School Revenue Sources
Over the course of the last year, we have been talking about the school revenue sources available to public schools in Texas. This conversation started when the district first began discussions about the Voter Approved Tax Revenue Election (VATRE). During those discussions, information was shared via podcasts, town hall meetings, informational meetings around the city, and newspaper articles. While that information has been disseminated through many avenues, there still seems to be confusion about funding sources and what exactly the money from those funding sources can be used for. The purpose of this discussion is to outline the two basic funding sources in Texas (there are other monies available from state and federal grants with strict limits on usage). These funds are based on the tax rate set by the school district and then distributed into two basic pots of money. Those two funding sources available to school districts are: Maintenance and Operations (M & O) and Interest and Sinking (I & S). Both of these funding sources are levied on taxable property within the district. The revenues received by Hereford ISD are calculated on a per $100 valuation. There have been numerous changes and adjustments to how school districts are funded over the last 30 years. These include: the redistribution of wealth, the original required tax rate compression (2005-2006), House Bill 3, and no new funding for the basic allotment since 2019 (there was a slight increase of the basic allotment in the last legislative session).
In 1994, the redistribution of school wealth, better known as “Robin Hood” is a method to take M & O tax dollars away from property wealthy districts and give that money back to the state. This money is then redistributed to property poor districts. Maintenance and Operations funding for property wealthy schools is appropriate annually on a per student basis. Any amount of M & O tax collections above the formulated number is taken by the state and redistributed to property poor districts.
In 2005-2006 school year, the Texas legislature mandated the compression of M & O tax rates for all school districts. This stopped in 2007 where the M & O rate was given a ceiling of $1.04. The compression was required again by the Texas legislature in 2019. The M & O rate for Hereford ISD fell from $1.04 to $0.7122 in 2025. The impact of this has caused the district to lose funding on the M & O (day to day) side of its funding without a dollar for dollar impact to the state side of revenue.
The biggest impact of House Bill 3 is the new required safety requirements for all Texas public schools. The measures outlined in this bill are often referred to as “unfunded mandates” because the minimal funding, even with grants, has not kept up with all of the safety requirements for safety upgrades (guardian program/armed guards, fencing, entrances, cameras, etc. and training.
The M & O tax bucket is used basically for the day to day operations of the school district. These funds can be used for the basic needs of the district such as utilities, salaries, supplies, repairs, fuel or any other day to day needs within the school district including maintenance and building. M & O taxes are subject to the state funding formula as well as the redistribution of wealth. The M & O rate is now by the state based on the property valuations of the school district. The only way to increase this rate is through a VATRE approved by the voters. Clearly, our funding is lacking, having dropped .79 cents since 2005 ($1.50 to 0.71).
The I & S tax bucket can only be used for construction, renovation, roofing, HVAC, land, technology, school buses, etc. or other capital outlay projects. The taxes in this bucket are not subject to the state in any way and stay 100% in the community for capital projects. It is important to note that the taxes raised on the I & S side of the tax rate CANNOT be used for any of the day to day operations including teacher and staff salaries. Bond elections affect the I & S portion of the tax rate.
Interestingly, in 2025, Hereford ISD ($0.81) had the lowest tax rate in our area including Plainview ($1.27), Shallowater ($1.26), Pampa ($1.19), Borger ($1.13), Dumas ($1.03), Perryton ($1.02), and Canyon ($.93). I hope that this overview will help answer some of the questions raised about school revenue and if you have any questions, please contact me at ralphcarter@herefordisd.net.