[CSPS] school finance

Tue May 2 14:07:57 CDT 2006

FYI:
Texas A&M Real Estate Center Researcher Explains Texas School Finance
Tuesday, May 02, 2006

As the Texas Legislature struggles to agree on a new school finance 
bill, the public puzzles over its possible provisions.  Some clues to 
understanding the role of property taxes in this maze are offered by 
Texas A&M University's Charles Gilliland, a research economist in the 
Real Estate Center at Mays Business School.

"Texas has one of the highest effective property tax rates in the 
United States, typically ranking about 12th to 13th in the nation," 
says Gilliland.  "Texans' property tax burden is much higher than, 
for example, that of Californians.  School taxes constitute 55 to 60 
percent of a homeowner's total property tax bill.  Current rates 
constitute an onerous burden for homeowners."

Now the statutory limitations on school maintenance and operations 
tax rates have rendered the current system of school funding 
unconstitutional.

"As contributions from the state general fund have fallen as a 
percentage of total school funding, more responsibility for 
supporting education has shifted onto the local property taxes," says 
Gilliland.  "In fact, this shift to local property taxes has pushed 
local tax rates to the ceiling prescribed by law, so that local 
school property taxes in essence now constitute a state property tax, 
which is unconstitutional in Texas."

The Legislature is faced with figuring out how to inject funds into 
school finance to allow reduction of the maintenance and operations 
(M&O) tax rate.  Previous special sessions have considered proposals 
such as reducing the M&O rate from its present high of $1.50 per $100 
of assessed value to $.75.

"Such a reduction could be achieved no other way than by using state 
funds," Gilliland says.  Another proposal on the table in this 
legislative session, put there by the governor, suggests cutting the 
M&O tax by $.33.

"Many Texas citizens incorrectly believe that all this school finance 
money goes into building gold-plated educational palaces, Taj Mahals 
of public education," Gilliland says.  "In fact, school construction 
is financed out of funds earmarked for interest and sinking (I&S) 
funds to reduce bonded indebtedness for capital improvements.  These 
rates usually amount to just 10 or 11 cents per $100 of assessed 
property value.

"Even the highest I&S rates don't exceed 50 cents, and those are 
found in fast-growing suburbs which are building lots of 
schools.  So, contrary to much popular opinion, we Texans are not 
pouring lots of dollars into facilities construction."

Gilliland notes that many taxpayers believe that funds from the state 
lottery, originally earmarked for school finance, are being used 
improperly, but he points out that the lottery proceeds are dedicated 
to support education; however, the lottery brings in only about $1.5 
billion, "a drop in the bucket" when applied to the state's $17 to 
$18 billion education budget."

"The amount of school financing needed is increasing each year 
because our school systems are gaining 70,000 or more students each 
year," Gilliland says.  "That's like adding another entire Fort Worth 
school system each year.  With this level of increase, it's hard to 
expect that the current level of financing will remain adequate."

Two ways to address the need for more money for education have 
emerged during this legislative session.  One, favored by the 
governor, proposes a new tax on gross receipts of businesses 
collecting in excess of $300,000 each year, with sole proprietorships 
exempted.  The other proposes using the state's budget surplus to 
infuse more funds into school finance.

"Currently, enough surplus exists to drop the local school tax M&O 
rates below the $1.50 cap," says Gilliland.  "But such a measure 
could be just a one-time solution.  The other measure is popular with 
small businesses, as you might imagine.

Whatever the solution chosen by the legislature, it won't involve 
"killing Robin Hood," says Gilliland.  This school funding provision, 
which involves transferring money from wealthier districts to support 
schools in poorer districts, benefits far more Texans than it hurts, 
since two-thirds of all school districts receive, rather than donate, 
money under this law, he says.

"More constituents will favor Robin Hood than oppose it, once they 
understand the bottom line," Gilliland observes.

For more information about property taxes and other real estate 
matters, go to the Real Estate Center Web site at 
<http://www.recenter.tamu.edu/>http://www.recenter.tamu.edu
http://our-news.tamu.edu/newsmanager/templates/?a=2693&z=15

Jonathan Coopersmith
Associate Professor
Dept. of History
MS 4236
Texas A&M University
College Station, Texas  77843
979.845.8584
979.862.4314 fax

Secretary
History & Philosophy of Science Section (L)
American Association for the Advancement of Science
aaas.org 
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