Published: August 25, 2008 08:53 am      

School tax math

By Libby Cluett
lcluett@mineralwellsindex.com

The beginning of school also opens the season for school districts around the area to propose and adopt their 2008-09 budgets and 2009 property tax rates.

When looking at a local district's tax rates, there are several things to consider.

First, the taxes are divided into two categories:

• Maintenance and operations (M&O) - This is the primary budget for district operations - salaries, supplies, utilities and the day-to-day expenses.

• Interest and sinking (I&S) - This rate is based on a district's bond indebtedness, approved through an election. It differs for each district, but only pays for new building construction, technology, buses and whatever voters will pay for through a bond. It is not used for daily operations.

In some areas, like Garner ISD, the I&S has gone down, according to Superintendent Marion Ferguson, “because the bond for the elementary building was paid off in August and what remains is the principal and interest on the gymnasium.”

“I think it's important for people to understand the difference between M&O and I&S,” said Perrin-Whitt Consolidated ISD Superintendent Darren Francis. “I&S is voter approved and pays for bonded indebtedness. The pots of money are separate and don't mix.”

This is one reason a district could have great facilities but low employee wages and old buses.

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Why have school operational taxes gone down?

The answer lies mostly on the shoulders of the Texas Legislature, which passed House Bill 1 in an emergency session of the 79th legislature in 2006.

Among its tenets, HB1 compressed public school districts' M&O tax rates to $1 and offered them an additional 4 discretional cents. These few cents are considered by school districts as “golden pennies.”

HB1 was intended to give relief to property owners throughout the state, according to Gordon ISD Superintendent Jon Hartgraves.

“Although [GISD's] property tax values have gone from $53 million to $121 million [just in the three years he's worked at Gordon], we've had to compress the tax rate down, so we can't collect as much,” said Hartgraves.

He said the HB1 cap on M&O taxes makes the district's revenue a “flat line” - frozen in time to 2006. Meanwhile, district expenses continue to rise with inflation - including fuel costs, utilities, food costs, salaries and cost of living raises for staff.

“Our expenses are going to outpace our revenue. There's no room anymore to save money or put [savings] into your fund balance,” he said.

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Now that school districts' M&O tax rates are capped, it might appear that homeowners throughout the area would pay less in school taxes.

“That was the idea from the legislators [with HB1],” said Hartgraves. “But then the property values went up.”

Palo Pinto County resident Max Wheeler, a former county tax assessor-collector, said that on top of the “normal growth” several recent activities have driven up property values within the county.

“A lot of that is due to the oil activities, pipeline builders, water haulers and [other oil and gas production businesses] that have bought a lot of land along the highway and paid a lot, which has driven up property values. The mineral leases themselves have also driven up the values,” said Wheeler.

“Property values are based on market prices. Look at developments like the 7-R Ranch and Possum Kingdom developments,” he said.

He said his agricultural land more than doubled in value but the taxable value remained the same because of his agricultural use exemption. “Now people that don't have the ag exemption, they may be hurting.”

Wheeler said he looked at prices for The Cliffs Resort and The Hills Above Possum Kingdom Lake - also marketing a portion of the development as The Ridges at Possum Kingdom Lake.

“The acre price is more than I gave for an 80-acre farm in the '60s,” Wheeler said.

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Despite a fixed rate, one might think that school districts could reap the financial benefits from rising property values within their taxing pool.

“Although they might get the money, they can't keep it,” said Gordon resident Max Wheeler. “Anything above a certain cap - based on the average daily attendance due to 'Robin Hood' - goes to support schools with less income.”

“It's because that tax rate is based on a combination of state and local revenue. As local revenue increases, state revenue decreases,” explained Francis.

“In our situation now, our local revenues are higher than what our total entitlement should be. It will be another year before the state recognizes us as property-value rich,” he added - at which time the district will send money to the state.

“It's all about equitable education for all kids,” said Hartgraves. “The idea behind it is right - so schools that have all this money share with schools that don't. I don't know if it's the best system right now.”

“Even the experts don't know the solution that's equitable for the whole state,” he said.

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For their 2008-09 budgets, Texas districts are seeking ways to solve their budgetary shortfalls and dilemma.

Hartgraves and Francis said that a number of school districts are having tax rollback elections this year - however no districts in the immediate area opted for this.

Other districts are dipping into savings, or their fund balance, to offset inflation Hartgraves said.

“Some schools are adopting a deficit budget with revenue coming from the fund balance,” he added. “Schools won't get more revenue from the state unless [they] get more kids.”

Districts around the region have frozen limits for per-child spending. According to some superintendents, if the legislature does not change how public schools are funded, districts will have to have to cut drastically, go to the voters for a rollback election or become insolvent.

“There is no inflation adjustment built into the state funding formula,” said Francis who cited spikes in “fuel for buses and electricity, not to mention pay raises” as creating hardships for all districts.

“We're subject to inflation measures the same as a regular consumer,” he said. “We're still getting the same amount of money we did three years ago and we all know what fuel costs have done. It's pretty easy to see where the dilemma is for most districts.”