The average homeowner in Frisco ISD would save approximately $307 this year in property taxes, while the school district would receive up to an estimated $510 more per student next school year, under a bill passed Wednesday by the Texas House of Representatives.
House Bill 3 pumps billions of new state dollars into public education, while simultaneously decreasing the burden on local taxpayers and addressing systemic problems within the current school funding system.
The bill must now be reconciled with the Senate, which has earmarked the same amount of money in its budget for public education and property tax reform, but proposes spending those dollars in a different way. The key difference is each chamber’s approach to teacher salaries.
The Senate plan includes a $5,000 pay increase for every full-time teacher and librarian in the state at a cost of $4 billion, as well as $2.3 billion for a school finance overhaul and $2.7 billion for property tax relief.
In the House, HB 3 has been amended to include across-the-board raises for all full-time school employees who are not administrators. The amendment requires school districts to spend 25 percent of additional funds received from an increase in the basic allotment, the amount school districts receive annually for each student, on salary increases for employees other than administrators. At least 75 percent of those dollars must be allocated to across-the-board raises, while the remainder could go to discretionary raises. The provision would apply to any future increases in the basic allotment as well, providing a mechanism for guaranteed staff raises in the future.
More School Funding
Frisco ISD estimates that the amended version of House Bill 3 would mean as much as an additional $31.5 million in the 2019-20 school year compared to existing law. That number is higher than original figures, due to a few changes to the bill before it was advanced to the Senate. The largest contributing factor to the increase is the significant proposed statutory adjustment to the basic allotment.
Estimates regarding the potential financial impact of HB 3 are preliminary in nature and subject to change based on interpretation by the Texas Education Agency, modifications to the bill itself and any changes in projected student enrollment and/or property valuations.
Lower Property Taxes
For taxpayers, HB 3 would provide a property tax cut. The bill would require all school districts to reduce their maintenance and operations (M&O) tax rate by 4 cents. Additionally, districts with a current M&O rate above $1.04, such as FISD, would have their tax rates further compressed, with the state required to replace the loss of local property tax dollars with state funds. This guarantee would provide more state funding for each cent of a district’s tax rate so that school districts would not receive less funding due to the tax compression.
In FISD, the changes would result in a total decrease to the property tax rate of $0.07715 per $100 valuation. That 7.715-cent decrease would drop the total tax rate to $1.36285 compared to the current $1.44. The result would be a savings of more than $300 annually for the average FISD home valued at $422,364, factoring in the homestead exemption.
Moving forward, HB 3 would require a school district to ask for voter approval to increase its M&O tax rate and have an efficiency audit completed by a third-party auditor selected by the district at least four months prior to the election, which must be held on a uniform election date.
The bill also greatly reduces recapture or “Robin Hood,” the amount of local tax dollars that property-rich school districts are required to send back to the state, by increasing the portion of the tax rate that is not subject to recapture. This would allow FISD to keep a greater portion of the revenue generated locally.
“By slowing the growth of recapture, HB 3 cuts projected recapture payments in Frisco ISD to a fraction of what they would be otherwise,” said Chief Financial Officer Kimberly Smith. “While recapture would be significantly less under HB 3, FISD would still continue to pay increasing amounts of recapture so long as our property value growth outpaces enrollment growth.”
Subject to Change
Frisco ISD will be cautious about building additional revenue from HB 3 into the 2019-20 budget, due to the fluid nature of school finance legislation. Initial financial plans will be based on current law, with the ability to make adjustments in the coming months based on priority as lawmakers continue and complete their work in Austin.
“HB 3 is still a proposal and we know it is subject to change,” said Superintendent of Schools Dr. Mike Waldrip. “It’s important to Frisco ISD that school finance reform make meaningful change and lift up all school districts. In its current form, HB 3 addresses many of the underlying issues in the existing school finance system."