In Texas, school districts can set an M&O tax rate up to $1.17 per $100 of valuation. This possible M&O rate is divided into three distinct tiers based on the recapture level for Chapter 41 (Robin Hood) districts.
Tier 1 covers the first $1.00 of the M&O tax rate and if school districts exceed a specified wealth level per student, they must send tax receipts generated from the excess wealth per student to the state. All of the recapture that Eanes ISD pays ($83.3 million in 2016-17 and an estimated $94 million in 2017-18) is based on this first $1.00 of M&O taxation.
The second tier covers the next $0.06, known as the Golden Pennies because tax receipts collected from these six pennies are not recaptured. In 2017-18 each of Eanes ISD’s golden pennies is worth approximately $1.45 million. For comparison sake, each penny in tier 1 is worth about $500,000 after recapture is paid.
The final tier, which encompasses the 11 pennies between $1.06 and $1.17 are known as the copper pennies because they are recaptured at an even higher rate than Tier 1. In fact, after recapture, one copper penny provides less than one quarter of the net revenues provided by a golden penny. For this reason, the Board does not believe that copper pennies are a good value for Eanes ISD and its voters and has no plans to access them.
To provide some perspective, in 2006 most school districts in Texas had an M&O tax rate of $1.50. The school finance reform that was implemented between 2006 and 2008 compressed M&O rates to lower tax rates. Following compression, school districts were allowed to access up to four golden pennies without seeking voter approval; most districts, including Eanes ISD, chose to do that. In order to access an M&O tax rate above $1.04 (Eanes ISD’s current rate), districts must seek voter authorization through a TRE. The Board of Trustees is seeking voters’ consent to access the two remaining golden pennies which would increase operating revenues for the district by approximately $3 million in 2017-18 and more in subsequent years.