Austin ISD
10:50 am
Thu August 21, 2014

Here's Why Austin ISD Won't Keep All the Tax Money It Collects

Within the next couple weeks, an Austin judge is expected to rule whether the state’s school finance system is constitutional. Meanwhile, Austin Independent School District officials are worried about how much money the district will have to educate students next year—and five years down the road. 

The reasons for that go back to something called “recapture," a process that means some school districts don’t get to keep all the money they collect. And it's extremely complicated.

It starts with property taxes. A portion of your property taxes – usually the largest portion – goes to your local school district. The school district collects those taxes. Lately, the Austin school district is collecting a lot more taxes, as the city grows and property values keep going up. But AISD doesn’t keep all that money. It can only keep a certain amount, which is determined by the state.

This is part of what the state calls "Tier I" funding.

The state decides how much it gives each school district based on a bunch of formulas. The formulas weigh student attendance and other factors,  such as, “their participation in special programs that might increase cost like special education, Career and Technical Education, bilingual education, compensatory education," says Amanda Brownson with the Texas Education Agency. Compensatory education includes programs that help poor children or students at risk of dropping out.

Put all that together and it’s the basic amount each district gets to keep to educate its students. 

Then the state looks at how much a district can raise locally with property taxes. If a district collects more property taxes than the basic amount the state says the district needs, the difference goes back to the state. This is what's known as recapture, or Robin Hood.

Recapture usually occurs in districts with a lot of taxable properties. Nicole Conley is Austin ISD’s Chief Financial Officer. She says many people think more property taxes means more money goes directly to the district. But that’s not actually the case.

“While taxpayers are paying more because appraisal values are going up, the district isn’t seeing the benefit of those increases," Conley says. "We're just merely a pass through."

That means a lot of local property taxes are actually being sent to the state.

There's another way local school districts get funding – and lose it. It’s called Tier II.

Tier II is based on a school district’s tax rate. 

Basically, Tier II funding is anything over a state cap on a district’s tax rate for regular operations. It varies a bit by district, but in Austin ISD, anything above a tax rate of one dollar is considered Tier II. If the school district keeps the tax rate under a certain amount -- $1.06 -- it gets to keep all its Tier II money.

But if a district raises the tax rate between $1.07 and $1.17 (the tax cap set by the state)—the state can recapture some of that money. So a district can ask voters to raise taxes to get extra money, but it has to decide if it wants to do that even if it won’t get to keep all the money.

For example, right now, AISD's tax rate is at a $1.07, one penny over the level in which school districts can tax residents and still keep all the money. Therefore, the state recaptures some of the money raised on just that one penny. There is some talk of holding a tax rate election in Austin ISD to raise additional funds, but nothing has been decided at this time. 

Compared to other school districts, Austin is still getting more funding per student than the state average. Chandra Villanueva is with the Center for Public Policy Priorities, a left leaning state policy think tank.
She says Robin Hood isn’t the problem.

“We’re artificially keeping school funding very low mainly with our basic allotment, is really low," Villanueva. "If state were to raise basic allotment then the amount of recapture would decrease for Austin ISD. And they could keep more of their local funds.”

But that’s a subject for the legislature or the courts to determine, which we'll look at tomorrow.