I’ve had a lot of conversations lately about school funding, and one term that keeps coming up is “golden pennies.”
It’s confusing, so here’s a plain-English explanation using real numbers.
Note: The example below is intentionally simplified and assumes no exemptions, homestead caps, or special adjustments, just to make the concept easier to follow.
🪙 First: what is a “penny”?
In Texas, school tax rates are measured in pennies. Literally pennies.
- One penny = $0.01 per $100 of property value
So on a $200,000 home, one penny of school tax equals about $20 per year.
🥇 So what is a “golden penny”?
A golden penny is one of the first few Maintenance & Operations (M&O) tax pennies that a school district is allowed to keep locally, even if it is a Chapter 41 (recapture) district.
Under current Texas law:
- Districts can keep about 8 golden pennies
- After those pennies are used, most additional operating tax revenue is subject to recapture and may be sent back to the state
Golden pennies are essentially the protected portion of a district’s operating tax rate.
🏡 A real example (using Leon ISD)
Using our simplified example, a $200,000 home would pay about $1,500 per year in Leon ISD school taxes before exemptions.
That roughly breaks down like this:
- ~$220/year goes to bond repayment
(This always stays local.) - ~$160/year comes from golden pennies
(8 pennies × $20) - The rest of the operating tax is subject to Chapter 41 (recapture) rules, meaning a significant portion can be sent back to the state
This is why a large increase in property values does not automatically mean more money for local schools.
🏛️ Where does recaptured money go?
Money sent back to Austin through Chapter 41 (recapture):
- Is legally restricted to education
- Does not go to highways, prisons, or other state programs
- Is not earmarked for a specific school district
Instead, it is pooled into the statewide education funding system and used to offset what the state would otherwise have to pay.
So while it stays “in education,” it still means districts like Leon ISD don’t automatically benefit when local taxable values go up.
🏫 What about Title I?
Leon ISD is also a Title I district, with around 60% of students qualifying for free or reduced-price lunch.
Title I funding:
- Helps support students who need extra assistance
- Comes from federal funds, not local property taxes
Important to know:
- Title I does not change how golden pennies work
- Title I does not prevent recapture
- Title I does not allow the district to keep more local tax dollars
Title I and golden pennies are completely separate systems.
⭐ Why this matters
When people hear about new industry or large projects coming to an area, it’s easy to assume schools will automatically benefit.
For districts like Leon ISD:
- Only a small number of operating pennies are protected
- Most operating tax growth can flow back to the state
- Bond funding is often the most reliable way to keep more money local
Understanding this helps all of us ask better questions and have more honest conversations about school funding.