Frequently Asked Questions About TRE

1. What is a tax ratification election (TRE)? A TRE is a special election called by a school district’s Board of Trustees, asking voters to approve an increase above the current operating tax rate. The operating tax rate in Dallas ISD has been $1.04 for the last 10 years (when it was lowered to the current rate). Voter approval through a TRE is required for a school district operating tax rate to exceed $1.04.

2. What is the process for approving a tax ratification election? Passing a TRE is a two-step process. First, the Dallas ISD Board of Trustees must approve a new tax rate with a supermajority of 6 out of 9 votes in support. Second, a simple majority of voters (at least 50%) must then approve the new tax rate set by the Board on a ballot election.

3. What is the expected timeline for this process? Based on previous attempts, the Dallas ISD Board of Trustees will likely vote on a new tax rate at a special meeting to be called in August. If a supermajority votes in support of a new tax rate in August, it would go to voters on the November ballot.

4. How much is the proposed tax rate increase? Led by Superintendent Hinojosa, the Dallas ISD administration is recommending 13 cents be added to the operating tax rate, resulting in an operating tax rate of $1.17. Under the current Texas school finance system, this would protect DISD against $598 million in additional lost revenue due to “Robin Hood” (Ch. 41) recapture payments through 2022-23. Increasing the operating tax rate to $1.17 would make DISD’s combined tax rate $1.41, moving DISD from the 27th ranked tax rate among the 28 districts in Dallas and Collin counties to the 24th ranked tax rate. (If you used all North Texas, Dallas, Denton, Collin and Tarrant, we would move from 53/55 to 41/55).

5. Who pays Dallas ISD taxes? Residential property accounts for around 40% of Dallas ISD’s taxable value. That means around 60% of the district’s tax dollars come from commercial and business property.

6. How will the TRE affect taxpayers who are over 65 or disabled? Property taxes for citizens 65 years or older—or those who are disabled—are not affected by a rate increase, if the appropriate homestead exemptions are filed with the County Appraisal District.

7. How will the TRE impact a homeowner’s school taxes? The average taxable home value in DISD is $184,550. If approved, the 13-cent change would raise property taxes by $20 a month, or the cost of two tickets to the movies. The $240 annual cost is $0.66 per day. Below are the average home values and corresponding impact based on trustee district.

8. What other districts have passed a TRE?  Locally, districts like Plano ($1.17), Allen ($1.14), McKinney ($1.17), Carrollton-Farmers Branch ($1.17), Irving ($1.17), Wylie ($1.17), Coppell ($1.17), DeSoto ($1.17) and Grand Prairie ($1.17) have raised their operating tax rate in the last decade. Of the 28 area districts in Dallas and Collin counties, 18 (two-thirds) have passed a TRE. Additional area districts are considering TREs this summer and fall as funding from the state decreases. This includes Lancaster ISD, Cedar Hill ISD, Duncanville ISD and Richardson ISD, where each of their Boards have approved TREs that will increase their operating tax rate from $1.04 to $1.17. Since 2008, approximately half of the districts across Texas have passed a TRE.

9. What would be the impact of a failed TRE? If the Board of Trustees and voters do not approve the TRE, the district would be unable to continue funding its strategic planning initiatives or teacher and staff compensation increases. Without a 13-cent Tax Ratification Election, DISD will face these projected revenue losses over the next five year due to “Robin Hood” (Ch. 41) recapture:

2018-19

-$18 MILLION

2019-20

-$101 MILLION

2020-21

-$167 MILLION

2021-22

-$222 MILLION

2022-23

-$280 MILLION

10. What makes up a school district’s tax rate? Two tax rates combine to make a school tax rate. The first tax rate is the operating tax rate. DISD’s is currently $1.04 and is used to fund day-to-day operations such as payroll costs, utilities, and maintenance of schools and facilities. The second part is the debt service tax rate, currently $0.24. It may only be used to pay for district bonds that fund construction and one-time purchases such as technology, buses and equipment with a useful life of more than one year. The bonds that are funded by the debt service tax rate are much like the mortgage on a home. The two rates combined make up the current DISD tax rate of $1.28.

11. My home value has risen so I am paying more school taxes. Doesn’t this mean DISD has more operating funds? Unfortunately, no. Increases in DISD home values do cause a homeowner’s school taxes to rise, but the increases do not provide an ongoing benefit to the district’s operating budget. It actually has the opposite effect. As DISD collects more money from local taxpayers due to increased property values, state operating funding for DISD decreases. In fact, state officials have often used the benefit of additional local tax dollars generated in school districts like DISD to fund other parts of the state budget unrelated to public education.

12. How much funding would the TRE generate? Projections show that proposed operating tax rate of $1.17 would generate between $167 million-$192 million annually over the next 5 years. However, due to projected “Robin Hood” (Ch. 41) recapture payments, below is what the net revenue would look like over the next five years with a 13-cent TRE. After passing a 13-cent TRE, it is critical that we advocate at the state level for school finance reform during the next two legislative sessions in 2019 and 2021.

2018-19

+98M MILLION

2019-20

+$20M MILLION

2020-21

-$45 MILLION

2021-22

-$102 MILLION

2022-23

-$161 MILLION

 

13. How would DISD spend the revenue generated by the TRE? Based on its proposed 2018-19 budget, the DISD administration would spend $32.3 million next year to increase teacher and staff pay. It would also allocate an additional $3.1 million to early learning and an additional $1 million to expand choice schools. It would direct $92.3 million to the fund balance to save for “Robin Hood” payments to the state.

14. Would DISD have to pay the state recapture on funds generated through an increased tax rate? Yes. Because of a complicated school finance system, recapture requires “property rich” school districts to pay a portion of the property taxes collected to other districts in Texas that the state considers to be “property poor.” In 2018-19, DISD will become classified a “property rich” district due to growing property values and declining student enrollment. At the current rate of $1.04 per $100 of valuation, DISD can increase this rate by two pennies to $1.06 without any additional revenue subject to recapture by the state. When the rate increases above $1.06 up to the state cap of $1.17, the resulting additional revenue is subject to recapture, meaning that Dallas ISD would keep around 74% of revenue raised from any increase above $1.06 per $100 of valuation and return the remainder to the state.