The article below is the third in a series designed to give readers insight into the school finance system in Texas. School finance is complicated. But it matters because it affects everything: student learning, teacher pay, school facilities, security, school buses, computers, career and technical opportunities, internet access, sports, fine arts and on and on and on. Ultimately, it affects the future of Texas.
Each article in the series will bite off a small piece of school finance and attempt to give readers a basic understanding of the system in Texas and Arlington ISD. Check back each Wednesday for a new article.
Property Taxes
Last week’s article explained that school districts get their revenue from two sources: property taxes and state aid. Let’s look a little closer at property taxes.
There are two parts to the total property tax rate: maintenance and operations (M&O) and interest and sinking (I&S).
Maintenance and Operations tax rate (M&O)
The M&O portion of the tax rate raises money that school districts use for maintenance and operations. It’s the money that pays teachers, buys supplies, cuts the grass and keeps the lights on.
In Arlington ISD, the 2024-2025 M&O tax rate is $0.8128. While the rate is approved by the Arlington ISD Board of Trustees each year, it is set primarily by requirements, projections and formulas determined by the state.
Interest and Sinking tax rate (I&S)
Revenue raised from the I&S tax rate is strictly used to pay off bond debt and cannot be used for anything else. So, in Arlington ISD, I&S revenue pays off debt from our bond programs, like the 2014 Bond and the 2019 Bond. We’ll post an article later in this series that goes into more details about bonds.
In Arlington ISD, the 2024-2025 I&S tax rate is $0.2907.
Total tax rate
Added together, the M&O and I&S rates equal the total tax rate. In Arlington ISD this year, the total tax rate is $1.1035. That means homeowners pay $1.1035 for every $100 of property value they own.
This total tax rate is slightly lower than last year and is the lowest rate in the last 20 years. It started decreasing when the Texas Legislature established a compressed tax rate beginning with the 2006-2007 tax year. In other words, the state required school districts to compress – or lower – their tax rates. If the lower tax rates result in reduced revenue for a school district, then the state fills in the gap with state aid.
Additional tax compression was enacted through House Bill 3 in 2019. The rate has fallen each of the last four years from a total rate of $1.3871 in 2020-21 to a total rate of $1.1035 for this 2024-25 year.
Changes in revenue collected through local property taxes do not change how much revenue school districts will receive in a year. As explained in the last article, it just changes how much of the district’s total revenue is made up of local taxes and how much of it is made up of state aid. Read more about how school districts get their money in last week’s article here.
Of course, a falling tax rate doesn’t necessarily mean that your school property taxes will go down – or that they will go up if the tax rate goes up. That depends on your property’s value, which is set by the Tarrant Appraisal District.
Next week we’ll tackle the topic of allotment – how much money a school district can receive per student.
Call to Action: School funding
On April 10, the Texas House of Representatives will gather to cast one of its most important votes of the legislative session – passing its version of the state budget. This is a decisive moment for priorities like public school funding and improved teacher pay.
Lawmakers can support these efforts this Thursday by voting for any amendments to the state budget that increase the basic allotment and/or increase teacher pay. What happens on April 10 will set the table for what is possible for the rest of the legislative session. Ask your lawmaker to fund our schools and invest in our teachers. Click this link now to encourage your lawmaker to fund public schools and support teachers.