Excess Local Revenue - "Recapture"
For Chapter 49 districts subject to paying recapture, TEA has provided detailed information about how recapture works in the following link.
HB 3 in 30: Recapture | Texas Education Agency
How do your property taxes fund public education?
The Texas Legislature sets the level of funding per student that school districts are entitled to retain for the maintenance and operations of the district. This funding comes first from local property taxes and then from state aid. After collecting revenue from local tax collections for operations, the state makes up the difference to meet the funding level set by the Texas Legislature, as long as the school district does not exceed its state entitlement through local tax collections.
Since local tax collections in Midland ISD exceed its state entitlement, Midland ISD is required to pay a portion of its local tax rate as recapture back to the state of Texas. The recaptured funds contribute to the state’s overall education funding pool. They are used to help balance the funding each district receives. By recapturing funds from the school district, the state reduces the amount of money it needs to allocate directly to those districts, freeing up more resources to fund other state priorities. This can create budgetary savings for the state.
Where do your property taxes go?
73.40% of the M&O tax rate is retained by the district for operations, while 26.60% of the M&O tax rate is sent back to the state.
The M&O tax rate consists of two rates: The Tier I rate, known as the Maximum Compression Rate (MCR), set by TEA annually, and the Tier II rate, known as entitlement pennies.
The district currently has five entitlement pennies not subject to recapture, meaning 100% of the taxes collected with those pennies remain in the district.
For every $100 in property tax paid, approximately $26.60 is recaptured by the state.
The district first became subject to recapture in 2013-14, and based on current-year projections, is estimated to have paid approximately $1 billion back to the state at the end of the 2024-25 fiscal year.
The total net M&O collections shown in the graph reflect the amount of M&O tax revenue the district retains, which is not subject to recapture. The recaptured M&O collections represent the portion of M&O taxes the district collects but must return to the state based on the district's overall entitlement. The state funds shown represent a small contribution to the district's M&O funding, based on its overall entitlement.
MISD Funding Entitlement from State
