Optional exemption debated as level of state cuts remains unknown

Cy-Fair ISD trustees voted 4-3 on June 13 to wait 10 days before deciding the fate of the district's optional homestead exemption, which cuts taxes for the average homeowner by $400 per year while costing the district $50 million annually in tax revenue.

With lawmakers continuing their debate over education funding in Austin, trustees Lida Woodul, Don Ryan, John Ogletree and Bob Covey tabled a resolution setting exemptions until a special meeting, set for 6 p.m. June 23. Trustees Ethel Wolfe, Larry Youngblood and William Morris disagreed. A special meeting also is set for 6 p.m. June 30 on the 2011-12 budget.

School officials estimate reduced state funding of $40 million next year and $11 million in 2012-13, amounts that outgoing Superintendent David Anthony warns will overburden teachers and erode the quality of education.

But homeowners who addressed the board said the exemption is needed to help them make ends meet.

Jonathan Sykes, an attorney and Cy-Fair resident who spoke to preserve the optional exemption two years ago, encouraged trustees not to reduce it without doing an economic impact study. He suggested charter schools as a new model to lower costs.

CFISD is among seven Harris County districts that offer the maximum optional exemption, which reduces taxable value of a homeowner's permanent residence by 20 percent. Anthony said state lawmakers consider it a potential source of revenue for districts like Cy-Fair that are lobbying for more equity in state education funding during the special session.

Stuart Snow, associate superintendent for business and financial services, said he cannot predict what action the Legislature might take. The debate ranges from using more of the state's rainy day fund to offering private school vouchers. If no action is taken, education funding reverts to proration, which is expected to cut the district's allocation by $82 million in the second year of the two-year period, he said.

For now, the district is using House Bill 1 and Senate Bill 1 to guide budget planning and has identified $47 million in spending cuts for 2011-12 - the largest single-year reduction in its history - which Anthony said would compound previous budget cuts made since 2006 totaling $73 million.

Eliminating the exemption would increase taxes on a $160,000 home by $399.60 per year and on a $200,000 home by $498 per year. The tax rate is $1.43 per $100 of property value. Reducing the exemption to 10 percent would increase taxes by $203 for the $160,000 home and $253 for the $200,000 one.

Snow emphasized that changing exemptions this year does not make them permanent since the board establishes them annually.

No changes are contemplated for state-mandated exemptions or additional exemptions the district grants for the elderly and disabled.

Morris blamed Anthony for bringing the district to this juncture, citing his recommendation to raise salaries by 5.5 percent for teachers and 5 percent for administrators this year.

Covey said the blame lies with legislators, who appear unable to fix the structural deficit created in the school fund when tax rates were compressed in 2006 and a new margins tax on business failed to replace that revenue.

"We are the ones being penalized, and if you don’t believe that, you need to take another look at what’s going on," Covey said.