Category Archives: Recapture

How HISD fared this legislative session

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HISD’s 2017 state legislative agenda included finance, educational equity and local control and governance. Read below for a summary of how HISD fared after the 2017 session in Austin, where HISD’s government relations staff was stationed to support the district’s priorities.

Finance

Until the end of session, HISD’s board, superintendent, finance and government relations staff fought hard for a solution that would lower the district’s recapture obligation for the next two school years.  Unfortunately, by the end of session, the school finance bill died and the state’s budget continued the state’s practice of shifting more of its constitutional obligation to fund public education to local taxpayers.  The state’s declining contribution to public education is a result of its over-reliance on local property taxes, or recapture, to fund schools.

Per state law, HISD is property-wealthy and must pay recapture to the state.  An election was held May 6 asking voters how they wanted HISD to pay its recapture obligation – write a check to the state comprised of local property taxes or pay by losing a portion of the district’s commercial tax base to another school district.  The May election was the second time this question was put before the voters. The ballot measure known as Proposition 1 prevailed with over 60% of the voters wanting HISD to write a check to pay its recapture obligation.  HISD’s payment for this year is $83 million, and the payment will grow in future years as property values rise.

HISD’s recapture situation proves the school finance system is broken. With state revenues down, the 2017 legislative session was not the time for school finance reform. The House and Senate were at odds on almost every issue this session, and school finance was no exception. Speaker Joe Straus made school finance reform and reducing recapture a high priority. On April 20, the House passed HB 21, a school finance bill championed by House Public Education Chair Dan Huberty, which reduced HISD’s recapture obligation for the next two years and provided meaningful financial relief to school districts statewide. However, the bill came with a $1.9 billion price tag and deferred a payment to the Foundation School Program – two components the Senate disliked. For weeks, HISD’s board and superintendent continued to urge Senators to pass the House version of HB 21 because it helped the majority of students statewide and reduced recapture.

The Senate gave HB 21 a public hearing on May 11 and offered is own version, or committee substitute, which reduced the overall funding from $1.9 billion to about $530 million and added a voucher program for special needs students.  The Senate also removed the deferred payment. During the hearing, school advocates registered to testify immediately changed their position from “support” to “against.”  School choice, or vouchers, was one of Lt. Gov. Dan Patrick’s top priorities this session, and the Senate believed parents have a right to choose the educational environment best for their child: public or private. Many school advocates believed adding special education vouchers to HB 21 killed the bill.  An explanation of HB 21 as it passed the House and the Senate is below. The bill died because the House and Senate could not reach an agreement before the May 27 deadline.

HB 21 by Rep. Dan Huberty (R-Humble) spent $1.9 billion overall:

  • Reduced recapture payments for ISDs statewide
  • Increased the basic allotment per student from $5,140 to $5,350
  • Allowed recapture-paying districts like HISD to receive the transportation allotment
  • Established a $159 million financial hardship grant for districts losing targeted revenue assistance (ASATR)
  • Helped small, rural schools by phasing-in elimination of the small school district allotment
  • Increased the bilingual education weight from 0.10 to 0.11
  • Created a new funding weight for dyslexic students

CSHB 21 by Sen. Larry Taylor (R-Friendswood) spent $530 million overall:

  • Increased recapture payments for ISDs statewide
  • Did NOT increase the basic allotment – it remained flat (at $5,140 per student)
  • Established an Education Savings Account (ESA) or voucher program for special needs students
  • Helped small, rural schools by phasing-in elimination of the small school district allotment
  • Established a financial hardship grant of $150 million for districts losing targeted revenue assistance (ASATR), but limited districts being able to receive support
  • Included $20 million for an Autism Grant program
  • Allocated $100 million for facilities with half going to charter schools and the other half to the Existing Debt Allotment for school districts
  • Created a state-appointed Commission on Public School Finance that would make recommendations on how to improve the current system

The following finance-related bills were supported by the district but died during the legislative process:

  • HB 1037 (Capriglione) and SB 358 (Watson): Allow recapture-paying school districts like HISD to receive their transportation allotment from the state. The intent of these bills was incorporated in the House version of HB 21
  • HB 1059 (Murphy) and SB 1247 (Huffman): Trigger a reattachment process for detached properties, which is currently missing from the statute.  HISD and Houston’s business community supported HB 1059 in committee and the bill was left pending. SB 1247 did not receive a public hearing
  • HB 1324 (S. Thompson): Recognize half of the local homestead exemption in school finance formulas and remove a financial penalty for school districts. It lowers recapture, as well. The bill was a pre-filed amendment to HB 21, but was withdrawn
  • HB 1326 (S. Thompson): Count students enrolled in full-day pre-K in a school district’s recapture calculation only. Also, lowers recapture payments
  • HB 1838 (Meyer): Institute a recapture limit tied to inflation
  • HB 3375 (S. Thompson): Tie new local property value growth to the equalized wealth level, which is a good thing for schools. The bill passed as an amendment to HB 21, but HB 21 died.
  • HB 3795 (Dutton): Allow recapture-paying districts to count charter school students zoned to their district in recapture calculations, which will lower recapture payments also. HB 3795 had a public hearing and was left pending. HISD expressed appreciation to Rep. Dutton for starting the conversation around the impact of charter schools on school districts. 

Educational Equity

The district believes one of the best ways to improve equity among students is to educate students in a 21st-century learning environment equipped with the latest technology and Internet access at home and school. Digital resources are essential for students to feel prepared for post-secondary opportunities and life-long careers.

The final state budget invests $25 the million in the E-Rate program, which will improve Internet access for public schools statewide.  This $25 million investment triggers a federal match of $250 million to the state.  As a national trendsetter in digital learning, HISD worked with the state before and during the legislative session to make sure funds were appropriated for the biennium.

Local Control & Governance

Bills were filed this session to regulate school boards and school districts; however, most died.  Some of the bills the district fought – like the bathroom bill – will return during the special session, which starts on July 18, 2017 and will last up to 30 days.

HISD worked diligently this session to protect local control.  School districts need the flexibility to innovate and make decisions that are best for their students and families.  The local control topics debated this session include bathroom usage, sanctuary cities, school board governance, school bond elections, and taxation.

Bathroom bill

The bathroom bill discussion dominated a large portion of the session.  The Senate passed, SB 6 by Sen.Lois Kolkhorst (R-Brenham), which required people to use the restroom of their biological sex and would apply to all public facilities.  HISD opposed SB 6, and an HISD trustee delivered the testimony.  The House filed HB 2899 by Rep. Ron Simmons (R-Carrollton), a different approach to the bathroom conversation that prohibited local governments from enacting ordinances that protect certain groups of people from discrimination beyond those groups protected under state law.  HB 2899 nullified any existing local orders, ordinances, or other measures that establish such protections.  HISD opposed HB 2899, too, with a letter from an HISD trustee. In the final weeks of session, the Legislature limited the bathroom discussion to schools.  The House added schools-only language to a school safety bill, SB 2078.  The House amendment codified existing practice at the campus level and would allow schools to continue to accommodate students with unique needs.  The amendment would also allow the Texas attorney general to protect a school district if a lawsuit was filed.

Lt. Gov. Dan Patrick and Senate Education Committee Chair Larry Taylor stated publicly that the House amendment did not go far enough.  Patrick said he would ask the governor to call a special session, if the bathroom bill the Senate passed died during the regular session.  Patrick sees it as an issue of privacy and safety for women and girls.  The speaker responded that the House handled the bathroom issue responsibly and expressed his frustration that the Senate should have been more focused on school finance than bathrooms.  After a series of dueling press conferences between the House and Senate, the bathroom issue was punted to Gov. Abbott, who added the House’s version of the bathroom bill to the special session agenda.

Sanctuary cities

Banning sanctuary cities was a top priority for statewide leaders, and SB 4 was signed into law requiring local law enforcement to check the immigration status of individuals they detain or arrest. The bill exempts schools, but still has major implications for students and families.  HISD’s board, superintendent, and schools will continue to reassure families that our schools are safe places for students, and no student will face deportation while at school.

School board governance

Regarding school board governance, Sen. Lois Kolkhorst (R-Brenham) authored SB 1566.  According to the author, the bill’s legislative intent is to empower school boards to focus on student outcomes and provide them with effective tools and training.  The bill allows the board to compel the superintendent’s direct reports to testify in public hearings and appear in closed session.  The bill requires district staff to respond to board requests for information no later than the 20th business day upon receipt (30 days if the request is burdensome).  Once SB 1566 passed both chambers, it was a “Christmas tree,” or a bill that has multiple, random bills attached to it.  One of those amendments requires the school nurse to notify parents when a child in the classroom has lice, and another allows school staff who are licensed handgun owners to transport and store firearms in their personal vehicle on school property.

Representative Sarah Davis (R-Houston) filed two governance bills that died.  HB 1150 required school districts to post certain information online every month (academic policies, current finances, board meeting minutes, and all district plans and objectives under consideration by the board).  HB 1152 required the school board to hold a local election when changing the names of schools.

Elections and transparency

About 50 bills related to transparency, ballot language, and elections were filed, all died.  Overall, these so called “transparency” bills were a threat to local control.  Some  required school districts to place prescriptive and detailed information on the ballot for school bond elections, and some required a school board to hold an election to authorize using unspent bond funds on other expenses.  The remaining bills required school districts to hold elections only in November.  Right now, school districts can hold elections in May or November, and tax ratification elections can be held within 90 days after the tax rate is adopted.  The two main bills districts were concerned about were SB 460 and SB 461 by Sen. Eddie Lucio (D-Brownsville).  These two bills passed the Senate, but did not make it out of the House.

Property tax reform

SB 2 by Sen. Paul Bettencourt was the vehicle for property tax reform this session.  The bill capped cities’ and counties’ ability to raise their tax rates.  School districts’ tax rates are already capped.  SB 2 was a priority bill for Lt. Gov. Patrick and the Senate majority, citing Texans’ need for property tax relief.  The Senate also wanted voters to decide what their tax rate should be – this is known as a rollback election.  The House replaced SB 2 with its version of the bill and removed the rollback election provision. Ultimately, SB 2 died at the end of session, and the governor added it to the special session agenda in July.

An analysis of the state’s public education budget

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Overview

SB 1, the state budget bill, allocates $217 billion in all funds for the next two years.  The approved budget was a compromise between both chambers and passed May 26, 2017.  The Senate passed the budget 30-1, and the House passed the budget 135-14.  All of the “no” votes were Democrats.  Five members of HISD’s delegation voted against the budget: Sen. Sylvia Garcia, Rep. Harold Dutton, Rep. Alma Allen, Rep. Armando Walle and Rep. Shawn Thierry.  The remaining thirteen members of HISD’s delegation voted for the budget.

SB 1 provides over $55 billion to K-12 public education during the 2018-19 biennium.  There are pluses and minuses for K-12.  However, the budget continues the trend of the state shifting its constitutional obligation to local taxpayers.  School districts will see a cut in state general revenue, which means the local share of funding public education will increase.  That is a concern for HISD and districts around the state.

On a positive note, HISD is pleased to see an increase in the Austin Yield and additional funding for E-Rate (or classroom connectivity) in this budget.  The Austin Yield increase will provide some indirect relief on HISD’s recapture payments, and digital learning was a priority for HISD this legislative session.

SB 1 Highlights – Public Education

  • SB1 does NOT increase the basic allotment, which means higher recapture payments.
  • SB 1 funds enrollment growth (80,000 students per year).
  • SB 1 continues to shift the state’s constitutional obligation to fund public education to local taxpayers.
  • SB 1 does NOT fund high-quality pre-K with state dollars – districts will have to use their own funds.
  • SB 1 funds programs like Teach for America, Communities In Schools and P-TECH grants for early college high schools focused on technology.
  • SB 1 funds digital learning statewide by investing in the E-Rate program.
  • SB 1 requires school districts to pay a larger share of the health care costs for retirees (TRS-Care).

What’s in the state budget (SB 1) for public education?

  • The basic allotment stays the same (@ $5,140 per student) for both years of the 2018-19 biennium. This is a concern.  The basic allotment is the one part of the formula that benefits all schools.  When the basic allotment remains flat, that causes more school districts to enter recapture and causes districts paying recapture to write larger checks to the state.  The death of HB 21 (the school finance bill) meant there would be less impetus to raise the basic allotment.
  • There is an increase in the Austin Yield, which will indirectly take some of the sting out of HISD’s recapture payments. That’s a good thing.
  • $2.65 billion for enrollment growth (an increase of 80,000 students per year in Texas).
  • $350 million will go toward the Teacher Retirement System (TRS) to continue health care benefits for retirees; however, school districts will have to increase their contribution rate from .55 to .75. This change will cause a $3 million cost increase for HISD.
  • After much back and forth on high-quality pre-K funding, the budget conferees agreed to shift the burden to school districts. Therefore, the state is encouraging school districts to use part of their pre-K money from the state to cover high-quality pre-K at the campus level. School districts are not getting any money from the state for high-quality pre-K during the 2018-19 biennium.
  • Digital learning received $25 million for the 2018-19 biennium, and the federal government will match that with $250 million to improve classroom connectivity statewide (E-Rate). The $25 million is funded with a one-time withdrawal from the state’s Rainy Day Fund in FY 2018.  Digital learning was a priority for HISD this session.
  • The New Instructional Facilities Allotment (NIFA) was funded at $47.5 million.  The NIFA funds are for “fast growth” districts and charter schools.  HISD is not a fast growth district.  Our student population is pretty steady.  However, with the passage of HB 1081, HISD should be able to qualify for these funds this biennium.
  • P-TECH was funded at $5 million for the next biennium.  HISD can apply for the grant.  This program is for early college high schools focused on technology.  This was a priority for the Texas Urban Council (TUC) and HISD is a member the TUC.
  • Educational Service Centers (ESCs) were cut by $1.25 million. The ESCs service school districts statewide.  The Region 4 ESC services Houston ISD and surrounding districts.
  • Communities in Schools maintains its current level of funding ($31 million). HISD works with Communities in Schools.
  • Teach for America will receive $11 million for the biennium. TFA is one of HISD’s partners.  HISD hires their teachers.

 

How does the budget impact local school property taxes?

In SB 1, state funds drop substantially and are replaced with local school property taxes:

  • The Legislature cuts state general revenue funds for school districts by more than $1.218 billion from the FY 2016-17 biennium to the FY 2018-19 biennium.
  • The last time the Legislature cut general revenue to school districts was in 2011 (when Texas had a large budget shortfall), which was slightly more than 2017, at $1.275 billion rather than $1.218 billion.
  • The drop to state funds equates to an average drop statewide of more than $250 per district student over the biennium. ($1.218 billion/4.8 million ISD ADA; no state funds are cut for charter schools) or roughly $5,500 per 22-student classroom. (Compared with $339 nine-year drop in state aid per student from 2008-17, the two-year $250 drop is drastic.)
  • Local school property taxes will be increased substantially. The Legislature provides in Rider 3: “Property values, and the estimates of local tax collections on which they are based, shall be increased by 04 percent for tax year 2017 and by 6.77 percent in tax year 2018.”  The percentages have been increased a lot from those in the appropriations bills passed earlier in session in March and April, and the total 13.8 increase for the biennium is substantially higher than in the past five biennia and could set up funding cuts in future years if the Legislature’s forecast higher property values do not materialize.
  • The Legislature is increasing reliance on recapture by $725.9 million for the biennium. It was $3.845 billion in the FY 2016-17 biennium and will rise to $4.57 billion in the FY 2018-19 biennium – comprising more than 10 percent of the appropriation to the Foundation School Program.  In FY 2018, recapture will be almost double the amount that comes from the state lottery. 

Houston ISD’s Projected Recapture Payments:

  • 2016-17: $83 million (current biennium)
  • 2017-18: $210 million
  • 2018-19: $285 million

Note: these are rough estimates

 

HISD supports House Bill 21 to increase funding for all schools and lower Recapture payments

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The Houston Independent School District supports House Bill 21, which passed the Texas House of Representatives April 21 and would lower HISD’s Recapture obligation by providing approximately $40 million in additional resources for the 2018-19 biennium.

Houston voters go to the polls on May 6 to decide how to pay this year’s Recapture obligation of $77.5 million. Proposition 1 asks voters whether they want to “purchase attendance credits.” A vote for means HISD will write a check to the state, while a vote against would result in the state’s detachment and reassignment of the district’s most valuable commercial property. Early voting began April 24, 2017, and ends May 2, 2017.

House Bill 21 is expected to increase the basic allotment for all schools to $5,350, which also reduces payments for all Texas schools currently in Recapture. The bill also invests in English-language learners and students with dyslexia. The bill will now go to the Texas Senate.

“I’m pleased the House of Representatives is making an effort to fix an outdated school finance system,” said HISD Board President Wanda Adams. “HB 21 is a step in the right direction for public education and will help provide our students with the resources they need. On behalf of the Board, I’d like to thank Speaker Straus, Chairman Huberty, Chairman Zerwas, Chairman Ashby, Chairwoman Senfronia Thompson, and the members of HISD’s House delegation for their hard work and support.”

HISD voters first voted on Recapture, or Proposition 1, in November 2016. Since that vote, action by the Texas Education Agency and other factors have lowered HISD’s Recapture obligation from $162 million to $77.5 million. In response, the HISD Board of Education voted to call the May 6 election, giving voters another opportunity to decide how HISD will pay its Recapture obligation.

The Recapture process requires “property wealthy” districts that exceed a wealth per student set by the Texas Legislature to send a portion of their local property taxes to the state. Recapture is part of the state’s school finance system and is more commonly known Robin Hood.

The district created a website with information on Recapture and detachment at HoustonISD.org/Recapture.

 

Budget negotiations underway as state lawmakers look for agreement

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Both chambers made progress on their versions of the budget during the months of March and April.  The only issue is both chambers still remain far apart on how they’d like to appropriate funds for the 2018-19 biennium.

On March 28, the Senate voted unanimously in favor of their budget proposal, Senate Bill 1. Here are some key elements of the Senate’s version of SB 1:

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HISD seeks financial relief as state lawmakers meet in Austin

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HISD’s Board and Superintendent have been in Austin on a regular basis since the session began in January, proposing solutions to state lawmakers that would provide financial relief to HISD and school districts statewide. The ultimate goal is for the Legislature to reform the state’s school finance system, but no progress is expected this session because of the cost and complexity of such reforms.

In the meantime, HISD’s Government Relations team will continue to push legislation that improves HISD’s Recapture situation for the next two years or until the Legislature meets again in 2019.

The district supports a number of bills that would help lower HISD’s Recapture obligation or return property that gets detached should Proposition 1 fail. The following bills have moved or had public hearings:

  • HB 21 by Rep. Dan Huberty: reduces recapture payments for ISDs statewide, increases the basic allotment, contains the transportation allotment and creates a new weight for dyslexic students. HISD and other school groups supported the bill in committee and the bill is a priority of Speaker Straus. The bill passed the House on April 20.
  • HB 1059 by Rep. Jim Murphy and SB 1247 by Sen. Joan Huffman: trigger a reattachment process for detached properties, which is currently missing from the statute.  HISD and Houston’s business community supported HB 1059 in committee and the bill was left pending. SB 1247 has not had a public hearing yet.
  • HB 3795 by Rep. Harold Dutton: allows recapture-paying districts to count charter school students zoned to their district in recapture calculations, which lowers recapture payments also. HISD expressed appreciation to Representative Dutton for starting the conversation around the impact of charter schools on school districts. The bill was recently heard in committee and was left pending.

The remaining bills are supported by the District, but have not moved yet in the legislative process:

  • HB 1037 (Capriglione) and SB 358 (Watson): allow recapture-paying school districts like HISD to receive their transportation allotment from the state. One could argue these bills are part of HB 21.
  • HB 1324 (S. Thompson): recognizes half of the local homestead exemption in school finance formulas and removes a financial penalty for school districts. It lowers recapture, as well.
  • HB 1326 (S. Thompson): counts students enrolled in full-day Pre-K in a school district’s recapture calculations only and thus lowers recapture payments.
  • HB 1838 (Meyer): institutes a recapture limit tied to inflation.
  • HB 3375 (S. Thompson): ties new local property value growth to the equalized wealth level, which is a good thing for schools. This bill was adopted as a floor amendment to HB 21, which is a win for HISD and other districts in recapture.

Educational Equity
The District believes one of the best ways to improve equity among students is to educate students in a 21st Century learning environment, equipped with latest technology and broadband access.  All students need access to the most current digital resources and the Internet both at home and at school.  Such resources are essential for students to feel prepared for post-secondary opportunities and life-long careers.

A major area of alignment between the House, Senate and the Governor is the need to invest in digital learning opportunities for public school students.  As a result, the proposed state budget invests $25 the million in the E-Rate program, so that schools throughout the state will have stronger Internet access. This $25 million investment triggers a federal match of $250 million to the State of Texas.  HISD worked with the state during the months before the legislative session to make sure funds were set aside for digital learning and broadband access.

Local Control & Governance
Many bills have been filed this session related to local control and school board governance.  HISD’s goal this session is to make sure the District and the Board of Education have flexibility to innovate and make decisions that are best for the Houston community and its students.  Governance and student outcomes are priorities of school boards. Sometimes it is unintentional, but state proposed legislation should not jeopardize local control.   To date, specific bills related to bathroom usage (SB 6 and HB 2899), sanctuary cities (SB 4), taxation (SB 2 and HB 15), school board governance (HB 1150, HB 1152 and SB 1566), and school bond elections (SB 460 and SB 461) are some of the bills school groups are closely watching.

HISD trustees approve election after TEA reduces recapture payment

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The Houston Independent School District Board of Education voted  in February to call a May 6 election asking voters to authorize sending lower recapture payments to the state rather than face detachment of commercial property in July. The swift timing allows the district to follow the deadlines set by the state and Harris County.

Previously, HISD’s recapture obligation was estimated at $162 million. Under the Texas Education Agency’s recent announcement of recognizing half of the local homestead exemption, along with adjustments made to student enrollment and property value figures, HISD is now subject to a reduced $77.5 million recapture obligation or the removal of about $8 billion dollars’ worth of non-residential, commercial properties from HISD’s tax roll.

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Here’s a basic guide to the 85th Texas Legislative Session

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The biennial session kicked off on Jan. 10 in Austin with the swearing-in of House and Senate members, who will convene for a total of five months to tackle the state’s business.

The Legislature meets for 140 days between January and June, every other year. The only item the Legislature is constitutionally obligated to pass is the state’s budget for the next two years.

HISD’s government relations team is in Austin full-time, educating lawmakers and staff on the most important issues affecting the district, especially the recapture payment and the pending detachment and reassignment of commercial property.

Learn More about HISD’s Legislative Agenda

The House contains 22 new members and four former state representatives returning to the Texas House. The Senate has three new members. Overall, there are 181 members of the Texas Legislature. The House has 95 Republicans and 55 Democrats (150 total). The Senate has 20 Republicans and 11 Democrats (31 total).

Rep. Straus re-elected House Speaker, cites support for school finance reform

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On the first day of session, incumbent Speaker Joe Straus, R-San Antonio, was unanimously re-elected to his fifth consecutive term as Speaker of the Texas House of Representatives.

A long-term supporter of public education, Straus said on opening day, “Our school finance system may meet the legal definition of constitutional. But parents and taxpayers know something different. They know that the system is broken. And, they know that it’s our job to fix it.”

One of his main goals is to reduce recapture payments school districts make to the state, a key priority for HISD this session.

With state revenue forecasts down, House and Senate propose different spending plans

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With oil and gas revenues down, state lawmakers anticipate having less money to spend during the 85th session.

In December, the Legislative Budget Board (LBB) adopted a conservative spending limit, used by the Legislature to craft the budget.  In early January, State Comptroller Glenn Hegar released his biennial revenue estimate, or forecast for expected revenues for the next two years.

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Gov. Greg Abbott outlines priorities in second ‘State of the State’ address

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Gov. Greg Abbott, R-Texas, gave his second “State of the State” Address on  Jan. 31, outlining his four emergency items this session. They include: CPS reform, sanctuary cities, ethics reform and a Convention of States.

Separate from his emergency items were his priorities and funding goals for the 85th Session. Governor Abbott’s priorities related to public education are ending inappropriate student-teacher relationships, improving school finance, fully funding Pre-K, school choice and ending automatic payroll deductions for union dues.

The Governor’s priorities align fairly well with the Lt. Governor’s this session. However, the Governor did not mention his support for the Lt. Governor’s “bathroom bill,” which applies to schools and government buildings and requires people to use the restroom of the gender on their birth certificate.

Differing from Patrick, Abbott also placed strong language in his proposed budget calling for the reduction or elimination of recapture. You can view Governor’s Abbott’s full list of priorities here and his budget proposal here .