Posted Date: 11/17/2023
In this edition of the Superintendent’s Blog, I’d like to take a very complicated topic and break it down to provide a simplified understanding of what is going on with your taxes as they apply to school districts. Again, this subject can be very difficult to understand all of the intricacies, so please forgive the simplicity of this discussion.
First, school districts basically get their funding from two primary sources: 1) local taxes and 2) state funding. There are other sources with very strict guidelines such as specific grant funding and federal funds. All public ISDs such as Hudson receive a ‘guaranteed’ minimum amount of money per student. We call this the Basic Allotment. Think of it as a bucket of money to operate with. For Hudson, about 20% of those monies come from local tax dollars. The remaining 80% comes from the state, which is obviously statewide funds from many other taxes, etc. The funding from the state is adjusted based on student daily attendance, not the number of students enrolled in the district. There is also an adjustment based on special programs, such as Career and Technical Education, Special Education, etc.
Schools operate under a complicated formula that determines the tax rate at which to annually pass. Schools do not have any say in how much your home and property are worth. The Angelina County Tax Appraiser is responsible for assessing your value. Obviously, no one likes to pay a big tax bill, but there has been an ongoing problem with homes and properties selling and being worth more than what was listed. Almost no one would sell their property for the assessed value. Well, understanding that if schools receive local taxes based on that value and the state has to ‘fill the remainder of the bucket’, the state is getting the raw end of the deal. So, the state’s comptroller's office reacts by doing a Property Value Study, where they ‘audit’ the local tax assessor's values. With values being lower locally than what the state determined, there is much pressure for local values to increase to more closely match what properties are actually worth. So, you have noticed over the last few years some major spikes in your values, which affect how much you pay in taxes. The state’s goal is for values to be within a 5% margin (higher or lower) from their assessment. If it’s not, there are some significant penalties by withholding state funding from schools.
To complicate matters a bit, the state also initiated a ‘tax compression’, which is a requirement for school tax rates to decrease. If values are in that 5% margin, the state would continue to fill ‘the bucket’. For a short period of time, this was basically a ‘wash’ for many (higher tax rate X lower value vs. lower tax rate X higher value). Because Hudson ISD’s values were within the 5% margin, coupled with the additional tax compression this year, many of you have seen a ‘decrease’ in the amount of taxes owed. Most homeowners in the Hudson area have always blamed a high tax rate as the reason for high tax bills. However, Hudson ISD actually has the lowest school tax rate in the county…it’s just that properties in Hudson sell for more (and therefore valued higher) than other properties in the county. To further benefit homeowners, the state recently passed a $100,000 homestead exemption (up from $40,000). In simple terms, this means that if your home is worth $250,000, you are taxed as if it is only worth $150,000. Therefore, the average homeowner in Hudson ISD should have seen a reduction in the tax bill by a few hundred dollars. Great news! But, we all know it’s still a lot to pay. Jokingly, it’s the biggest scam: paying taxes on money you make, taxes on money you spend, and taxes on things you own that you already paid taxes on with already taxed money.
Hopefully, this brief and simple explanation gives a little understanding for everyone. If you are having a difficult time sleeping, research and read the nitty-gritty version.
Donny Webb, Superintendent