Blasting the Senate for taking a symbolic approach on school district taxes, a panel of House lawmakers heavily altered then approved the upper chamber’s version of priority property tax legislation late Thursday. And committee members pointedly included a provision meant to rebut claims that they were not committed to wholesale reform.
The chair of the tax-writing Ways and Means committee, State Rep. Dustin Burrows (R-Lubbock) said the House had kept a provision in Senate Bill 2 that attempts to constrain school district property taxes. While he and finance experts have said the language needs to be addressed in the Education Code, rather than the tax code, there “is an intent in the Senate to symbolically express that they are committed to lowering school property taxes,” Burrows said.
“Well, because of that, I want to make sure that the House also expresses its full commitment to lowering people’s property tax bills related to schools,” he said.
The Senate had tried to limit schools’ tax rate increases to 2.5 percent, without an election.
“We actually used a 2.0 number,” Burrows said, “to show that the House is equally as committed to doing significant things this session for the property taxpayers of the State of Texas.”
The insertion of the 2.0 figure may be a dig at hardline conservatives and Senate lawmakers, who have suggested the House gutted its own property tax reform package when they removed school district language from it in March. The lower chamber’s approach, however, has earned the backing of experts who say a separate public education bill is the most feasible way to make changes to the school finance system.
“To do property tax reform for schools, you really have to do it in the Education Code. I think that all of the experts agree,” Burrows said. “This bill has never touched the Education Code. It can’t touch the Education Code, that is House Bill 3,” he said, referencing the lower chamber’s omnibus school finance package.
As adopted in a 8-3 vote Thursday, SB 2 now closely resembles House Bill 2, a companion measure passed by the House committee last month — even taking on the same name: The Texas Taxpayer Transparency Act. The Democratic vice chair of the committee, State Rep. Ryan Guillen, joined Republicans in support of SB 2’s passage Thursday.
In the latest version of the bill:
- Cities, counties and emergency service districts must hold an election if they wish to raise 3.5 percent more property tax revenue than the previous year
- Those entities can increase their property tax levies by $500,000 a year, without triggering an election
- Other taxing units — namely, hospital districts and community colleges — remain at an 8 percent election trigger, with Burrows’ citing the inflation of medical and education expenses
- Homestead exemptions offered by local municipalities can be factored into the revenue growth calculation, preventing cities and counties from being penalized if they offer their residents tax reductions
- A five-year carry-over provision lets taxing units bank unused revenue growth
Currently, cities, counties and other taxing units can raise 8 percent more property tax revenue before their residents can petition for an election to roll back the increase. SB 2 and HB 2 would make those elections automatic, and would make a raft of widely-supported changes to increase the transparency and consistency of the property tax system.
The Senate’s bill had previously required small taxing units, those that brought in less than $15 million in combined sales and property tax revenue, to opt-in to some of the bill’s provisions. It also allowed indigent defense costs to be factored into the revenue-growth calculations, a possible boon for local budgets. Both of those provisions were struck from Thursday’s version.
A final change Thursday makes passage of SB 2 contingent on HB 3’s approval.
“These two are tied together,” Burrows said.
The measures had already appeared to be moving forward in near-lockstep. SB 2’s advancement came as a Senate committee agreed to hear HB 3, a long-awaited measure that State Sen. Kirk Watson had suggested was “held hostage” for the Senate’s property tax legislation. Both bills have been subject to delays.
In January, the House and Senate unveiled identical reform bills aimed at slowing the growth of rising property tax bills, and making the property tax system more accessible to homeowners. Gov. Greg Abbott said it was “unprecedented” for lawmakers to be unified on an important issue so early in the legislative session. Since then, fractures between the two chambers have become apparent — including a testy, now-deleted Facebook exchange between the bills’ authors, and a tense standoff over when each measure would be heard.
The placement of schools taxes in the property tax bill has proven particularly divisive. Because school districts levy the bulk of property taxes across the state, some lawmakers have said exempting them from SB 2 would provide little respite to homeowners.
But school finance and tax experts have said one method preferred by the Senate, a stricter election trigger for school district tax rate hikes, is unlikely to result in meaningful tax relief.
“I think a lot of people wonder why I put the schools back in,” Burrows said, after the vote Thursday. “Sometimes, if the emperor has no clothes, you’ve got to let him walk down Congress Avenue to show everybody.”
HB 2 and SB 2 have been described by lawmakers as reform measures. As filed, HB 3, the lower chamber’s comprehensive school finance bill, would lower school district tax rates by 4 cents per $100 valuation, leading to roughly $100 in savings on a $250,000 house.
Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, all Republicans, have also backed a measure that would reduce school district property taxes using a one-cent increase in the sales tax.
Despite the high-level support, that proposal — which would generate about $5 billion in revenue per year — has already drawn a prominent detractor in the Senate, and will likely face a precarious path forward. Republicans are often leery of appearing to support a tax increase. Democrats generally dislike the sales tax because it has a disproportionate impact on poor people.
Several procedural steps stand between the property tax legislation and its passage into law. In addition to needing approval from the full House chamber, the measure may be sent to a conference committee, where lawmakers from both chambers will try to reconcile their different approaches to the bill. In 2017, the Senate and House deadlocked at proposals that would have limited property tax growth to 4 percent or 6 percent, respectively.
Meanwhile, the legislation’s chief detractors — city and county officials — saw no change to their fortunes Thursday. In a recent press briefing, several mayors said the bills would drastically limit their ability to provide public services while making just a small dent in most property owners’ bills.
“There are elements of that bill that I think many cities support,” said Austin Mayor Steve Adler.
But the biggest driver of rising property taxes are school districts, he said, and those will “continue to rise because the State will not fundamentally fix the school finance system.”