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Chapter 7
FINANCIAL MANAGEMENT

This chapter reviews the financial management functions of Dripping Springs Independent School District (DSISD) in three sections:

A. Planning and Budgeting
B. Financial Operations and Fund Balance
C. Tax Collection

C. TAX COLLECTION

Local school districts levy property taxes as a source of funds. The tax generally is composed of a maintenance and operations (M&O) component and a debt service component. The M&O tax component cannot exceed $1.50 per hundred dollars of assessed property value. The voters authorize the debt service component of the tax when they pass a bond issue.

The county appraisal district appraises all school districts' property. All school districts adopt a tax rate that is applied to the assessed value, minus tax exemptions, to determine the amount of levied taxes. Some school districts collect their own taxes and others contract with another entity. A tax attorney usually collects delinquent taxes.

Due to the inverse relationship between property wealth and state funding earned, poorer districts rely more heavily on state revenues and wealthy districts rely almost completely on local revenues. Exhibit 7-10 presents the amount and percentage of local taxes (including penalty and interest), other local revenue and state revenue for the general fund that DSISD received for the years of 1997-98 through 2001-02.

Exhibit 7-10
DSISD Comparison of Tax Collections, Other Local Revenue
and State Revenue to Total Local and State Revenue
1997-98 through 2001-02
  1997-98
(Actual)		 1998-99
(Actual)		 1999-2000
(Actual)		 2000-01
(Actual)		 2001-02
(Budget)
Tax collections $6,812,797 $7,894,526 $9,108,882 $11,357,147 $13,647,444
Percent of total local and state revenue 51.0% 53.0% 53.3% 62.0% 72.0%
Other local revenue $390,141 $427,770 $494,294 $594,443 $374,355
Percent of total local and state revenue 2.9% 2.9% 2.9% 3.2% 2.0%
State revenue and pass-through $6,159,776 $6,576,973 $7,487,797 $6,365,390 $4,922,766
Percent of total local and state revenue 46.1% 44.1% 43.8% 34.8% 26.0%
Total local and state revenue $13,362,714 $14,899,269 $17,090,973 $18,316,980 $18,944,565
Source: TEA, PEIMS, 1997-98 through 2001-02.

DSISD has relied on the local property tax for as much as 72 percent of its funding in 2001-02 and as little as 51 percent in 1997-98. The district receives the majority of its revenue from property taxes, so it must maximize collections each year.

DSISD's assessed property value has more than doubled over the last five years. Exhibit 7-11 presents the assessed property value, tax rate, levy and tax collections for DSISD for the period of 1998 through 2002.

Exhibit 7-11
DSISD Change in Property Value and Tax Rate
and the Percentage of Taxes Collected to the Total Levy
1997-98 through 2001-02
  1997-98 1998-99 1999-2000 2000-01 2001-02
Assessed property value $503,708,612 $540,196,340 $597,465,003 $723,735,096 $1,070,163,480
M&O tax rate 1.3767 1.4451 1.413 1.500 1.3482
Interest and Sinking tax rate 0.5155 0.5249 0.437 0.333 0.2617
Total tax rate 1.8922 1.97 1.85 1.833 1.6099
Tax levy $9,297,299 $10,382,220 $11,053,103 $13,801,361 $16,682,159
Total tax collections $9,179,899 $10,509,138 $11,831,655 $13,820,634 N/A
Percent collected to levy 98.7% 101.2% 107.0% 100.1% N/A
Source: External Audit Reports 1998 through 2001; Comptroller's Office, Property Tax Division; DSISD Business Office.

The district's tax rate declined from a high of $1.97 in 1999 to a low of $1.61 in 2001-02. The district eliminated the optional homestead exemption to enhance revenues and reduce the tax rate. This, in turn, moved DSISD away from the $1.50 cap to $1.35 in the M&O component of the tax rate. Taxes receivable on August 31, 2001, represented 3.3 percent of the 2001 tax levy.

FINDING

The district contracts with Hays County to collect its taxes after eliminating its tax collection office in 2000-01. As a cost-saving measure, the district eliminated the tax collector position as part of the 2000-01 budget reductions. Eliminating the tax office resulted in an annual net savings to the district of $67,990. This savings is the difference in the salary of the tax collector and the office operating cost of $70,000, and the $2,010 cost of having Hays County collect the district's taxes.

The district has maintained a high percentage of tax collections to the current year levy, and for the past three years has collected more than 100 percent of the levy. The district has saved money and maintained the high collection rate by contracting with Hays County. DSISD has the second highest tax collection rate of the peer districts (Exhibit 7-12).

Exhibit 7-12
DSISD and Peer Districts
Tax Rate, Levy, Tax Collections and Tax Collections as a Percent of the Levy
August 31, 2001
District Total
Tax Rate		 Tax
Levy		 Total Tax
Collections		 Percent
Collected
to Levy
Marble Falls 1.6800 $16,452,079 $16,516,160 100.4%
Dripping Springs 1.8330 $13,801,361 $13,820,634 100.1%
Burnet Consolidated 1.5817 $9,303,502 $9,268,769 99.6%
Lake Travis 1.7795 $36,623,351 $36,048,873 98.4%
Eanes 1.6964 $83,068,192 $81,401,298 98.0%
Source: DSISD and Peer Districts, External Audit Reports 2001.

COMMENDATION

DSISD contracts with Hays County to collect its taxes as a cost saving measure.