March 21, 2004
Sunday school finance op-eds

State Rep. Scott Hochberg (D, Houston) makes some good points in this piece in which he defends the much-maligned and marked for death Robin Hood system of distributing property tax revenues to school districts. Here's something you probably didn't know:


Robin Hood has been blamed so many times for district budget problems that many taxpayers believe their Houston Independent School District taxes are being sent to some other district.

They aren’t. HISD is one of the 889 districts that receives money from the state. Only 132 districts, with less than 12 percent of the state’s public school students, give up any money raised locally.


132 out of 1021 districts give up local money under Robin Hood. You'd think with those numbers it'd be more of a third rail than Social Security, but you'd be wrong. I wonder how many new Republican state reps were elected on a platform that included revamping Robin Hood from districts that receive its funds. I'm not saying there aren't still reasons to want to overhaul the system - pretty much everyone agrees that it isn't working well enough to meet the state's needs - but I'll bet a lot of people voted against their own interests without fully realizing it.

Sure, those 132 districts want to keep all the property taxes they raise. And the leadership in Austin desperately wants to let them do that, because it is great politics. But even after they make their Robin Hood payments, those districts have at least $600 more to spend on each comparable student than does HISD or any of the other districts receiving state funds. That’s already a huge advantage in hiring teachers, setting class sizes and offering programs.

Eliminate Robin Hood payments by those districts, as some have recommended, and their advantage, on average, goes up to $2,600 per student, at a cost to the rest of us of $1 billion per year. Some solution!


Equity among the districts, the reason for Robin Hood in the first place, will still need to be addressed by whatever replaces it. There are indications that Republicans whose constituents are mostly in property-poor districts, such as State Sen. Todd Staples, recognize its importance and may cross the aisle to work with Democrats on a compromise. Governor Perry better doublecheck his math before he calls that special session.

Meanwhile, Clay Robison notes the study by Stuart Greenfield that the Quorum Report funded and fills in a couple of details.


If you own an average valued house of $150,000 and pay the average property tax rate of $1.46 per $100 valuation, a one-third cut would reduce your annual property tax bill by about $750, Greenfield says.

He warns that the reduced property tax deduction also would raise your federal income taxes by $113. The lost tax break couldn't be recouped from higher sales taxes because sales taxes aren't deductible from your federal return. A state income tax would be deductible.

What's more, Greenfield adds, the higher the value of your house -- which is the single biggest federal tax deduction for most Texas filers -- the bigger your net loss as property taxes are reduced and sales taxes or any other form of taxation (other than a state income tax) is increased or imposed.

There also is talk, for example, of increasing the state cigarette tax or creating a new, broad-based business activity tax. Whatever the merits of those proposals, they also wouldn't provide a replacement federal tax deduction for individual filers.

Many Texans who don't file itemized federal tax returns are renters, and they wouldn't necessarily realize the full benefits of property tax cuts or other tax breaks that their landlords might receive. But they certainly would pay any higher sales tax or, if business taxes were increased, would see higher costs for some goods and services.

The annual per capita sales tax load in Texas is $642. But since even the youngest children are included in that calculation, the average taxpayer actually pays more, a load that would be significantly increased if the Legislature either raises the tax rate or expands coverage to additional goods and services.


Obviously, $113 is a long way off from $750, so the final numbers will depend heavily on the kind of taxes that are imposed to replace the property tax revenue. The point, which I noted as well, is simply that whatever those taxes are, they won't be deductible. You won't be getting any of that back no matter what.

Posted by Charles Kuffner on March 21, 2004 to Budget ballyhoo | TrackBack
Comments

I think one of the reasons why property taxes are so often protested is because it's a huge bill, all due and payable at once. I think we'd be revolting about the size of our federal government if there were no withholding, only one huge bill all due in one lump sum.

I wonder how much "tax revolting" there would be over property taxes if they were paid monthly in more manageable payments 1/12 the size? It's easy to be irate over property taxes when you receive a $5,000 bill in the mail, all due at once, rising 10% a year.

And truthfully, I fully agree with what you stated here -- it's a bad idea to replace federally deductible taxes with nondeductible taxes. At least when they're deductible, Uncle Sam is essentially picking up a quarter of the tab.

Posted by: Tim on March 22, 2004 8:23 AM

I wonder how much "tax revolting" there would be over property taxes if they were paid monthly in more manageable payments 1/12 the size? It's easy to be irate over property taxes when you receive a $5,000 bill in the mail, all due at once, rising 10% a year.

Maybe we need to encourage more people to use escrow accounts. I did that on my first house and never really noticed what my property taxes were. And, as a bonus, I'd sometimes get a refund if they'd overestimated my payments.

(No, that's not a serious suggestion. I'm just noting that one can spread one's property taxes - as well as one's homeowner's insurance - over 12 payments.)

Posted by: Charles Kuffner on March 22, 2004 8:43 AM

Recently, on the local NPR station, I heard a lay person say that "Robin Hood" was wrong but that something should be done to ensure proper funding of schools. The interesting thing about the arguments against the program: The critics aren't using reason, like viewing whether or not the program works, which it certainly seems to.

Coppell, home of Marchant who's running for 24th U.S. Rep., is a hotbed of "Robin Hood" criticism, as you can see to some degree from this CISD presentation. Carrollton-Farmers Branch is another openly hostile to "Robin Hood."

One thing about some districts, like Coppell, is that they are excellent schools (imagine a wealthy district having good schools!) and are attracting lots of families. To their credit, that is a challenge.

I don't like "Robin Hood," but I also don't want to see a return to funding prior to "Robin Hood." But I find it interesting that teaching staff is reduced, not extracurricular staffing.

Being irrational and uninformed about the issue, though, is a problem.

Let me add one more thing about property taxes to fund education: I believe this tax is perceived as a local tax, making it seem logical to many to spend the money locally. A house is worth what it is because of the local community, including the reputation of the school. Someone I know who lives in Coppell says that paying high property taxes is worth it, even though he doesn't have kids. Why? Because the good schools make his property worth more.

Posted by: Tx Bubba on March 22, 2004 10:29 AM

We received a flyer from our local elementary school in Houston ISD today, publicizing "HISD Town Hall Meetings on Public School Finance," on a weekly basis beginning March 30.

The HISD website has online info at this link:

Houston ISD site

This is what the link says:

"Facing a $39-million budget cut, mainly because of the state's "Robin Hood" system of financing schools, HISD will hold five town hall meetings to talk with the public about financial issues.

"Top HISD officials will give the public information about how the state's school finance system works and its impact on HISD. The district has invited members of the Legislature as well as business and community leaders to attend.

"The town hall meetings are scheduled from 6:30 to 8:30 p.m."

Hope folks looking for info will be able to attend.

Posted by: Jeff Nobles on March 22, 2004 9:51 PM

This is the URL for the HISD link I tried to post above:

http://www.hisd.org/HISD/portal/article/front/0,2731,20856_2566_56587572,00.html

Posted by: Jeff Nobles on March 22, 2004 9:57 PM