Nonresidential expanded tax base approach to public school finance in Texas

In 2002--03, Texas public schools, which served over 4.2 million students across 1,033 independent school districts, faced an uncertain future that was widely characterized as a statewide school finance crisis. The funding formulas were no longer capable of generating additional school revenues. More than 600 school districts representing 75% of all students in Texas had a maintenance and operation tax rate at or near the state-mandated cap of ;This study utilized quantitative means and publicly available school finance data to examine the impact on measures of student and taxpayer equity of a nonresidential expanded tax base (ETB) approach to collecting and distributing education revenues for public schools in Texas. The impact across time of a nonresidential ETB plan on student and taxpayer equity was considered while attention was also given to the proposed policy's effect on the state's share of overall school funding. Regression analysis was used to explain variation in revenue across districts. The simulations removed for tax purposes nonresidential property from local school district jurisdiction, taxed the nonresidential property at either the regional or statewide level, and returned the nonresidential property tax revenues back to local school districts using four different redistribution plans. Measures of student and taxpayer equity were calculated under simulated conditions and results were compared to actual equity measures for the 2002--03 and 2000--01 school years.;According to the study's findings, the nonresidential ETB approach to school finance in Texas improved student and taxpayer equity when compared to the actual equity measures from both the 2002--03 and the 2000--01 school years. In particular, the proposed policy improved horizontal equity and frequently distributed tax burden in a manner considered more progressive. Equal opportunity measures did not always improve. The simulations had a negative impact on equity measures for urban school districts in Texas. The nonresidential ETB simulations increased the state's portion of education revenue to more than 55% for both school years.