Some Texas districts to pay $5 billion in property taxes to fill funding gap at other schools

Tuesday, May 2, 2023
Districts pay billions in taxes to fill funding gap at other schools
13 Investigates found even though districts are collecting billions more in property taxes for education, that doesn't exactly mean school funding is increasing.

GALVESTON, Texas (KTRK) -- Cynthia Velazquez parks her car outside Central Middle School as she waits for her child to be released from school.

Velazquez said there are a few things that have changed at the school since she graduated from the Galveston Independent School District, but the decades-old building where her child goes could use more improvements.

"I went to this school. I've been here all my life, so I was born here and raised here, and I went to all the schools, and they were all good," Velazquez told 13 Investigates. "They have been upgraded, but it still kind of looks the same."

Galveston ISD said it could make more updates to schools or even build new ones and give teachers raises if only it could keep all of the millions in property taxes residents pay specifically for education.

In Texas, districts can only keep a certain amount of local property taxes per student. The rest is "recaptured" and sent back to the state.

If a district, like Galveston ISD, collects more than the basic amount it is entitled to per student, they are required to send the extra property tax collections to the state. The state then redistributes those funds to other districts that don't collect enough in taxes locally to fund their own enrollment.

Advocates say it's a way to ensure every student receives the same amount of basic funding regardless of where they live.

"Property values across the state vary dramatically from school district to school district, and if we didn't go in and equalize funding between districts, we'd have some districts that are only able to raise maybe $1,000 (or) $1,500 per student with their tax rate while other districts are able to raise $14,000 (or) $20,000," said Chandra Villanueva, director of policy and advocacy at Every Texan. "If we didn't level it off between the two districts, we'd be asking them to offer the same level of education at very different levels of resources."

This year, Galveston ISD is sending back 43% of the property taxes it collected to the state instead of spending it on public schools in town as part of Recapture, which is also known as the "Robin Hood" plan.

During the first year of Recapture in 1994, only 34 school districts had to pay a combined $131 million to the state for collecting more property taxes than they were entitled to, according to the Texas Education Agency.

Now, 13 Investigates found the amount school districts send back to the state has increased over the years to nearly $2 billion more than what's needed to make up for districts that don't collect enough property taxes for their enrollment.

The number of districts considered "property wealthy" has also increased, with more than 260 districts paying into the recapture system.

"When more dollars from recapture or come into the system, that means that the state can put less of its general revenue in to support schools instead," said Christy Rome, executive director of the Texas School Coalition. "What they do with the general revenue that they're able to save because they don't have to use it for schools, we really can't track and know, so I think that for many schools, they feel like they're sending in additional dollars through Recapture and Robin Hood, but yet schools in the state are not seeing increased funding as a result of it, and we really can't see what the state is doing with the money that they save as a result of it either."

13 INVESTIGATES INTERACTIVE: Want to know if your school district is sending money back to the state as part of the recapture or "Robin Hood" program? Search for your district on the map below. If your district isn't on the map, that means it isn't paying local taxes back to the state this year. On mobile device? Click here for a full-screen experience.

The TEA admits even if districts collect more in property taxes, that doesn't mean more overall money for education.

The TEA said districts are funded through both local and state funding. Since 100% of local property taxes have to "stay in public education," that is the first funding source, the TEA said.

"The remaining funding - whatever amount it takes to fill the rest of the entitlement bucket - comes from various state sources, such as lottery proceeds and tax revenue. If recapture goes up, for example, due to property value growth, less state funding is needed to reach the entitlement level (of per-student funding). If recapture goes down, for example, due to property tax relief enacted by the legislature, more state funding is needed to fill the cup. In both cases, this is a question of how public education entitlements will be paid for, not how much districts will receive," the TEA said in a statement to 13 Investigates.

Our analysis of state data shows 185 school districts are paying more than $1 billion combined more than they did last school year.

Despite 80% of Galveston ISD students being considered by state standards as economically disadvantaged, the City of Galveston itself is considered property rich.

This year, Galveston ISD is expected to collect $103 million in local property taxes, according to the Texas Education Agency's budgeted financial data for the 2022-23 school year. But, the district had to send back $44 million as part of the recapture. Ten years ago, the district only had to send back $11 million to the state.

"We're being penalized for something that's really out of (our) control," Galveston ISD Superintendent Dr. Jerry Gibson told 13 Investigates. "It's out of the control of the 6,700 to 6,800 students that we have here. It's not their fault that we're property rich, and it's nobody's fault. It is what it is. We have great tourism. We have the Port of Galveston, and you have very nice beach houses, and that's not our children's fault, but who has to pay the price?"

Houston ISD is budgeted to send back $247.4 million in property taxes as part of recapture this year, according to the TEA.

State data shows Cypress-Fairbanks, Katy, Fort Bend, Conroe, and Aldine independent school districts aren't budgeted to send any property taxes through the recapture program.

Districts are 'not adequately funded'

Some lawmakers and advocates are concerned the state isn't doing enough to contribute its fair share toward education.

"The true solution to solving recapture is the State of Texas doing its constitutional duty in paying for public education, and that's why I support the State of Texas paying 50% of public education and not putting that onus on the property owners," State Rep. Mihaela Plesa, D-Dallas, told 13 Investigates.

Plesa has filed several bills this session that would reduce recapture and keep more property tax funds in local schools rather than sending it to other districts across the state.

The lawmaker said her desire for local school districts to send less money to the state is "not about not wanting to help other school districts."

Plesa said she wants to make sure all five million of the students in Texas' public schools receive equal educational opportunities, but the state needs to do a better job or prioritizing education instead of "defunding education."

"We need to know where our money is going. I pay my property taxes every year, and I'm assuming that that money is going to pay for teachers, for retired teachers, for school buildings, to protect my kids and to make sure that they're getting a fulfilling education," Plesa said. "What I'm finding out is that most of that money is going into general revenue, so our 'tax-parency' bill ... will basically show the receipts that show people where is the money going. Is it staying inside my school district? Or is it getting sent back to the state, and then they're using it for things like building a wall?"

Advocates tell us one way to make sure recapture districts keep more of their local property tax dollars is by raising the basic amount of money each district gets per student.

"(Recapture) is really an equity tool that's about leveling the playing field between districts, and what a lot of people get confused about is the concept of equity and adequacy," Villanueva said. "What we have is a somewhat equitable system because of the recapture program, but what we don't have is adequate funding, so people get upset when they pay recapture because they're not adequately funded, and that's what we're really trying to address, is how well our schools are funded."

According to the Texas Education Agency, "the basic allotment is the legislatively mandated apportionment of funds from the general revenue funds that goes to each school district to provide a basic level of education for the district's residents."

The Texas Education Code says a district is entitled to at least $6,160 per student. The amount the district is entitled to an increase depending on student characteristics, like special education or socioeconomic factors.

Still, the basic allotment of $6,160 per student hasn't increased in four years. The last increase was during the 2019-20 school year when the allotment increased about 20% from $5,140 per student.

When we asked the Texas Education Agency if it supports increasing that amount, they told us it "can't comment on pending legislation."

There could be some changes on the horizon to school funding. Last week, the House passed a nearly $4.5 billion school finance bill that would give districts an extra $90 per student in 2024. The bill is now waiting for Senate approval.

"Unless the state raises the formula amounts, like the basic allotment and other things in the formula, public education really has no more money to spend than they currently have, so just doing away with recapture doesn't fix anything in terms of the state funding system," said Ray Freeman, executive director of The Equity Center, a nonprofit that represents more than half of the state's school districts.

At Galveston ISD, Gibson said he wishes the district didn't have to send millions back to the state because that money could go toward increasing teacher pay, better facilities, and providing more after-school programs for students who need it.

"You talk about a parent who might work two jobs to keep their lights on, to feed their children to whatever it might be. They would know that while I'm working my second job, my child's still at school because we have money so we can have those afterschool programs, where they're going to get another meal. They're going to get more instruction. They're going to get time to burn energy," Gibson said.

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