As if our state finance reporting couldn't get worse!
While investigating how the school districts across the state that are shielding almost $1 Trillion in property values through Chapter 313 abatements could be shorting the school recapture or "Robin Hood" fund, this comes to light.
It seems the state of Texas has turned the court founded "Recapture Payments" into essentially a general slush fund. (Recapture is the school funding where asset rich school districts with high property values are used to fund districts that cannot raise a sufficient funding to support their school district)
Because Texas collects the recapture payments from the school districts in a formulaic basis, then comingles that money in the Foundation School Program (https://tea.texas.gov/finance-and-grants/state-funding/foundation-school-program/foundation-school-program) to disperse to those school districts recognized as in need. The problem in comingling the school district recapture payments with the Foundation School Program is it cannot be determined if those school districts are funding beyond the needs to achieve the court findings to require Wealth Equalization. This then becomes a tax levied on the higher value school districts to fund the state but not necessarily balancing education costs between districts. This could be a violation of the court findings if not an out and out absconding of additional revenue.
SOLUTION: Recapture funds should not be comingled into the Texas General Funds of the Texas Treasury. Is this possible? Can this data be captured? It can be. The TEA reports on the districts that are deemed to be in the receipt of recapture funds. The student population of these districts is known. The state average daily attendance allotment is set by the legislature so this is a known. The rest is simple calculations. Then everyone will know the amount collected and expended. If Texas is collecting more in recapture than it takes to achieve wealth equalization, then the school districts paying should see a reduction in their recapture payments. The district can either lower the property tax rate or at least have more money for educating the children in their district.
This generates an outcry from TEA and the Texas Legislature, that Texas will have to pay more of the costs of Public education. Well that is the legitimate cost of public education and Texas shifting those costs over to districts determined to be wealthy does not really meet the test of the court finding. If the Texas portion of public education costs should be higher, so be it!
Shifting the legitimate statewide burden to roughly 167 school districts determined to be "property value rich" is not the premise that the Texas Supreme Court ruled. The funds collected from the high property values school districts should be accounted for in a separate account and the payments to schools requiring recapture payments disbursed from that account. In this way, if this account should generate a surplus less need be collected from the wealthier school districts . Any shortfalls will be transparent that more money is required from the general funds. This would increase transparency of school financing. It could expose even more how much Chapter 313 property tax abatements are costing Texas Taxpayers.
The Legislature's slush fund of recapture must come to a screeching halt. There are around 167 school districts paying into the comingled slush fund labeled "recapture". They should collectively sue the Texas Comptroller's Office and demand a full accounting of the recapture formulae. They should also sue those school districts giving out Chapter 313 property tax abatements therefore possibly lowering their payments into recapture.
As Chandra Villanueva, Director with Every Texan, says, " “It’s just a leveling tool between districts based on the formulas."
And Ms Villanueva is exactly right. But the Texas Legislature is allowing comingling recapture within the Foundation School Program which has turned a $3 billion "wealth equalization" directive into a hush hush slush fund.
When Recapture or the colloquial "Robin Hood" fund was established in 1993 it was about a 3 dozen school districts paid in $130million. Today it is $2.87 billion and has over 160 school districts paying. However, we can not determine if those funds go directly to benefit the lower wealth school districts in order to meet the court's ruling and directive. When we add in the $1billion in Chapter 313 corporate property tax subsidies, we are up to $4billion of egregious abuse of the Texas Taxpayers.
The comingling of funds is a violation of why recapture was established. The recapture has Ms Villanueva states is to fund Texas education evenly across the state. Therefore, the funds collected by recapture should be separate and accounted for separately within the Foundation School Program with the disbursements in order to achieve wealth equalization clearly reported. In this way any shortfalls within the recapture (which may be due to Chapter 313 abated property values) that must be made up from the general funds would be readily apparent and any surpluses could be reflected in lower property taxes in the contributing districts.
"Many school leaders say more transparency is needed about where the recapture dollars flow. They look at the system and see a shell game," Dallas Morning News article July 26.
"Plano officials, which pays the highest recapture in the state, also want tax bills to clearly explain how much money from a property owner ends up flowing back to the state through recapture." Dallas Morning News article July 26.
In essence, education property taxes are going to the Texas Treasury for general funding of the state. This could be completely illegal.