Chapter 41, Tax and Funding FAQs
As Pflugerville ISD’s Board of Trustees prepare to approve the upcoming 2017-18 budget, as well as the tax rate, it is important for PfISD residents to understand the various issues that impact these decisions. This includes:
Pflugerville ISD was notified that beginning with the 2017-18 school year, it is classified as a Chapter 41 district by the Texas Education Agency. What does this mean for PfISD and its taxpayers? Please read the following FAQs to learn more.
What is a “Chapter 41” district?
Chapter 41 of the Texas Education Code (TEC) makes provisions for certain school districts to share their local tax revenue with other school districts. For the purposes of the school finance system in Texas, districts are designated as either Chapter 41 or Chapter 42 districts. The relative wealth of the school district is measured in terms of the taxable value of property that lies within the school district borders divided by the number of students in weighted average daily attendance (WADA). Chapter 41’s provisions are sometimes referred to as the “share the wealth” or “Robin Hood” plan because districts subject to Chapter 41 of the TEC are required to share their wealth with other school districts. The funds that are distributed by Chapter 41 districts are “recaptured” by the school finance system to assist with the financing of public education for all school districts.
Is PfISD a Chapter 41 district?
This year, PfISD became a Chapter 41 district. However, based on the fact that the Maintenance & Operations (M&O) portion of PfISD’s tax rate is below $1.06 per $100 valuation, the effects of Chapter 41 don’t come into play. There is no payback to the state, or “recapture,” for PfISD at this time.
When would PfISD be subject to recapture under Chapter 41?
Two things would trigger recapture for PfISD. One of these is within local control – the amount set for the M&O tax rate not exceeding $1.06. The other trigger is the “wealth per student amount,” (or, Equalized Wealth Level), which would have to exceed $514,000. Currently, PfISD’s wealth per student is $357,000.Tax RateHas PfISD increased its tax rate in the past several years?
No. PfISD’s tax rate has stayed the same for the past five years. Based on the Board’s decision at the July 2017 meeting to set the maximum tax rate at $1.54, the rate will not increase for the coming year.
What does “proposed maximum tax rate” mean?
This is the tax rate amount that the PfISD Board says it will not exceed when setting the tax rate for the upcoming year.
What is PfISD’s current tax rate?
The current tax rate is $1.54. This overall tax rate is divided into two separate rates. The first rate is for maintenance & operations (M&O) of the district, which is currently set at $1.04. The second rate is for paying off the district’s debt, which is known as interest & sinking (I&S). The I&S rate is currently set at $.50.
If the tax rate hasn’t changed in five years, why do my taxes keep increasing?
Because property values, as determined by the county appraisal district, have increased substantially in the past several years. Property values, in combination with tax rates, are calculated to determine the amount of taxes you owe.
How does PfISD’s average homeowner tax amount compare to that of surrounding school districts?Pflugerville ISD homeowners, on average, pay less property tax than surrounding districts. The following chart provides a comparison for the 2017-18 school year.
Why doesn’t PfISD lower its tax rate?
Given that the state has not changed its funding level, the higher taxes paid by local property owners are offset by lower state funding, which results in no real increase in operating funds per student.State FundingCan you simplify how state funding for public education in Texas works?
State funding is complex, but here is a video analogy that helps explain essentially how it works.
How has the level of state vs. local (tax) funding changed for PfISD in the past several years?
The change has been drastic. From 2015-16 to 2018-19, state funding will fall over $25 million, from $83 million to $58 million. In comparison, local (tax) funding will increase $41 million, from $100 million to $141 million. Given our increase in student enrollment, the net change in funding per student increases by less than 1 percent per year.
This shows the local vs. state percentage of funding trend for PfISD from 2015-16 through 2018-19:
Funding Comparison (Percentage) between Local and State for PfISD 2015-16 through 2018-19
Local tax per WADA*
State funding per WADA*
How does the state funding level for public education impact PfISD?
Based on the shrinking funding levels from the state, PfISD, like most public school districts, is forced to do more with less. In our case, our district continues to grow in terms of student enrollment, the number of campuses and facilities, and the number of teachers and staff to provide for our students. Our growth shows no sign of slowing down, yet the state’s funding contribution continues to decline.
Why does PfISD need to borrow money?
Since PfISD is a fast-growth district, it must continue to borrow funds by issuing bonds to fund new schools and maintain over 4 million square feet of existing facilities.
How does PfISD manage its debt?
The district’s debt management strategy is not unlike the reality each of us experiences with our personal debt. If we only make the minimum payment on our credit card each month, it is going to take us longer to pay off our debt – and we will pay considerably more in interest than if we made higher payments each month. PfISD’s debt management strategy is to pay off its debt as efficiently and quickly as possible – faster than most other districts.
How does this strategy help PfISD taxpayers save money?
Two ways. First, the district’s strong financial management has resulted in two bond rating upgrades, which lowers the interest rate it pays to borrow money – and thus saves the taxpayers money. (In fact, there are over 1,000 school districts in Texas, but only 18 maintain a higher credit rating than PfISD’s rating of AA by S&P.) See how PfISD’s bond rating compares across the state:
Second, by paying off its debt quicker, the district saves its taxpayers millions of dollars. Over the last five years, PfISD has used a strategy of defeasing (or pre-paying) its debt on an annual basis. This link shows PfISD debt service and defeasance history. This strategy reduced taxpayers’ outstanding debt by over $82 million. The average annual cost of this strategy to the average taxpayer was approximately $80 over the last five years.
It is estimated that when the district does its next bond, it may be able to finance it over an even shorter time period than it previously did. The savings in interest from borrowing for 15 instead of 25 years is estimated at over $100 million.
Watch this video analogy to better understand how PfISD taxpayers have saved due to this debt reduction strategy.
What does the proposed 2017-18 budget for PfISD assume?
Here are the features/highlights of PfISD’s 2017-18 proposed budget:
Maintenance & Operations (M&O) Tax Rate $1.04
Debt Service (I&S) Tax Rate $.50
Total Tax Rate $1.54
Freeze adjusted taxable value ($1.4B increase) $11.8B
Collection rate: 99.2%
Projected enrollment (615 student increase) 25,306
Percent attendance 96.2%
Added positions $6.1M
New facilities (Timmerman ES, Mott ES, Weiss HS,
Teacher pay increase (market’s median salary) 2.5%
Non-teacher pay increase (position’s midpoint) 2.5%
Medical contribution ($400/month) unchanged
Campus basic allotment (per pupil):
High school: $105; Middle school: $94; Elementary: $79
Food service ($.15 increase; breakfast: $2.15; Elementary lunch: $2.90; Secondary lunch: $3.15)
Debt service (maintain tax rate at $.50 and do another bond defeasance)
When does the 2017-18 budget get approved?
The Board of Trustees is expected to consider and approve the 2017-18 budget at its August 17 meeting.
What is PfISD’s fund balance?
Board policy dictates that PfISD maintain a fund balance equal to the amount that would allow the district to operate for 45-60 days. If the 2017-18 budget is approved, PfISD’s fund balance would be at $37,861,000, or 63 days.
Where can I find more information about PfISD’s finances?