Sunday, October 23, 2016

Mea Culpa Re: HISD Prop 1

In an October 17th post I argued that a "no" vote on HISD prop 1 was the best option for Texas children. I think it's important in political life to acknowledge when other people know more about something than you do and I think it's important to leave room open for those people to change your mind.

Briefly, the question before the voters is whether or not HISD should send several million dollars to the state to avoid having the state detach non-residential properties from the district's tax base and assign them to other districts whose taxable properties are less valuable. The vote is being forced by a school finance system that is fundamentally broken and does not acknowledge that a district like HISD, with significant numbers of students living below the poverty line and students who are English as a second language learners, needs more money per student that a district without those challenges.

Ninety percent of political questions don't have a right and wrong answer. There are somethings where compromise means contributing to the oppression of other people and compromise is not an option, but most of the time we're just deciding between different equally distasteful solutions.

I've long quipped that "anyone who tells you they understand Texas' school finance system is either lying, delusional or Scott Hochberg." Hochberg is a former member of the State House who spent two decades earnestly trying to fix school finance with varying degrees of success. He knows more than I do and yesterday he made his opinion on HISD Prop 1 known in the Houston Chronicle:

"'s the thing: If HISD writes a check to the state, it loses only the amount of the check. But, if the district gives up taxable property, it loses the recapture amount, plus all the bond taxes the district would have collected off that property.

That means the tax rate we all pay for bond payments, now and in the future, has to go up to make up for the taxes lost from the lost property.

And, once the property is gone, it's gone forever. No take backs or fingers crossed.

State law actually favors districts that send cash. There's an "early decision" discount available for those districts. A no vote means we pay the full price.

Voting no is like giving away your garage to avoid paying property taxes on your house. That's why no district in the state has ever chosen the option of having property removed instead of sending a check. It's a bad deal.

The argument for voting no is that it will "send a message" to the legislature that it needs to fix the school funding system, and the legislature will obey. Maybe, but I served 20 years in the Texas Legislature working on these issues, and I don't buy it. It's not a bet I would make, much less risk HISD taxpayers' money on."
I would argue on the "no take backs" bit that the legislature created detachment and the legislature can fix it, meaning that while there's no way to get the property back under current law there could be under future law and with school finance sure to be a major issue in the next session that's a possibility, but this is Scott Hochberg - and Scott Hochberg knows this issue far, far better than I.

I still don't believe there is a right and wrong on this vote. Anyone who looks at all the facts and votes "no" can do so with a clear conscience, but I've learned the wisdom of trusting people who are smarter than me. When Scott Hochberg says "yes" is the best course of action I have to believe he knows what he's saying.

Monday, October 17, 2016

Understanding HISD Prop 1

UPDATED 10/17 9:25 pm: see below

Several people have asked my opinion on the HISD ballot question (it's the very last thing on your ballot (Find your ballot here)

There's no right answer on this. It's just a bad situation no matter how you look at it.

Some background: In Texas we rely on local property taxes as the primary funding source for schools. Since some school districts have very valuable land they can tax, others do not. Without intervention that would mean that school districts with rich students would be better funded than school districts with poor students. In 1989 the Texas Supreme Court found that this system violated the Texas Constitution's requirement that the legislature "establish and make suitable provision for the support and maintenance of an efficient system of public free schools"

That's how we got the current school finance system, designed to ensure that all school districts receive sufficient funding for their students, regardless of the real estate values in the district. The system sets an expected per student level of funding, based on the number of days students attend classes. If a school district raises more from property taxes than they are allowed there are 5 options that the state or district can take to balance out the finances. Because of HISD's size 3 of those don't apply here. The two left are 1) for the district to "purchase attendance credits" from the state (so the district sends money to the state and the state gives them credit for days of attendance they don't have) this is what's on the ballot or 2) the state re-assigns non-residential properties to school districts that are below the line (so you and I won't ever see "FWISD" on our property tax bill, but the coffee factory on Harrisburg might) - if the prop doesn't pass the state will likely start this process.

Some context: 40% of HISD students live in households below the poverty line and 1/3 are ESL students. Some kids cost more to educate than others and the current system does not recognize that. HISD and several other districts sued the state to try to fix the system and won at the trial level, but the Texas Supreme Court overturned the ruling and said the current system meets the minimum requirements of the constitution - then spent the rest of the opinion taking the lege to task for letting it get this bad. The lege will almost certainly change the formula this session.

If the proposition passes the money paid to the state goes to the state. In theory the lege is supposed to then move those funds over to finance under-financed schools - but there's no guarantee that will happen and the lege has a long history of playing shell games with the money in the budget. If the prop does not match the reassigned property taxes go directly to other school districts, not through the state. The reassigned properties would be subject to the tax rates of the reassigned districts so those properties would likely wind up paying higher property taxes.

This, to my mind, is the very best argument for "no." Even under the worst case scenario a "no" vote means more money for schools - maybe not Houston schools- but schools all the same.

Also, with it very likely that the lege is going to rework the system HISD may have a different course of action under the new process. If they are locked buying attendance credits by a ballot initiative it may be difficult for them to legally get out of it.

Some have argued that a "no" vote is a dangerous game of chicken. That the legislature just doesn't have any options to increase funding. Let's dispose of this fiction: they could close the excise tax loophole, they could index the gas tax, they could stop letting WalMart keep a portion of the sales tax, they could tap the rainy day fund (that's why it's there), they could repeal the tax break for yachts they recently created, the list goes on.

Now, you might say that these options are not politically viable - and you'd be right. The current mess is what we keep voting for. The three biggest expenses in the state budget are education, public health and transportation. This is what we vote for when we elect people who say they're going to "cut taxes" - cuts to education, public health and transportation. If we're going to change that it has to start at the ballot box. So, vote "no" on the HISD question, but only if you'll also stop voting for Austin-bound candidates who say they'll cut taxes.

There's no right answer - that money is going to go away and not be used to educate kids in Houston, and that sucks. To my mind voting "no" creates more options down the road, and ensures that even under a worse case scenario the money goes to education.

UPDATE: To clear up confusion it should be made clear that the $168 million sent to the state is likely less than the cost to the district if properties are reassigned. The reason is kind of complicated. There are actually two taxes that go into the single line item for HISD you see on your property tax bill: the maintenance tax - which runs the district, and the debt service tax - which is used by HISD to pay back it's bonds. The value that the state will reassign (likely) if Prop 1 fails to pass will be based solely on the larger maintenance tax, but the district will lose both taxes. One estimate is that this will cost the district an additional $30 million over the cost of purchasing attendance credits if the proposition passes.