An overview: How school district finances work
The following information is a very simplified explanation of the school district funding process. The actual process is very complicated and I am not in the least qualified to try to explain it. However, appraisal districts became an integral part of the school funding process in 1980 when they were established in order to ensure that the appraisal process was uniform across the state and all school districts were maximizing their local tax efforts. The state takes into consideration how much revenue school districts are generating with their local property tax levy when they calculate how much funding the state will provide to the school districts. If school districts are maximizing their local tax effort, the state will fund the district at their full allotment. If the local effort is not maximized, the school district will not receive their full allotment.
The way the state determines local effort is by ensuring that property taxes are based on a common basis, which is market value. Appraisal districts in Texas are audited by the State Comptroller’s Property Tax Division. The comptroller performs a property value study to determine if the property market values, certified to the school districts, represent actual market values within each school district. The state performs the property value study every other year. The year that the property value study is not done, a methods and procedures audit is performed to ensure that the appraisal processes used by the appraisal district are in compliance with the Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice.
When the state comes in to perform the Property Value Study, they gather information, from various sources, concerning local real estate sales to determine what property is selling for. The state auditor prepares independent appraisals for randomly selected properties that sold within the last year. Then they review and compare their appraisals to our appraisals to determine how close our values are to actual market value.
If their determination of market value for a property is $100,000 and our market value of the same property is $98,000 we are rated at 98 percent on that property. If their determination of market value for a property is $100,000 and our market value of the same property is $102,000 we are rated at 102 percent. After the state has compared hundreds of properties, they determine an overall rating which is reported to the state to be used in the calculation to determine how much state funding the school district will receive. In order for the school district to receive their full allotment from the state, the Ector County Appraisal District must receive an overall rating of 95 percent or greater. So our goal then is to receive at least a 95 percent rating. By the same token, we don’t want to over appraise property either. What we do is a mass appraisal process. It’s not an exact science so when we complete our appraisals, some values could be over 100 percent. Notifying property owners what their value is and providing both informal and formal protest opportunities each year are what keep our appraisals from going over 100 percent.
For 2010, our Property Value Study ratio was 100 percent. We consider this study our performance test and anxiously await the results each year. Thankfully, our report has always been in the 95 to 100 percent range which qualifies Ector County Independent School District for their full allotment of state funding. So there is a method behind our madness or should I say a reason for those annual appraisal changes that we notify you about in May of each year.
