‘Robin Hood’ Destroyed $81 Billion of Property Wealth in Texas

Published December 1, 2004

A 10-year attempt by education finance lawyers to reduce per-pupil spending disparities in Texas schools by means of a so-called “Robin Hood” scheme has produced a smaller spending gap but also resulted in the destruction of an estimated $81 billion worth of property wealth, according to a recent study led by Harvard University economist Caroline M. Hoxby.

The redistribution scheme is on the brink of collapse and is likely to be abandoned soon.

The Texas Robin Hood program involved the forced redistribution of about $30 billion annually in school property taxes, taking from so-called “property-rich” districts and giving to “property-poor” districts. Hoxby’s analysis shows the plan did not succeed in equalizing per-pupil spending throughout Texas, although it did reduce the gap between the highest-spending quartile and the lowest-spending quartile from about $2,000 to $1,500 per pupil.

That $500 reduction was achieved at a cost of $27,000 per pupil in property value destruction across the state.

“Good intentions about redistribution are not enough in school finance: Understanding the economics is important too,” write Hoxby and Ilyana Kuziemko in their July 2004 report, “Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas’ School Finance Equalization Plan.”

To give readers an idea of the magnitude of the wealth destroyed by the Robin Hood scheme, the researchers consider what the money could have been used for had it simply been confiscated from the wealthy instead of being destroyed. If the money had been used to create a permanent endowment fund, it would have generated sufficient annual revenues–about $1,350 per pupil–to bring per-pupil spending in every district in Texas up to the level of the top 5 percent of districts.

The destructive consequences of the Robin Hood scheme may have been predictable to economists, but they were not foreseen by the plan’s designers, who were lawyers, not economists. The intent of the lawyers, as described by Hoxby and Kuziemko, was to devise a funding mechanism that would skirt the Texas Constitution’s ban on a statewide property tax.

The Robin Hood formula was devised by the Texas legislature in 1993-94 as a third response to a 1984 lawsuit charging that the then-current system of school finance was unconstitutional, a charge the Supreme Court of Texas upheld in 1989. The court ruled the Robin Hood system constitutional in 1994, but stated the system would become unconstitutional if all school districts reached a 15 mil tax cap.

That point is close at hand. Both property-poor and property-rich districts have responded to the incentives in Robin Hood and raised tax rates to the point where more than 80 percent of Texas pupils are in districts within half a mil of the cap.

“A better understanding of how school finance works might lead to the adoption of schemes that are more efficient, more stable, more equalizing, less burdensome to taxpayers, and–in the long run–more likely to achieve the goals of school finance,” the authors conclude.

George A. Clowes ([email protected]) is managing editor of School Reform News.

For more information …

The July 2004 report by Caroline M. Hoxby and Ilyana Kuziemko, “Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas’ School Finance Equalization Plan,” is available online at http://post.economics.harvard.edu/faculty/hoxby/papers/txpaperaug2004.pdf.