
The State used to perform studies that examined funds needed to meet educational requirements. Thompson said the State no longer does, and therefore, doesn’t have the proper data on what it takes to fund a child’s education.
“I don’t think we have a complete handle on what the cost is of what we are trying to accomplish,” he said.
This school finance discussion takes place at a time when some State legislators say property taxes in Texas are too high.
State Sen. Paul Bettencourt (R-Houston) and Bernal serve on an interim commission to examine school finance. At the Texas Commission on Public School Finance’s initial meeting, Bettencourt emphasized that property taxes would have to decrease.
If the State only considers property taxes, it will fail to grasp the complete picture, Northside ISD Superintendent Brian Woods countered at Tuesday’s meeting.
“While yes, property taxes are high in the state of Texas compared to other states, if you look at the total tax burdens on individuals, that story is very different,” Woods said.
Other states rely on other taxes – including income and sales taxes – to fund public education. Texas only uses property tax for local revenue and does not collect a state income tax. Woods said Texans’ total tax burdens are low compared to those in other states due to the absence of state income tax. That, in turn, drives property taxes up.
There are other options to fund school finance, said Edgewood ISD Superintendent Emilio Castro, who oversees the highest-poverty district in Bexar County. Ninety-three percent of the students in his district qualify as economically disadvantaged.
Castro proposed what he called “heresy in Texas” – establishing a state income tax as a viable solution.
Another option, using sales tax, would be illogical and regressive, Castro said.
“The higher the income, the [smaller] the bite is from your apple. The lower your income, the greater the bite from your apple,” he said.
While these solutions would be vast and far-reaching, it is unlikely that the City Council will include such specific solutions in its legislative agenda.
Jeff Coyle, the City’s director of government and public affairs, said the committee will contribute to an overarching legislative agenda that City Council will then rally around. Previous legislative agendas have been more broad in nature, without specific proposed solutions for school finance.
On Tuesday, Saldaña said the group must be careful to remember that the “inability to do everything leads to not doing anything.”