Do districts get more money when property values increase?

Many people believe that when their property values increase, Cypress-Fairbanks ISD receives extra revenue. It doesn't. More funds for Cypress-Fairbanks ISD would be an asset for the community; however, that is not the way the current state funding system works. Local money simply replaces money that would have come from the state.

What are the revenue sources for school districts?

School districts have only three primary funding sources: local property taxes, state revenue, and federal funds. Some governmental entities receive revenue from sales taxes, but school districts do not.

What is equalization and why does the state share local property tax revenue with other districts?

Education in Texas must be a top-priority. It must also be equally available to all children across the state. Texas courts have held that each school district should have the same access to funds to support its schools as any other district in the state.

Under the current funding system, equal access to funding for each child is prescribed through state funding formulas called "equalization." In the equalization process, the state is attempting to ensure the same amount of funding for each student attending public schools. This guarantee is accomplished by requiring school districts with larger property tax bases to either send local tax dollars to the state to be distributed to other districts or to have state funding decreased in proportion to the amount of tax revenue that can be generated locally.

With equalization, a district's level of wealth (the amount of revenue that can be generated through local property taxes) determines if the state increases funding, decreases funding, or recaptures funding (takes local revenue away). Cypress-Fairbanks ISD has lost considerable state revenue due to increased local property values.

When local property values increase, local taxpayers pay higher taxes and school districts receive more local revenue. However, the state then reduces it share of money to fund school districts. In essence, the more property values rise, the more the financial burden shifts away from the state and onto local taxpayers. For the past two years, local taxpayers have shouldered $31 million that would have been previously funded by the state.

What impact does equalization have on CFISD?

When property values rise, the district receives the additional revenue. Yet, under equalization, CFISD loses that amount in state aid. Our schools do not benefit from our local taxpayers' larger tax bill -- the state does. The total amount of educational funding that the district receives remains the same. Only an increase in the property tax rate can provide continued funding for educational programs. However, the district's Maintenance and Operations Tax rate cannot be increased again under the current system. For the past two years, the CFISD Board of Trustees voted on a M&O Tax rate of $1.50, which is the state cap.

Information Source: Real Deal

[Finance Home Page]