“Robin Hood” and Texas School District Borrowing Costs

The “Robin Hood” system of school financing in Texas takes property tax funds from wealthy school districts and gives them to poorer districts. This paper examines Permanent School Fund-insured, school district debt and discovers that under the “Robin Hood” system, Texas school districts with either Aa or A1 underlying credit ratings have higher borrowing costs than districts with lower ratings. Also, the borrowing costs of Texas school districts with underlying credit ratings of Aa and A1 are higher than those for non-Texas, privately insured school districts with the same ratings, while the borrowing costs of A and Baa-rated Texas school districts are lower.