[authors: Ares Dalianis and Scott Metcalf ]
A recent article in the Wall Street Journal details how the soaring value of Texas oil fields has not resulted in much additional revenue for local school districts. In Karnes City, Texas, an eightfold increase in the value of property over the last two years resulted in the local school district’s property tax revenues increasing from $6.5 million to $20 million. But, the Karnes City Independent School District will not get most of that additional $13.5 million because, under the system for equalization of school funding in Texas, the designation of the district as “property rich” results in most of the additional revenue being redistributed to other school districts. The article highlights the differences between the equalization of school funding in Illinois and other parts of the country.
While Illinois school districts retain all the property taxes they collect, the same cannot be said in other parts of the country. According to the Wall Street Journal, in Texas about 55% of funding for school districts comes from local resources. The remainder of school funding is provided by the state through a school funding system often referred to as “Robin Hood.” The boom in oil and gas drilling that has resulted from new extraction techniques means 23 school districts in Texas were reclassified to “property wealthy” from “property poor.” According to the article, the funding system will require the Karnes City school district to return approximately $3,000 per student to the State of Texas. The result is that despite the dramatic increase in property values, the Karnes City school district will essentially maintain the same per pupil expenditures. A large lawsuit against the Texas system for funding schools is currently ongoing in Austin and is expected to last into January, 2013.
Equalization and school funding in Illinois are much different. Rather than turning any local resources over to the State of Illinois, state funding for education consists of tax dollars and other revenue collected by the State of Illinois and distributed under the General State Aid formula. The formula is driven in large part by the equalized assessed value of real estate within a school district. Under the Property Tax Code, the equalization of assessed values among the 102 counties in Illinois is conducted by the Illinois Department of Revenue. The Department is given the authority to raise or lower the total assessed value of property in each county so that the property will be assessed at 33 1/3% of its fair cash value. To accomplish equalization the Department conducts sales/assessment ratio studies that compare the sales prices of properties within each county to the recorded assessments of those properties. Based on the evidence collected, the Department then issues an equalization factor – or multiplier – for each county that raises, lowers or maintains the assessed values set by local officials. It is the equalized assessed value on which tax bills are calculated and General State Aid is distributed.
Regardless of the merits of any particular system for funding education, the Wall Street Journal article highlights the importance of property tax revenues for public education across the country. Each state may approach school funding differently, but each state also must struggle with the complexities of property taxation.