Qualified property under Chapter 313 is the industrial plant the limitation covers. At Barbers Hill Independent School District that property sat at $8,968,589,907. It was limited to a taxable value of $1,300,000,000. Rep. Mitch Little read those figures from the district's audited annual financial reports at the House Select Committee on Governmental Oversight on August 26, then put them in one line: "What should have been taxable value of $8.9 billion was taxed at $1.3 billion inside of Barbers Hill ISD. Is that fair to say?" Mandy Drogin, a senior fellow at the Texas Public Policy Foundation: "That's fair."
Chapter 313 of the Texas Tax Code capped a school's maintenance-and-operations taxable value on large industrial projects. In place of full tax on the qualified property, the company paid a supplemental payment, a check the agreement treated as a payment in lieu of taxes. Barbers Hill's agreements let the board of trustees send those payments to its education foundation instead of the district. Drogin's review of district records: the district redirected approximately $97.1 million to the Barbers Hill Education Foundation from January 2012 through June 2025. Only about $6.5 million came back from 2010 through October 2025. She told the committee the superintendent had said, at a public meeting, "The state can't touch our education Foundation money." At Barbers Hill, she said, the financial relationship is "exactly backwards."
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Supplemental payments left the ISD books
Companies that used Chapter 313 around Mont Belvieu paid those supplemental checks, and the ISD could send them off the district books. Drogin said the 2024 audit reports approximately $133.7 million in foundation investments, and that in 2025 the foundation reported a fund balance of approximately $200 million. Superintendent Greg Poole, who is also executive director of the foundation, put the fund at "250 million approximately" and last year's earnings at $22 million. "We hope that we just spend the earnings," he said. "That's the Ivy League endowment idea is that you've got this cash cow that you spend the earnings of."
Rep. Carl Tepper said he was "still having a hard time grasping how these foundations are able to offset the recapture provisions in the state." Texas recapture is the school-finance transfer from property-wealthy districts. Sara Leon, the district's attorney, said the supplemental payment is not tax revenue. "It is not impacting recapture one way or another." "This additional supplemental payment does not count as part of the school finance system. It's outside the funding formulas and it has absolutely nothing to do with recapture."
Rep. Shelby Slawson put the sequence to Poole: "You've made a 313 so then it's not coming. And then you diverted it to the Education Foundation to avoid the recapture, because if it came to the ISD, it would be subject to recapture and come back to Austin, which is the problem he's trying to avoid." Poole: "We are not gaming the system on it." "313s aren't recaptured in the first place." A Chapter 313 limitation reduces taxable value before recapture is calculated. The foundation is where the supplemental payments sit after that reduction.
Slawson read the foundation website back to him: $200 million on the site, grants distributed $2.4 million. "That's in grants," Poole said.
Rep. Little offered to rewrite the clause the ISD used
Little read section 6.6 of the agreements, the board's option to send the applicant's payments to a designee. "Because when you write the law, you make things legal." "If Barbers Hill's Education Foundation did something that is legal and they simply mastered a game that the legislature created for them, who should we be blaming for that?" His fix was one sentence. "We can just write that out of the law." Drogin said "Absolutely."
Chair Cody Vasut closed the panel. "I think it behooves the legislature if there is a clever workaround that a good paying lawyer made their buck doing good for them." "If our laws are such that the workaround has happened, then it behooves us if we want to, to close the loophole and close the workaround."
Chapter 313 is gone. The Texas Jobs, Energy, Technology and Innovation Act replaced it. Vasut asked whether the payment-in-lieu avenue was closed in that successor program. A witness said the provision, as far as he could tell, still exists in Chapter 313. Anyone still holding a 313 agreement needs that successor answer in statute.
Dual hats, a joint venture, and a hiring date Poole would not pin
Drogin told the committee the foundation board includes Poole, three sitting ISD trustees, a former trustee, the CFO of the city of Mont Belvieu, and Nathan Watkins, a vice president at Americus Holdings. The foundation holds a 50 percent equity interest in the Brickyard multifamily project in Mont Belvieu, totaling over $5.3 million. Americus holds the other half. In that opening she asked, "Did anyone recuse themselves?"
Poole said, "We're not a bad actor." "There is no illegal activity, period." He said the district has not raised taxes in 20 years and has given 4-to-5 percent raises. "The idea was we need to somehow have an alternative funding structure to make up for the redistribution." "And frankly, the only thing we're really guilty of is eye popping success."
Rep. Ellen Troxclair put Commerce Street Holdings on the table. Poole named Dory Wiley as the investment manager and put the money that firm manages near $200 million. Troxclair said a Google search lists Hillary Poole as vice president of institutional business development at Commerce Street. "And she's your daughter?" "Yes, ma'am." Slawson asked whether she worked there when the foundation hired the firm. "It's very close and I don't remember." After he certified he would give truthful testimony, she asked again. "Ask you three different ways, ma'am, I don't remember."
The Kerrville Public School Foundation showed the other model
Sarah Betts, executive director of the Kerrville Public School Foundation, told the committee her shop is a nonprofit founded in 1987. The superintendent sits as a non-voting board member. Board members sign a conflict-of-interest statement. She described "the structure and process with which we donate funds directly to Kerrville ISD."
That is the ordinary Texas education-foundation pattern: community money in, classroom money out. Drogin's Barbers Hill file is the other pattern: district-directed Chapter 313 supplemental payments in, a private fund that spends earnings.
The Public Funds Investment Act is the statute that limits how a school district can invest public money. Poole asked the committee to "put parameters up" under that act so districts can invest. Little already named the parameter that closes the designee clause: write it out so the supplemental payments land on the ISD.
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Watch the education-foundations hearing: house.texas.gov/videos/22756.
Sources
- Texas House Select Committee on Governmental Oversight, interim hearing, education-foundations charge, August 26, 2026. House video: https://www.house.texas.gov/videos/22756. Notice: https://capitol.texas.gov/tlodocs/89R/schedules/html/C0752026082610001.htm. Witness list: https://capitol.texas.gov/tlodocs/89R/witlistmtg/html/C0752026082610001.htm.
- Official House caption segments for event 22756 / inner 44813, assembled 2026-08-27. Names restored from the clerk witness list and committee roster. Dollar figures above are on-record from Drogin, Little's read of the district's audited annual financial reports, or Poole.
- Witnesses on the education charge include Mandy Drogin, Texas Public Policy Foundation; Greg Poole, Barbers Hill ISD; Sara Leon, Barbers Hill ISD; Sarah Betts, Kerrville Public School Foundation; Brent Ringo, Kerrville ISD; William Caudill, Barbers Hill ISD Education Foundation; David Marx, Texas Education Agency.
- Committee members quoted: Chair Cody Vasut; Rep. Mitch Little; Rep. Carl Tepper; Rep. Shelby Slawson; Rep. Ellen Troxclair.
Not legal advice. Confirm statutes and filings against primary sources.