Local Funding

Public education funding in Texas today relies on a combination of state revenue from sources such as state sales taxes and state fuel taxes, plus local funding that comes from property taxes assessed on homes, land and businesses. When the state’s share of education funding goes down, the share of the burden placed on local property taxes goes up.

But how did we get here?

The Gilmer Aikin Act, adopted by the Texas Legislature in 1949, established a public school finance system that, for the first time, included funding from local tax bases in order to enrich or supplement the education provided by state funding. Over time, however, state funding did not keep pace and districts were forced to rely on local property taxes for daily operations, rather than just supplementation.

Because Texas districts vary greatly in both size and property values, wealth per-student varied widely as well. In 1989, the Texas Supreme Court ruled in Edgewood I that the Texas system of school finance was inequitable. This ultimately forced the Texas Legislature to create a new school finance system, commonly referred to as ‘Robin Hood,’ requiring each property-wealthy district to help equalize funding by choosing from five different options by which they could “share their wealth.” By creating both a floor (or guaranteed yield), that each district could achieve, and a ceiling (or a wealth limit), that no district could exceed, the system was determined to have equalized funding.

Districts that are considered property wealthy send local property tax revenue away from their communities through a mechanism called “recapture.” In other words, while most school districts keep their local tax dollars in the community to pay for local schools, districts that pay recapture must send some local tax dollars to the State. In the beginning, only 34 school districts, serving less than 1 percent of the State’s students, were subject to recapture to equalize funding. In the 1993-94 school year, approximately $130 million was sent away from these 34 districts.

As property values increased, the Legislature was forced to increase the floor in order to maintain equity in the system. However, the State stopped trying to keep pace. This decision caused the number of schools subject to Robin Hood to increase dramatically. As the state share of education funding declined, more than 370 school districts were required to pay more than $2.7 billion per year in recapture.

In 2019, the Legislature passed reforms in House Bill 3 that increased state funding for education and compressed, or reduced, local property tax rates. As a result, the amount of money school districts are required to send away through recapture decreased compared to what it would have been without those changes, though the amount didn't decrease much by actual numbers. During the 2019-20 school year, 141 districts paid $2.6 billion in recapture statewide. Whether recapture payments begin to increase again will depend in large part on how much state revenue legislators are willing to invest in public education.