UnRAPPed

The Basic Allotment is a per-student funding amount set by our legislators and serves as the primary building block of our school finance formulas. It is a completely arbitrary number created by lawmakers and is not based on identifiable costs, nor is it adjusted regularly. It ultimately determines a school district’s entitlement based on the number of students it serves, or how much money the state “allows” us to collect per student through property taxes. 

In property-wealthy school districts, such as Lewisville ISD, the amount of property taxes collected exceeds student entitlement. Those excess funds are paid back to the state in the form of recapture. In non-recapture school districts, property taxes do not cover the student entitlement; therefore, the state makes up the difference.

On average it costs approximately $10,000 to educate a student in Texas, while the basic allotment districts receive per student has stagnated at $6,160… and the gap continues to widen. 

After the legislature took no action to adjust the basic allotment in 2021, our schools have now gone four years amidst soaring inflation rates with no increase. If the Legislature adjusted the basic allotment for inflation annually, using the Bureau of Labor Statistics Consumer Price Index, the basic allotment per student would have been $7,075 for 2022. 

For every $100 added to the basic allotment, our district’s recapture payment would be reduced by nearly $6 million. In LISD, we are not advocating for a complete elimination of recapture, rather an increase in the basic allotment to benefit ALL Texas public schools. 

And that’s Basic Allotment, unRAPPed!

The school finance system in Texas is complex, so let’s break it down. 

First, it’s important to understand the way schools receive money is split into two different revenue streams funded by taxpayer dollars, which we’ll represent with a blue and yellow bucket. LISD’s tax rate is currently a dollar thirteen, and is split into these two buckets of funds. Seventy four cents of our tax rate supports the Maintenance and Operations, or M&O, side of our budget; while thirty eight cents of the tax rate funds our Interest and Sinking, or I&S budget. 

Let’s start with the blue bucket, which represents the M&O budget. The size of our blue bucket is determined almost entirely by legislators through the basic allotment. It represents how much money we are allocated to educate each student in LISD. The blue bucket is filled with funds through two primary sources, local property taxes, which make up about 86 percent of our M&O budget; and state funds, which are generated by things such as sales taxes, business taxes and lottery proceeds. 

The blue bucket contains the money that can pay for the daily operations of the school district, such as teacher and staff salaries, fuel, electricity, and insurance. The size of the blue bucket has not been adjusted by lawmakers since 2019 amid soaring inflation rates, which have increased on average by 22 percent. In order to have the same buying power in 2023, the basic allotment, or the size of the blue bucket, would need to increase to 7,515 dollars. 

The amount of money the state contributes to a district’s M&O budget is contingent upon the amount of revenue collected by local property taxes. If local property values set by the county appraisal district rise and tax collections increase, which has been the case over the last several years in LISD, local schools DO NOT receive more funding. Instead, the state simply contributes less money to fill the blue bucket.

If the amount of funds a school district collects exceeds the size of the blue bucket, those funds funnel back to the state in the form of recapture. The intent of recapture is to redistribute funds from districts that exceed their entitlement to districts that do not meet their entitlement. Instead, the recapture funds fall into the state’s general budget, with no transparency on how or where it’s being used. 

And remember, school districts cannot use any funds received from a bond election to pay for daily operating expenses, which include staff salaries. That brings us to our yellow bucket.

The yellow bucket represents funds that are used to pay off bond debt that has been approved by voters through the Interest and Sinking, or I&S, portion of the tax rate. A school district’s I&S tax rate is set by local school boards, and is determined by how much revenue is required to pay off bond debt. The yellow bucket of funds can only be used to support major facilities repair and renovation, and construction projects that are proposed in bond elections. Every facility we have in LISD was built with bond funds - every stadium, school building, competition field, and more. Funds in the yellow bucket are not subject to recapture, which means 100 percent of funds from the I&S side of the tax rate stay in the district.

LISD is able to take on the proposed bonds in the spring 2024 election with no change to the I&S tax rate. UnRapp more about how school debt affects the tax rate in another episode of this series. Lewisville ISD residents are eligible to vote in the Bond election. Early voting runs from April 22 through April 30, and election day is May 4th.

It’s important to understand that the state of Texas has set up the school finance system this way, and the only way for lawmakers to address school funding to keep up with inflation is for them to increase the basic allotment. 

And that’s the buckets of school funding, UnRapped!

Recapture, also known as “Robin Hood”, continues to be a buzzword throughout the many school districts in Texas it affects, LISD being one of them. When this concept was created back in 1993, it only applied to 34 districts across the state that were required to pay approximately $130 million collectively back to the state. Today, the latest comptroller estimates are showing that Texas is projected to receive upwards of $5 billion from more than 240 school districts through recapture in the current school year. 

In LISD, the funds we receive from our local taxpayers through their property taxes exceed the entitlement we are “allowed” by the state of Texas, which means we send millions of dollars back to the state every year. LISD sent $45 million back to the state in recapture for 2022, and is set to send approximately $60 million back to the state in 2023, more than 10% of the property taxes collected by local taxpayers. This impacts LISD’s ability to hire and pay staff, as well as provide the quality educational opportunities available to students.

One of the most concerning aspects of recapture is the lack of transparency from the state on where the funds collected through recapture are being used. These funds do not necessarily pour into other public school districts throughout Texas. When the state collects more local property tax dollars from school districts through recapture, those funds funnel into the state’s General Fund balance where dollars are spent on other priorities unrelated to education. 

The best way to relieve the burden on school districts related to recapture is to increase the Basic Allotment, which benefits all school districts in the state.

In the spring of 2024, voters residing within Lewisville ISD boundaries saw three bond propositions on their election ballot for LISD - propositions A, B and C. UnRapp details about what projects are included in the Bond election in an earlier episode of this series, or visit lisdbond.com. 

You may have seen that even if voters approve these bond propositions, the tax rate will not change. But how is that possible?

Let’s simplify this with a comparison. Imagine you're a homeowner and several systems or components in your house, like your roof, air conditioning unit, and garage door, are reaching the end of their useful life. You’ve made repairs over the years, even decades, and now it’s not cost efficient, or possible, to continue to make repairs to these components, but rather time for a replacement. You take out a loan to cover these replacements, paying it down gradually. Later, when more components like your fence, refrigerator and oven need to be replaced, you can take on new debt without increasing your credit limit because you've paid down the previous loan. This cycle continues as replacements become necessary.

Now, scale this concept up to the size of Lewisville ISD, which spans 127 square miles and more than 9 million square feet of facility space. When major repairs or replacements are needed in our facilities after years of routine maintenance, the district seeks approval from voters for bonds to fund these projects. Similar to taking out a loan, the amount of overall debt increases. But thanks to LISD's conservative financial and debt management policies, existing debt has been paid down, ensuring no increase in the I&S tax rate is necessary to fund the bonds proposed in the spring election. Over the last decade, LISD has even paid off nearly 140 million dollars in debt early, saving taxpayers 19 million dollars in interest.

You may ask yourself, doesn’t the district have a savings account they set aside to pay for these types of projects? While the district does pay for routine maintenance and repairs through it’s M&O budget, the state of Texas has set up the school finance system in a way where public school districts do not receive funding to pay for major repairs and replacements, but rather are required to ask voters for their approval through bonds. We’ll dive deeper into the two buckets of school funding in another episode of UnRapped.

And that’s how school debt affects the tax rate, UnRapped!