Texas school districts, like Dripping Springs ISD, are funded by three primary revenue sources — local revenue, state revenue and federal revenue.
Local revenue comes from property taxes paid by residential and commercial taxpayers within the boundaries of a school district. In Texas, the tax rate of a school district that shows up on a property owner’s tax bill is a combination of two rates that fund different portions of the school district’s budget. These rates are the Maintenance and Operation or M&O Tax Rate, and the Interest and Sinking, or I&S Tax Rate.
The M&O Tax Rate funds the day-to-day maintenance and operations of the school district like teacher salaries, utilities, and classroom supplies. This is also known as a school district's General Operating Fund. The General Operating Fund is the larger of the two tax rates.
The I&S Tax Rate can only be used to pay off debt incurred by issuing voter-approved bonds. School districts are required to set the I&S tax rate at the level necessary to make the annual debt payments on all outstanding voter-approved bonds.
Dripping Springs ISD's M&O Tax Rate is currently $0.9429, and its I&S Tax Rate is $0.35 cents, for a Total Tax Rate of $1.2929 per $100 of taxable value.
The I&S Tax Rate has been $0.35 since 2017-18. The taxes collected by the I&S Tax Rate is collected and set aside in its own account and used to pay back bonds.
School districts in Texas are allocated funds based on the number of students they serve. The basic allotment of $6,160 per student. This allotment is funded by local property taxes, sometimes known as the district’s local share, plus state provided revenue, sometimes referred to as the state’s share. With a larger number of students comes increased expenditures for additional teachers and related staff to serve those students.
As a school district is able to fund more of the calculated basic allotment through its property tax base, the less state funds the school district receives. Conversely, if a community raises less money locally through taxes, the district receives more state funds. A district (such as DSISD) with property wealth that generates more than $6,160 per student is required to send excess local tax revenue to the state. The state calls this “Local Revenue in Excess of Entitlement” but you will often hear it referred to as “Recapture” or “Robinhood.”