BCISD MESSAGE: Property values, taxes, and state funding

The Burnet Consolidated Independent District has been developing its budget since January and conducted its first budget workshop in March. The next budget workshop is June 4. A key data point in developing the district’s budget is property values.

Burnet County property value estimates were provided to BCISD by the Burnet Central Appraisal District on April 25. BCISD had been working under the conservative assumption of a 5 percent property value increase for the upcoming school year, but the actual estimate came in higher at 9 percent.

I want to make clear that BCISD does not determine property values, but it is important to understand that state law requires the Burnet Central Appraisal District to appraise properties at least at 95 percent of market value or else the appraisal district fails the state comptroller’s ratio study and the state reduces funding to local schools. The state comptroller’s ratio study compares sales prices with appraised values set by the county appraisal district.

Burnet County was determined to be under the 95 percent threshold in 2017 and is in a grace period. If Burnet County does not pass the comptroller’s ratio study in the future, BCISD and Marble Falls Independent School District could both lose millions of dollars in state funding.

The Burnet school district does set two tax rates each year: Maintenance and Operation (M&O) for day-to-day operation of the district (salaries, utilities, transportation, etc.) and Interest & Sinking (I&S) to pay off the district’s debt related to bond programs. The district’s M&O rate is currently $1.04 and as low as it can be without being penalized by the state. The I&S rate was lowered by a penny in August 2016 and another 3 cents in August 2017 and is currently $0.24.

Because of rising property values, BCISD Board of Trustees is projecting to lower the I&S tax rate again in August 2018 and recently approved the early payment of bonds totaling $2,550,000. This early payment of bonds, called bond defeasance, is a strategy used to decrease the interest expense paid on the district’s bonds. This specific defeasance saves BCISD more than $200,000 in interest payments.

The Board of Trustees is committed to having the lowest-possible tax rate while maintaining a commitment to planning for the future, offering the highest-quality educational programs, and being fiscally responsible while servicing its debt. Approval of the final tax rates will be made when the budget is adopted in August.

The increased property value also means the property wealth per student in BCISD is projected to reach a threshold defined in law that will result in the district being subject to “recapture.” For the first time in the district’s history, it will be sending property taxes generated within BCISD to the state as part of the “Robin Hood” school finance plan. The district is projecting that this recapture payment will be $350,000 for the 2018-19 school year.

These are funds that will not be available to support innovative programs, teacher pay raises, or school safety initiatives but will instead be redistributed to other Texas school districts. While some school districts in the state have fallen off the “funding cliff” when they become a recapture district, the BCISD Board of Trustees and administration have been carefully planning for the future by setting money aside to assist with the projected loss in funding.

The one entity benefiting the most from increased property values is the state of Texas. As local property tax collections go up, the amount of state aid to fund education is reduced. This means the state is contributing a smaller share of funding for BCISD than it has in the past.

Because the state adopts its budget for a biennium, BCISD always plans a two-year budget framework so it is looking ahead for any possible budget challenges such as recapture. The district takes very seriously its responsibility to be a good steward of taxpayer dollars and plan appropriately.

Keith McBurnett is the superintendent of Burnet Consolidated Independent School District.

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