City and county budgets could be one of the key battlegrounds in the 2017 Texas Legislature. Bills in both the House and Senate aimed at overriding local ordinances and mandating local tax caps on a state level could have significant consequences for Texans, city and county leaders say.
At the Center for Public Policy Priorities (CPPP) Dare Texas Summit on Nov. 30, county judges from Harris, Dallas, and El Paso counties expressed concern over one bill in particular, SB 2, the Property Tax Reform and Relief Act. The lengthy bill would place a state-enforced cap of 4% on local taxes and create a system of state oversight on local tax initiatives.
The judges expressed concern that this extension of state power would further take control from local governments, and, therefore, their constituents.
“Who do you want taxing you? Local, state, or federal government?” Dallas County Judge Clay Jenkins asked.
The strength of tax decisions made at the local level is that its officials live next door to their constituents. They are the ones getting an earful at city council, school board, and neighborhood meetings, the judges said. Local leaders have smaller districts and can be voted out by a smaller voice of discontent. State districts, on the other hand, are large enough to allow for special interests and industries to weigh more heavily than neighborhood-level issues.
The judges also pointed out that the needs of every city are vastly different. Their populations, infrastructure, city/county population distribution, relationship to ports, borders, and major industries are different. They require local discretion.
“Certainly in a state as large as Texas, one size does not fit all,” Mayor Ivy Taylor said in an interview with The Rivard Report.
When it comes to fixing roads, passing bonds, improving parks, and the myriad of local governments’ public health and safety functions, the voice of the people is essential.
“(A municipal government is) the government closest to the people. That is supposed to be a value,” CPPP Senior Fiscal Analyst Dick Lavine said.
That local authority seems to be what the Republican-led Legislature seeks to undermine.
“It’s been a strange shift in the way that legislators view local government,” El Paso County Judge Veronica Escobar said.
The fact that Republicans – or at least conservatives – have historically been the small-government party, makes this discussion somewhat ironic. Bills like SB 2 place two traditionally conservative values at odds: lowering taxes versus weaker central government. The Legislature appears to have made its choice.
“(SB 2 is) an attempt to shrink local government(s) so that they have no discretion to do anything but (implement) state mandates,” Jenkins said.
Legislators seem intent on “demonizing” local governments, Harris County Judge Ed Emmett said. Many lawmakers blame them for Texas having the fifth highest median property tax in the country.
Accepting federal dollars – Medicaid expansion, for example – would be one way to alleviate some of the strain, Emmett said.
State leadership goes to great lengths to limit federal government involvement in Texas. County leaders including Judge Nelson Wolff have advocated for the expansion of Medicaid, which governors past and present have refused. Lt. Gov. Dan Patrick and Attn. Gen. Ken Paxton have made their own cottage industry out of suing the Obama administration for “federal overreach.”
What they abhor at the federal level, they seem to promote at the state level.
State Rep. Diego Bernal (D-123) said that even before SB 2, the expansion of state power has been a recent theme in the Legislature, particularly when it comes to protections or regulations.
“If you look at the issues the State wants to control, they are all things that municipalities have done to protect their vulnerable populations or resources,” Bernal said.
Bernal and others see bills, like the much-discussed “bathroom bill,” the discussion on payday lenders, and tree ordinances as the State’s effort to override local regulations and non-discrimination ordinances.
“San Antonio has one of the most aggressive payday loan ordinances in the state,” Bernal said. “There’s always a push to say that the State has the final say.”
State regulation of payday loans could be more permissive than local ordinances, which according to Bernal, would put San Antonians at risk of predatory lending schemes.
The ability to govern regulations at the local level should appeal to small-government advocates.
“The Republican philosophy is inconsistent,” Bernal said. “They like small government when it works for them.”
SB 2 takes state control to the point where it undermines municipalities’ ability to fund local services.
Another ironic feature of SB 2 is that it would require voters to approve a tax rate above 4%. In addition to rushing the work of the appraisal district to allow time for an election, the process of putting the initiative before voters would cost Travis County and others like it around $1 million, according to Lavine. The bill, therefore, creates more government bureaucracy and spending.
One unintended consequence could be that cities and counties preemptively raise their tax rate to 4%, when they could have kept them lower. They might do this in order to save up for years when they would need to exceed 4%, meaning cities and counties would be incentivized to pad their own rainy day funds.
SB 2 was filed by Paul Bettencourt (R-Houston), Brandon Creighton (R-Conroe), Kelly Hancock (R-North Richland Hills), and Van Taylor (R-Plano). Their core argument is that local property taxes are going up faster than income. Lavine, however, said that throughout recent history, taxes and income have grown at different rates, but in the same direction.
Emmett, a Republican, sees something more sinister behind the bill. Having witnessed no public outcry for the State to save people from burdensome local governments, he cites State overreach.
“This is not a public clamoring. This is a political agenda,” Emmett said.
Proponents of the bill, which includes Lt. Gov. Dan Patrick, overstate the bill’s positive effect on local households, Mayor Ivy Taylor said.
“It might save (families) $5 a month. That’s not real relief,” Taylor said.
The cost to municipal governments and their many services that those same families enjoy, however, will be significant. In San Antonio, Taylor anticipates that services would need to be cut. The City’s AAA bond rating would be in jeopardy, and infrastructure needs would go unmet.
The panel of judges pointed out that the Legislature should stop saying “tax cuts” like it’s free money with no cost. Streets, police, firefighters, schools, trash collection – every public service citizens utilize requires money. So cutting taxes is really cutting the revenue to the City, to the police department, the schools, the sidewalks. Many voters in cities are aware of this, which is why they keep voting for bonds, TREs, and more. It’s why Democratic county judges and mayors do well even in conservative cities like Dallas – people will pay for what they value.
When we say “tax cut,” it is like referring to fat, salt, and sugar as “the tasty stuff.” Indeed, we want and like the tasty stuff, and we want and like tax cuts. But for every calorie we eat, there’s a consequence. For every dollar cut, especially at the local level, there’s a consequence. Too many calories – or cuts – and we have a problem.
The Texas Legislature wants credit for a tax cut, but the services that will be cut are at the local level. In other words, while the Legislature will get to be the fun uncle who hands out candy bars full of the tasty stuff and then sends the kids home, local governments will have to act as the parents burdened with the consequences of a sugar overdose.