Where the Money Comes From
To finance public education for students in Texas, school districts collect funding from local, state, and federal revenue sources. Of these three sources of revenue, money collected locally contributes the most.
Local taxes are the primary source of revenue for most school districts, generally accounting for more than 50 percent of total revenue. The biggest of these revenue generators is local property taxes, which accounts for a majority of a district’s local tax revenue. Smaller school districts or districts with less property wealth will generally receive a significant contribution from the state.
Each school district in Texas also receives federal funds, but in most cases, the funds received do not affect a district’s income as significantly as local tax revenue.
Major sources of school district revenue
Local Taxes
Property
The Texas Comptroller of Public Accounts’ Annual Property Tax Reportreports that Texas school districts levied a total of $21.2 billion in property taxes in 2008. A 54.5 percent share of all property taxes levied went to local school districts, experiencing an average annual increase of 6.5 percent since 1989. Property tax rates range from $0.73 to $1.67 per $100 of property value. The largest school district in Texas—Houston ISD—is the only district to levy more than $1 billion in property taxes in 2008.
Other Local Revenue
School districts are not authorized to levy a sales and use tax. However, districts receive revenue from non-tax sources that include capital lease proceeds and profits from the sale of capital assets.
State Revenue
Foundation School Account
Since Texas school districts’ geography and population demographics vary widely, some districts collect far more property tax revenue than others. Small school districts or districts that have properties with low taxable values still need a sufficient amount of revenue to fund public schools. These districts use state revenue sources as their primary source of income.
The Foundation School Account receives revenue from the state general revenue fund. Monies are distributed to districts through Foundation School Program funding formulas. Texas’ general revenue fund brings in revenue from constitutionally dedicated public education funds: one-quarter of receipts from gasoline, water, electric utility taxes, the oil production tax, and the natural gas production tax.
Federal Revenue
School districts manage special revenue funds for federal education grants or federal programs such as the National School Breakfast and Lunch Program.
