States have great flexibility in moving tax base and spending among local governments. The classic case is Texas. State officials wanted the revenues and tax policy consequences of a statewide property tax for schools, but the state constitution forbids such a tax. The effect is achieved by a complex device which gives school districts the option of choosing among five alternatives. If they don’t choose one, the state merges them with another district. The options include sending local property tax money to the state for redistribution to other districts, sending it to a neighboring poorer district by transferring some tax base to that district, or paying the cost of educating pupils from another district.

States can also move property tax money by how they distribute state-assessed revenues from such entities as railroads, pipelines, and electric transmission lines. They can do even more. For example, Mississippi decided that the tax base represented by the Grand Gulf nuclear power plant shouldn’t just go to the district where the plant is located. So it distributes property taxes on the plant to every taxing jurisdiction where power from the plant is sold — a large part of the entire state.

California, facing a fiscal crisis in the early 1990s, effectively shifted much of it to cities and counties. It moved substantial chunks of property taxing authority from municipalities and counties to independent school districts. It then took credit for the added school district revenues as though they were increases in state aid.