Eliminating the Texas school finance stigma

Recapture. The infamous, intimidating, complex school finance policy often referred to as "Robin Hood." The very term imparts a sense of negativity.

But why? Robin Hood, as I recall, was a beloved superhero of sorts. He was the welcomed rebel bringing money to the poorest, most in need — providing food, comfort and hope. This concept prompted me to look back at the truth behind Texas’ recapture policy and ask why this policy gets such a negative rap.

Recapture, while popular in the headlines and daunting at times, is just one piece of Texas' school finance system. In 1876, Texas leaders decided it was the duty of the government to provide a system of free public schools for all students to receive an education. In 1993, legislators were faced with the task of financing that very system. So the legislators looked at the options before them and found that — much like today — they could impose a statewide property tax or income tax, or they could increase other taxes such as the sales, gas and business taxes.

Ultimately, lawmakers decided using local property tax gains and revenue to help fund public schools was the lesser of evils — the more reliable, most efficient way to access wealth from across the state. Recapture became the state’s method of collecting excess property value gains and using those dollars to help fund the whole public school system.  

Two important points about recapture:

  • All schools experiencing growth in property values pay recapture, either by the state sending a smaller check (locals making up the difference) or the school sending the state some money — meaning the state is the benefactor of any growth in property values.
  • A common misconception is that recaptured schools send any or all tax increase back to the state. However, the state guarantees the same amount of money to all school districts that choose to raise their local taxes (capped at $1.17). (Texas Education Code, Sections, 42.007, 42.101 and 42.302.) True, recaptured districts will send the excess collections to the state, but they are guaranteed the same yield for their tax dollar as what every other district receives. They may not have any more, but they won’t have any less.

Ultimately, recapture itself is not the problem — and never has been. One could argue the state’s overreliance on local property values as a primary funding source for Texas schools is the problem, but as long as that is our system, recapture will be necessary. In fact, recapture acts as a cost-savings mechanism for the state.

But, let’s just suppose we do away with recapture. In order to do so, the state must either increase the state budget significantly to make up for the loss in revenue — to the tune of $2 billion per year, according to TEA district recapture projections for fiscal year 2017 — or the state would need to come up with other revenue streams. Maybe they would decide a statewide property tax is the answer, or perhaps an income tax, or doubling the sales tax. Or maybe the revenue loss would be made up for by reductions in state spending across the board, in transportation, healthcare, water. Or perhaps just public education spending would suffer.

It’s really impossible to predict, but the bottom line is recapture exists because the system allows schools to have more funding than others due to higher local property values. In short, even after paying recapture, it works to the advantage of those districts to have local property growth as a major driver in the system because they get more money that way.

There are some calling for the state to end recapture, but what happens if they do? Where will the state find the extra money? How will they make up for the inefficiency that will cause?

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A quick example, if the state does away with recapture and chooses not to make up the difference: The Basic Allotment would be reduced from $5,140 to $4,908 – a drop of nearly $250 per student for the over 750 non-recaptured districts across the state.

If reliance on local property values is the problem, fix that. If the state is not providing adequate funding for schools to meet the standards and local needs, fix that.

But to claim the policy that guarantees schools the same level of funding — nothing more, but nothing less — is a problem? Since when is a policy that ensures efficiency and savings to the state budget a problem?

Ray Freeman

Deputy executive director, Equity Center

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