Chapter 49 Recapture: Who Owes, How to Pay, and Why

Texas Chapter 49 recapture is the state law that requires property-wealthy school districts to send excess local property tax revenue back to the state, where it helps fund public education in districts with less taxable wealth. It lives in Chapter 49 of the Texas Education Code, and it is the mechanism behind what many Texans still call “Robin Hood.” For the 2024–2025 school year, the Texas Education Agency identified 369 districts with potential excess local revenue, and the system moves billions of dollars a year.¹

When a District Owes Recapture

Every Texas district has a state-calculated funding entitlement under the Foundation School Program. That entitlement is paid for from two sources: local property taxes and state aid. When local property values are high enough, the local share alone covers the entitlement. When it overshoots, the extra money is “excess local revenue,” and Chapter 49 requires the district to give it up.

The trigger sits in Section 48.257 of the Education Code. A district must reduce its revenue level under Chapter 49 if its Tier 1 local share exceeds the Tier 1 entitlement minus the district’s Available School Fund distribution. A parallel rule applies at Tier 2: if the Tier 2 local share exceeds the equalized amount, that excess is also subject to recapture.²

TEA runs the numbers each year using final weighted average daily attendance and any attendance credits the district has already purchased.³ Appearing on the annual excess-local-revenue list does not automatically mean a district owes money after all adjustments; it means the district is in the calculation.¹

How Districts Actually Pay It Back

Chapter 49 gives a district that owes recapture four legal ways to reduce its excess revenue. In practice, one of them does nearly all the work.

Purchase of attendance credit (Subchapter D). The district pays cash to the state and receives a credit against its student count. This is by far the most common route and accounts for nearly all recapture payments. The board of trustees must sign an agreement with the state, and voters must approve it in an election. Once voters approve, the board can enter future agreements without going back to the ballot.⁴
Education of nonresident students (Subchapter E). The district contracts to educate students who live in another district, spending the excess on instruction instead of remitting it.
Detachment and annexation (Subchapter C). The district transfers part of its tax base to a property-poor neighbor by agreement.
Tax base consolidation (Subchapter F). Two or more districts merge their tax bases so property wealth is shared across a larger student population.

Detachment, annexation, and consolidation all require voter approval and are rarely used.⁵ The state can also offset recapture against state aid the district would otherwise receive, so the district’s state payment simply comes in smaller rather than the district cutting a separate check.

What Happens If a District Refuses

Non-compliance is not a realistic option. If a district fails to reduce its excess revenue under the agreement it filed with the commissioner, the Education Code requires the commissioner to act.⁶

The first step is a default notice, and the commissioner will refuse to certify the district to adopt a tax rate until the excess is resolved. A district without a certified tax rate cannot collect property taxes. From there, the commissioner analyzes the district’s tax base and may forcibly detach commercial, industrial, mineral, pipeline, and utility properties and annex them to neighboring districts. If detachment alone won’t bring the district below the threshold, the commissioner must consolidate the entire district with one or more others. A district that has not even called an election authorizing a recapture option by September 1 will see the commissioner order detachment of property.⁶ The state’s authority runs all the way to dissolving the district.

Why the Law Exists

Recapture was not a policy choice made in a vacuum. In 1989, the Texas Supreme Court held in Edgewood ISD v. Kirby that the state’s school finance system violated Article VII, Section 1 of the Texas Constitution, which requires the legislature to maintain “an efficient system of public free schools.” The Court found that districts must have “substantially equal access to similar revenues per pupil at similar levels of tax effort.”⁷ The legislature responded with a wealth-equalization framework, originally in Chapter 41. House Bill 3, passed in 2019, repealed Chapter 41 and moved the recapture provisions into Chapter 49, with revised formulas under Section 48.257.⁸

Key Numbers and Dates for the Current Cycle

The Basic Allotment, the per-student figure that drives Tier 1 entitlement calculations, is $6,160 in average daily attendance for 2024–2025.⁹ For 2025–2026, districts that did not submit local property value data receive the lesser of their prior-year maximum compressed rate or the state maximum compression rate of $0.6322 per $100 of taxable value.¹⁰ TEA notifies affected districts of their entitlement and excess local revenue calculations by July 15 each year.¹¹

If your district appears on the annual excess-local-revenue list, the practical question is which Chapter 49 option the board has authorized, not whether the district will participate. That decision, in almost every case, is the purchase of attendance credit.

1
Texas Education Agency. 2024-2025 Excess Local Revenue Districts
2
State of Texas. Texas Education Code 48-257 – Local Revenue Level in Excess of Entitlement
3
State of Texas. Texas Education Code 49-003 – Inclusion of Certain Factors
4
Justia. Texas Education Code Chapter 49 Subchapter D – Purchase of Attendance Credit
5
Justia. Texas Education Code Chapter 49 – Options for Local Revenue Levels in Excess of Entitlement
6
Texas Education Agency. Options and Procedures for Local Revenue in Excess of Entitlement
7
National Center for Education Statistics. Edgewood v. Kirby, 777 S.W.2d 391 (TX 1989)
8
Texas Education Agency. Excess Local Revenue
9
Texas Education Agency. Basic Allotment One-Pager
10
Texas Education Agency. 2025 Final Maximum Compressed Tax Rates (MCR) and Adoption of Tax Rate
11
Texas Education Agency. Options and Procedures for Districts with Local Revenue in Excess of Entitlement