'Cautious' Katy ISD criticizes 3% appraisal cap

The $18.4 million Katy ISD administration building.

LoneStarTimes.com recently received a comment from reader James Ashe, the parent of a student in the Katy Independent School District. Mr. Ashe forwarded us an email sent by the district to faculty members and certain parent groups. The email, from KISD Superintendent Dr. Leonard Merrell, read as follows:

Educators and citizens across the state are extremely concerned that House Bill 2, which could be put to a vote within the next few days, is a totally inadequate approach to meeting the needs of Texas schools. In an effort to raise public awareness of this “band aid” approach to the critical needs of public schools, I have submitted an op ed to the Houston Chronicle for possible publication this weekend. The text is posted on the Katy ISD website. I have also made several personal contacts and sent letters to all of our representatives in the Texas House. It is most distressing to be told by our elected officials that constituents have voiced no opposition or major concerns about HB 2. If that is! the case, it is critical to our future as educators to let them hear from us. There is a petition in the front office at NCE if you are interested in signing it. It will be faxed on Friday, March 4th. Thank you. Dr. Leonard Merrell

In that op-ed piece, Dr. Merrell criticizes House Bill 2, claiming it provides inadequate funding for local school districts:

It has been reported that the funding level in HB2 increases current allocations by five percent. This amount provides extremely limited dollars beyond the three percent annual inflation rate and does little to fix the lack of meaningful discretion in setting local tax rates held to be unconstitutional by the courts.

In addition, Katy ISD issued a white paper entitled "On Review: Finance 101." The document claims that the district's "fund balance" -- a reserve fund used to cover revenue shortfalls -- will decline without additional tax revenue:

During the 1990's in anticipation of enrollment increases, Katy ISD began adding to its fund balance to cover future expenses, much like a family utilizes a savings account or college fund.

The fund balance reached $48 million in 1998-99, but the district has reached into its reserves for three of the last five years. With approximately 6,000 additional students and the opening of two more new schools in the next two years, projections indicate that the district's fund balance will be unable to generate additional revenue to maintain the fund balance.

However, the same document notes that Katy ISD's tax rate is significantly higher than that levied by other Houston area school districts:

Katy ISD's total 2004-05 tax rate is $2.00, its legal tax cap. $1.63 is levied for maintenance and operations (m&o); the remaining 37¢ is for debt service (i&s).

In addition, the document points out that this maximum tax rate is applied to a record high tax base:

In the last 10 years, Katy ISD's tax base has more than doubled -- from $4.8 billion in 1995-96 to more than $11.7 billion this year.

The document -- produced at taxpayer expense -- goes on to claim that despite record high tax rates and property appraisals, the district could be in a tough financial spot:

Without the ability to raise revenue, that fund balance will decline to dangerously low levels.

Without immediation (sic) action by the Legislature, however, every district in Texas will be in an untenable financial position.

The op-ed doesn't directly address reducing the appraisal cap to 3 percent, so I called Kris Taylor, director of communications for Katy ISD. Ms. Taylor was less than enthusiastic about relief for Katy taxpayers:

We are cautious about that appraisal cap for a couple of reasons. One of them is that growth is one of the things that has really driven our financial concerns.

Taylor went on to compare a 3 percent appraisal cap to rent control in New York City:

There are some real inequities that are inherent in a cap on appraisals ... You begin to have extremely large swings in the value of a property, and all of the sudden you get to see very, very large gaps in appraisals.

Taylor suggested that a more complex method is needed for school finance reform:

A cap on apprisals seems like a very easy way to control increases in local taxes, but it has a tendency to have a lot of downsides. It’s really a simplistic way to go about it.

Bottom line?

It creates some real cash flow problems.