School finance in Texas and what it means for Round Rock ISD
As the only school district in Texas to earn a AAA Credit Rating by both Moody’s and Fitch, Round Rock ISD currently operates on a $445.4 million general operating budget. With declining contributions from the state due to the current school finance formulas and their reliance on property values, coupled with other decisions made by the Texas Legislature, Round Rock ISD has faced budget challenges in recent years that will only become more pronounced in the future.
1) maintenance and operations, also called the M&O fund
2) interest and sinking, also called the I&S or debt service fund
Money in the maintenance and operations fund is used for daily operations (i.e. salaries, supplies, utilities, etc.).
Money in the interest and sinking fund is used to repay bonded indebtedness. School districts hold school bond elections to obtain authorization from local voters to sell bonds for capital projects. Taxes are collected for the repayment of the bonded indebtedness. Monies from the bond sale are used for construction and capital improvements to facilities and to buy furniture, equipment and/or to purchase land.
The money collected on the I&S side of the ledger cannot be used for maintenance and operations costs. Simply put, you cannot use I&S funds to pay salaries, which account for more the 80 percent of the District’s budget.
Have a budget question or interested in hearing a budget presentation at your school or community group? Contact us.
Chapter 41 or Robin Hood
Currently, Texas is operating under the Recapture or “Robin Hood” system, where districts deemed “property wealthy” must send money back to the state of Texas to be distributed to districts deemed “property poor.” As property values have gone up in Texas, state funding for schools has gone down—and now Round Rock ISD must send money back to the state because of rising property values. Recapture payments are intended to go toward other school districts, but in effect, simply reduce the amount of funds that the state must contribute to public education.
While the Board of Trustees has decreased the debt service portion of the tax rate over the past five years, the Board is limited in its ability to adjust the maintenance and operations tax rate which represents 80% of the total tax rate. So with many homeowners property values increasing, even with a reduced total tax rate, the amount paid for school taxes has increased. Unfortunately, the state of Texas is the beneficiary of those value increases, not Round Rock ISD.
Round Rock ISD must make a recapture payment to the state of $32.3 million in 2018-19. For 2019-20, the recapture payment is estimated to be $58.2 million.
Taxpayers may be writing a larger check to Round Rock ISD for taxes, but the District does not get to keep all of it. The system is designed to put a greater financial burden on taxpayers for funding schools while the state’s contribution decreases.
2018-19 Tax Impact
The average homeowner’s tax bill that will be sent to the state as “Robin Hood” payments: $277
2019-20 Tax Impact
The average homeowner’s tax bill that will be sent to the state as “Robin Hood” payments: $473
Funding Allocation for Public Education
2008 state funding allocation
State Funding: 50%
Local Funding: 50%
2019 state funding allocation
State Funding: 39%
Local Funding: 61%
Reversing the increasing flow of local taxpayer dollars to the state’s budget rests with the Texas Legislature. It requires additional funds from the state and a commitment to higher prioritization of public education in order to ensure an educated workforce for the future of Texas.
What can you do?
- Contact your legislator. Share your frustration with the current system. Find out who your representative is.
- Demand action
- Stay engaged during legislative sessions
Overall, the results show that Round Rock ISD is more richly staffed than many of our peer districts, though the report acknowledged intentional programmatic differences that may require different staffing levels. The District will fully evaluate all recommendations. In the meantime, we are soliciting suggestions from District staff on potential efficiencies in the District.
Have suggestions? Contact us.
What makes up a district tax rate?
What makes up a district budget?
What are bonds? How long does it take to pay them off?
What are fund balances?
Can the District use fund balances as a “rainy day” fund?
Can a school board use the fund balance in any way they deem fit?
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