GCISD & Texas Public School Finance
GCISD understands that the State of Texas public school finance and local school district funding system is very complicated. Accordingly, below we provide some pertinent facts about GCISD finance, and a brief explanation with regard to;
(a) Property taxes and rates,
(b) How and why property tax collections have increased,
(c) The collection, categorization and disbursement of increased property tax dollars,
(d) Why GCISD cannot spend increased property tax revenues,
(e) The State of Texas mandated Robin Hood (“recapture”) payments, and
(f) The negative impact on GCISD operations and educational programs if property taxes are reduced.
We shall also provide a Frequently Asked Question (FAQ) summary that will recount the information provided below in a question and answer format.
There are two GCISD property tax rates that comprise the total tax rate of $1.3967. First, the Maintenance & Operations (M&O) Rate which is $1.04. The M&O assessment provides the revenues required to fund the GCISD’s daily operating costs.
Next, is the $0.3567 Interest & Sinking (I&S) Fund Rate that, much like your mortgage payment, provides the funds required to pay the interest and the principal on the debt the District incurs via voter approved bonds. The bond funds provide the money that, per State Law, can only be used to build GCISD facilities and fund other capital improvements.
Notably, the current M&O property tax rate of $1.04 is the maximum allowed by State of Texas, and has not increased since 2007.
Importantly, as explained below, per State Law,
(a) GCISD is only allowed to spend $.72 cents of the $1.04 on daily operating costs, and
(b) the revenue collected from the assessment of the I&S property tax can only be spent to pay principal and interest on bond proceeds used for GCISD facilities and capital improvements.
Again, to be clear, per Texas State Law, it is not permissible for GCISD or any Texas public school district to use property tax revenues collected via the assessment of the I&S Fund tax rate to fund employee salaries or any other GCISD M&O costs.
As property values rise, the amount of property tax collected by the District increases. As a result, taxpayers believe the increased tax revenue collected by GCISD is kept by the District and therefore should result in a lower property tax rate.
Unfortunately, GCISD does not get to keep the increased property tax revenue. State law mandates that Texas public school districts with property values in excess of $514,000 per student, are subject to the so-called Robin Hood property tax (“recapture”) obligations, and must send the State of Texas the additional tax revenues generated by increased property values.
Importantly, the increased tax collections and the amount of the Robin Hood payment is based on increased property values, not the property tax rate.
Accordingly, per the Robin Hood law, public school districts must remit to the State of Texas all property tax revenues collected on District-wide per student property valuations in excess of $514,000. Thus, as a result of the increase in Grapevine and Colleyville property values, the GCISD per student property value is approximately $785,000, or $271,000 above the $514,000 maximum allowable valuation not subject to the Robin Hood assessment.
Therefore, state law mandates that for every one of its estimated 15,900 students (actual enrollment is approximately 13,800 students, which is adjusted by the State’s formula to produce a weighted number of students equal to 15,900), GCISD must send to the State of Texas General Fund taxes collected on the $271,000 in excess property values. Again, these additional tax revenues are not the result of an increase in the property tax rates.
As a result, in the 2017-2018 school year, via the Robin Hood law, the State will collect approximately $44 Million in excess property tax revenue generated from increased GCISD property values above the $514,000 allowable maximum property valuation. School districts with property values of less than $514,000 per student are not subject to Robin Hood.
If GCISD could keep the $44 Million to spend on M&O, it is possible that property tax rates could be reduced. But, if GCISD lowered the property tax rate under the current Robin Hood law, the District would,
(a) still be legally required to send the $44 Million collected from increased property values in a Robin Hood payment to the State,
(b) be compelled to cut its M&O budget,
(c) operate with less money, and
(d) spend less on educational programs.
The State of Texas and NOT GCISD benefits from the increase in property values and the resultant increase in M&O tax collections.
The Robin Hood payments are made to the State’s General Fund to spend at the discretion of the State Legislature.
Property Tax Rates
Per Texas law, the property tax rate formula works as follows:
In 2006, State Law established a cap on the M&O property tax rate of $1.04 effective in 2007.
The first $0.98 of the $1.04 M&O assessment is subject to the Robin Hood recapture law that directs $0.32 to the State, and $0.66 is retained by GCISD.
Importantly, only $0.06 of the $1.04 are retained in-full by GCISD. When combined with the residual $0.66 remaining after the Robin Hood recapture, the district retains only a total of $0.72 of every $1.04 collected to fund the district’s M&O costs.
Impact of a Lower M&O Property Tax Rate
As noted above, for the 2017-2018 school year, GCISD projects its Robin Hood payment will be $44 million. Thus, if the M&O Tax Rate was lowered to $1.02 GCISD would collect $2.88 Million less tax revenue, and as a result, receive $0.7 Million less in State funding. Therefore, lowering property taxes would just result in less M&O dollars to fund essential GCISD operational and educational program costs and effectively penalize the District.
But, notwithstanding the lower property tax rate, and the resultant decrease in funds to operate the GCISD, per State law, increased GCISD property values would still obligate GCISD to make the projected $44 Million Robin Hood payment of increased tax collections to the State of Texas General Fund.
Increased Property Valuations Trigger Cuts in State Funds to GCISD
Additionally, and ironically, the State’s contribution to public education has steadily decreased over the last 30 years due to the increases of property values. In 1985, the State funded 68% of public education. Now the State’s contributions only amount to 38%, putting the burden on taxpayers to fund their local schools.
The painful irony is that increased property values have a three-pronged negative impact on GCISD.
First, property tax bills rise, but the District must, via Robin Hood law, send the increased tax monies collected to the State of Texas.
Second, increased property values trigger GCISD funding cuts from the State.
Finally, despite increased tax collections, GCISD cannot lower the M&O tax rate. The combination of decreased tax revenues and reduced State funding would negatively impact GCISD’s ability to operate and maintain the high-quality public education GCISD currently provides its students.
As a result, GCISD needs every dollar collected from the existing $1.04 M&O property tax rate to cover basic M&O costs required to maintain the top-quality education dispensed by the District.