Thursday, November 23, 2017

Robin Hood & Historical Chapter 41 Payments in Carroll ISD

It is difficult to explain a school bond election in Carroll ISD without first discussing how the state recaptures local tax dollars from property wealthy school districts and redistributes those funds to property poor districts. This system of funding public schools is called Chapter 41 or Robin Hood Recapture.

The foundation for understanding school finance starts with educating the public about the two sides of a school budget – the Maintenance & Operations side and the Interest & Sinking or debt service side. The Maintenance and Operations or M&O budget, can be used to pay for daily expenses including staff salaries, utilities, supplies, etc.  The Interest and Sinking or I&S budget, is used to pay debt that is used to construct facilities or purchase assets like technology and buses.

Carroll ISD is a property-wealthy, Chapter 41 (Robin Hood) district. This means that the school funding formula caps the amount of property value tax collections that Carroll ISD can keep on the M&O side of the budget. Any value increases above the state-set cap, do not go to benefit Carroll ISD’s M&O budget.

In addition to your school taxes, which is the largest part of your local bill, you pay county, city, hospital and college district taxes. Each entity sets a local tax rate which is applied to your home value. For instance, Carroll ISD’s M&O tax rate of $1.04 per $100 assessed valuation, is added to the I&S tax rate of $.35 per $100 assessed valuation, to create a $1.39 total school tax rate.

School districts that are property-wealthy like Carroll, must surrender taxes collected on the M&O budget to property poor districts.

Under the current school finance formula, CISD estimates to pay $19 million as part of the Robin Hood recapture payment in 2016-2017.

  • For an average-valued home, the total property tax bill for 2017 was $8,355; the state keeps $29.9% to redistribute to other school districts.
  • Because of Robin Hood, Carroll ISD keeps $5,857 and $2,498 is recaptured; in the future if property values grow, CISD does not get to keep the additional taxes collected on the M&O budget; CISD only keeps the I&S tax collections, which helps pay for new debt.

From 2001 to the current budget, Carroll ISD’s total Chapter 41 Robin Hood recapture payments have been $215 million. Despite state funding cuts and deficit budgets, the district has been able to give 3 percent raises and manage through growth using short-term portable building options.

 

Historical Robin Hood Payments (2001-Present):

UpdatedRobinHoodPaymentChart

In order for Carroll to spend $1 on the M&O side of the budget, the district must tax local residents $1.40. CISD keeps the $1 and the state recaptures 40 cents on every dollar collected. For this reason, the Capital Needs Planning Committee studied options for shifting M&O costs to the I&S budget. Voters decide through school bond elections if school districts can fund construction projects and incur loan debt.

Robin Hood recapture does not affect the Interest & Sinking (debt service) budget. Therefore, when CISD makes a purchase on the I&S side, it’s $1 spent for $1 collected. If voters approve projects in a school bond election, the district sells bonds – a bond is like a loan. The district pays back the loan plus interest.

The May 6 school bond election includes a $208 million proposition to fund projects at all of the district’s 14 facilities. Financial advisors used conservative forecasting for property value growth to estimate that CISD can sell and finance
$208 million in bond projects without needing a debt service tax rate increase. The 2006 and 2009 bond elections were completed without a debt service or I&S tax rate increase.

Although the local tax rate may not increase, school officials explain that it doesn’t mean your local tax bill won’t go up. Your tax bill is based on the property value of your home, which is set by the Tarrant Appraisal District. If the value of your home increases, your bill will rise even if the tax rate remains the same. That is not true, however, for residents who are over 65 years of age; their taxable value is frozen. Rising property values creates additional I&S tax collections to help pay for the new debt.

The average property value increase over five years is about 6 percent. Sometimes values increase above and beyond the value estimated by Carroll ISD; the additional tax dollars are placed in the I&S fund balance and/or used to meet debt obligations. By law, the only thing Carroll ISD can do with debt service tax collections is pay off debt early or refinance debt to save taxpayers money.

If a bond election does not pass, a school district may lower the debt service tax rate. School officials say the debt service tax rate could decrease. Some projects identified by the committee may not get completed. Although CISD is already working under an operational deficit, school officials would have to fund M&O projects within the current budget or face cuts in programs and staffing. The district also has the option of calling another election in November or May 2018.

As a result of the school finance system and growing services for CISD students, the district adopted a deficit budget for 2016-2017. Fortunately, CISD Administrators hope to manage out of the deficit budget scenario this year. Any deficit at the end of the year, is covered by the M&O Fund Balance.

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