NCPA - National Center for Policy Analysis

Funding Rules Test Schools

November 28, 2012

The Karnes, Texas, school district has long been among the poorest in the state -- and it remains so, local officials say, even though an oil boom has sent property values surging eightfold in the past two years, says the Wall Street Journal.

  • That jump in value has changed the town's designation to "property wealthy" from "property poor," under Texas' school-funding formula.
  • That means the town can't keep most of this year's projected property tax of $20 million -- up from $6.5 million last year -- and must instead share the bounty with other districts.

The property-tax windfall in the Eagle Ford Shale is mostly generated from collections on the oil and gas itself, which, like land, is taxable. For the most part, property taxes on oil and gas are paid by the companies extracting it, rather than by the ranchers and farmers that often live in these communities. But school officials say funding rules prevent them from making suddenly affordable improvements -- or even from dealing with rising costs, such as schooling for the children of oilfield workers.

  • In Texas, about 55 percent of funding for school districts comes from local sources, mostly property taxes, according to the state comptroller.
  • As oil and gas production climbs rapidly in Eagle Ford Shale and other oil-and-gas-producing areas, property-tax collections are soaring.
  • As a result, 23 school districts, including Karnes City's, this year switched to "property wealthy," according to a preliminary list from the Texas Education Agency.
  • The designation is based on several factors, including property values, and districts that cross into the "property wealthy" category often end up with roughly the same amount of money per student as they had when they were "property poor."

Opponents of the system, intended to equalize school funding, say the way it assigns resources doesn't reflect communities' needs.

Backers of the school-funding formula, which is widely dubbed "Robin Hood," say it is necessary to even out income differences in rich and poor communities.

Source: Ana Campoy, "Funding Rules Test Schools," Wall Street Journal, November 20, 2012.


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