A Taxing Problem: Breaking Down the Remarkably Low DISD Tax Rate

Math is hard, but low tax rates are easy to understand

high-fiving-a-million-angels

Yesterday, I mentioned that some people still fail to equate spending with student achievement. Given that point, and in light of the presentation to the board a few weeks ago about the big dollar costs associated with the comprehensive implementation of Destination 2020, I thought I’d look a bit at the school finance picture. I’d like to say said picture is a Monet — up close it’s blurry, but far away you can see clearly what is going on. Really, though, it’s like a Pollock – art majors love it, but to everybody else it looks like the 3:01-to-the-end mark of the Freeze Frame video. 

Let’s start with some basics. Like, what is the total budget of Dallas ISD? You’d think this would be pretty easy, but I’ve heard many, many, many different numbers reported.

A major reason for this confusion is that Dallas ISD has four budget categories:

  • General Operating – which pays for teachers, electricity, maintenance, buses, and any other operational item.
  • Food Service – which pays for meals for kids
  • Debt Service – which pays down all the outstanding debt approved by voters in bond elections
  • Special Revenue Funds – largely composed of federal grants that supplement the General Operating budget

If you add them all up, we’re looking at a hair under $1.7B in annual spending. If you look only at the general operating budget, it’s $1.2B, but that misses a lot of spending, no?

What does this mean? Without context, it doesn’t mean anything. So let’s contextualize this noise.

Total spending given the number of kids in DISD translates to $10,632 per student. Is $10,632 per student a little, a lot, or something in between?

Average spending per student in the state of New York is $19,076; Massachusetts: $13,941; California: $9,139; low-tax-Texas: $8,671. Of course, average spending in a state varies heavily from one district to another. Individual district spending within those states can be quite telling — NYC: $21,408; Boston: $19,181; LA: $15,134; Houston*: $11,182

(*Figuring out total spending in Houston ISD is harder than in Dallas, because Houston doesn’t present a view of the budget that combines all 4 spending categories, but instead leaves Special Revenue Funds out. Note to Houston: fix this transparency problem, you’re being outclassed by Dallas. I did a bit of rough calculating by looking at the most recent HISD Comprehensive Annual Financial Report and adding the Special Revenue Fund total to their budget Functional Summary. This method mixes years a bit, but it’s close enough for these numbers. If you’ve got a better way to figure this out, let me know.)

Of all those individual districts, Dallas ISD has the highest percentage of kids living in poverty at nearly 90 percent. As well, Dallas ISD’s spending is lower than all those districts. Doesn’t seem right. IJS.

How about private schools in the area? They may have a different cost base: They don’t necessarily feed breakfast and lunch, nor do they typically bus. Plus, not all private schools serve all grades PK-12, which can throw off the comparison. But it’s probably still worth trying. Obviously, private schools are private, so getting their actual spending per student is difficult. Tuition per kid is probably a good approximation. But if the school has a major endowment or is attached to a church that subsidizes expenses or if it has regular ongoing capital campaigns, tuition will be lower than true spending per student. (Important note: Dallas ISD’s number above includes total capital costs as well as operating costs). But here’s a peek at a few tuitions:

Granted, of these, only Hockaday and Greenhill aren’t attached to a church, so external subsidies could be a major issue in these figures. But I think we’re safe to say that a) the DISD student population has a substantially higher percentage of students in poverty than any of those schools, and b) Dallas ISD is near the bottom in spending per pupil. Pretty safe to conclude that DISD currently spends less than most large urban school systems in the country, including Houston, and it spends less than most private schools in the area.

Where does that DISD money come from? You’d think it would be all those property taxes we pay. But you’re only part right.

Yes, we all pay property taxes. Even if you’re living in an apartment, you’re paying property taxes. You just don’t realize it, because it’s built into your rent as the landlord has to pay it and they get all their money from you. How much do we pay in property taxes? A pretty penny. Two and ¾ pennies, actually. Total property taxes are about $2.73 for every $100 of assessed value — i.e., 2.73 percent of the value of your home (or office park or sweet Design District hi-rise or hovel). But of that, you only pay $1.28 to Dallas ISD (well under half of your total property tax bill).

I tend to think all taxes are a lot. (My history with the IRS would confirm this.) But given alternatives, is $1.28 per $100 a little, or a lot? Turns out, it’s very little. DISD’s tax rate is lower than every school district in Collin County by a pretty healthy margin. It’s lower than every district in Tarrant County  except Azle. In Dallas County, Garland and Highland Park are the only districts with lower tax rates. But that’s misleading, because DISD offers an extra 10 percent homestead exemption (on top of the state minimum), which Garland does not. If you factor that in, DISD is actually a few pennies lower than Garland. (Not to mention that Garland is considering raising its taxes by about 20 cents). So between Dallas and Collin counties, the Dallas ISD tax rate is second lowest only to Highland Park, where median home values are about $1M per home higher than in Dallas.

Now, uh, this is not normally what we do when we think of DISD, but I think you (and I) need to take a moment and say thank you to the district for keeping our taxes so low. (We’ll get to the moral conundrum of keeping our taxes low and correlating that to the plight of poorly educating poverty-stricken kids some day, but let’s ignore that for now just high-five a million angels.)

So we all chip in the low, low price of $1.28 per $100 of assessed value, and that funds DISD. Right? Not quite.

Local property taxes account for about $1.075B of the total $1.7B. So, about $700M in funding for our school district comes from a combination of the state (largely, sales taxes collected throughout the state) and the feds (our income taxes, and apparently lots of borrowing from the Chinese to be paid by our kids). So, even though we think our property taxes pay for our schools, they only pay for about 60 percent of DISD schools.

Because of the way these funding formulas work, DISD is at a slight disadvantage given its current tax structure. Remember that extra 10-percent-off-the-top homestead exemption I mentioned? If DISD didn’t have that (which would make it like every other district in Dallas except Highland Park), Dallas would end up collecting more from the state. The state penalizes us for offering that 10 percent off the top. In a conversation for another day, if Dallas ISD did a tax swap between debt and operations, it would bring in even more from the state. This requires voter approval, but Plano ISD recently did this very thing.

At some point, I’ll write about the complex relationship between the general operating and debt service funds, the history of public school spending in Dallas and the state, and what our options are in terms of fully funding all of the needs of our kids. But first, I need to understand them beyond the “this makes my head hurt” phase, which is where I am currently on this. In the meantime, I’ll quit griping about school taxes, and ask myself an uncomfy question: If we need to reform the district, why aren’t all paying a little more?

Comments

  • Amy Severson

    Really enjoyed the math. Thanks.

  • Todd Williams

    Very helpful. Thank you.

  • Guesty

    A couple other things worth noting:

    1: Private schools mostly have no special needs students, which are disproportionately expensive. That expense distorts the amount spent per pupil. Not sure if you can get numbers showing what we spend on average excluding special needs students, but I expect you would find that the number is materially lower. I would note that this only is an issue when comparing to privates, as all public schools face this issue.

    2: Those private schools not only are heavily subsidized by churches or endowments, but they do a fine job of raising additional money from parents/the church/alumni. I have been hit up very expensive fund raisers for private schools that already charge more than $20,000 a year in tuition. To put it bluntly, sticker price is tuition for the middle class parents. Anyone with the means is expect to contribute more. And on top of that, you get rich parents willing to buy entire buildings for private schools just so they can put little Timmy’s name on them (or in less extreme cases, their own names). This doesn’t go into an endowment, but it does avoid the very significant facilities upgrade and maintenance expenses faced by the DISD. My guess is that the DISD would need something like $3 billion cash today to match the facilities at a good private school without increasing its yearly obligations beyond what a typical private school pays out of tuition for facilities/maintenance. Sadly, the only way for the DISD to get that money would be to borrow it, which just increases their yearly obligations.

    • Beth

      check out the cost of Shelton, Winston, Fairhill and Lakehill schools which have programs for kids with various special needs and learning disabilities – they are all pretty pricey.

      Also DISD provides speech therapy and other services for kids in private schools who need it.

      A lot of private schools charge extra for band, orchestra, and other extracurriculars while DISD doesn’t. Often kids don’t even have to pay for instrument rental.

      Private schools often require students to pay for their books in addition to tuition (like college). So have to add that in.

      Look at the number of AP and dual credit courses offered at a non-magnet DISD school and compare to private schools. My daughter will graduate DISD having taken 9 AP classes and 3 dual credit. She has gotten a “3” (passing) or better on 5 out of her 6 AP exams, so the instruction is definitely up to par. I am not aware of any private schools that would allow a student to take so many AP and many offer no dual credit on campus or allow early release or late arrival for students to take on a college campus.

    • 1st anon

      You should substantiate your charge that “special needs students … are disproportionately expensive”. Many parents of children with special needs send their kids to private schools, such as Shelton, Notre Dame of Dallas, and The Rise School. So the schools get the parents tax dollars without the cost burden. Next, some of these schools are less expensive than public schools. Last I saw, Rise and Notre Dame were sub-$1K/month and did not include summer months, equal about $10K/year.

  • Guesty

    I am not sure why you are so defensive about it. I’m not suggesting anything about not funding these programs or blaming anyone for anything. What I am saying is that you must account for the extra costs if you are going to compare the costs per student of running public school (which by law must provide free education to disabled students) vs. private schools (which mostly exclude moderately to severely disabled students). In other words, I just want an apples to apples comparison, which I think will reveal that private schools almost all spend more per student than public schools, suggesting that they believe spending more will result in better outcomes (the point of this post).

    There is a lot of data concerning the expense of educating special needs students. See, e.g., http://bigstory.ap.org/article/special-needs-kids-staying-traditional-schools

    In fact, the problem is large enough that the State of Texas has a special fund for paying some of those costs, though I don’t know how that is reflected in the budge numbers discussed in the original article. See http://www.tea.state.tx.us/index2.aspx?id=2147490628

    In response to your specific examples, some of those schools are very expensive (e.g. Shelton is way more than double what the DISD spends per student). The others are heavily subsidized and still more expensive (e.g. Notre Dame and the Rise School).

  • 1st anon

    You are correct. I am pretty defensive about it. Try going into a public school ARD meeting with you (the parents), a teacher or 2, and the school’s “special ed resource specialist” (fancy words for the budget manager) and being shot down left and right for help that our kids need, but is neither expensive nor unrealistic. I am tired of seeing comments in school and in public that suggest our kids are too expensive. Our kids often don’t get the expensive football, basketball, music, and technology advantages. You would become defensive too.

    Notre Dame and Rise are not subsidized. They both have amazing organizations behind them that help raise funds, but it’s not much.

  • Patricia Arvanitis

    Great information. Thanks