Many Texans are paying attention to the 88th Legislature’s Special Session in the hopes that they achieve substantive accomplishments.
While hoping this happens, the word I would use to describe the 140 day Regular Legislative Session is….squandered.
Blessed with a record $33 billion surplus, Texas’ legislative leaders have so far failed to reach consensus on what should have been everyone’s number one priority, property tax relief. Texas currently has the 7th highest property tax rate in the nation, behind solidly blue states such as Illinois, New Jersey, Vermont, and Connecticut.
That’s not to say that there weren’t good ideas proposed. House Bill 2 passed, providing state funding for local school districts to reduce their Maintenance & Operations (M&O) tax rate by $0.15, while lowering the annual appraisal increase cap from 10% to 5%, and extending it to commercial properties.
Senate Bills 3 and 4 provided funding to lower the M&O rate by $0.07, while increasing the Homestead Exemption from $40k to $70k for those under 65, and to $100k for those over 65/ disabled.
The state budget approved by both chambers and signed by Governor Abbott provided $12.3 billion in new property tax relief in addition to $5.3 billion mandated by current law. The problem is that the two chambers cannot agree on a final plan specifying how to allocate the $12.3 billion.
Both chambers’ bills have their merits, but instead of working together to develop consensus, House and Senate leaders are digging in their heels.
It’s not as if property tax relief hasn’t passed before. In 2019, Senate Bill 2 capped cities and counties annual increased property tax revenue to 3.5% on existing parcels; newly constructed properties provided additional revenue. Due to SB 2, Boerne, Fair Oaks Ranch, and Kendall County all reduced their rates for the first time by $.02 last year.
In 2019, House Bill 3 limited school districts to 2.5% new revenue annually from property taxes, including new parcels. Should a district grow by more than 2.5%, the state increases its aid to that ISD. By the state increasing its share of K-12 public education funding, Boerne ISD has been able to reduce its tax rate each year since 2019 by a total of $0.18. An additional reduction of $0.06 is forecast for 2023-24, even without further legislative action.
Additional tax rate reductions are essential as property appraisals have skyrocketed. While those who claim a homestead have a 10% annual cap on tax increases, commercial property owners see no such benefit.
However, there is a misconception among many folks that as appraisals increase local school districts see large budget increases. This is not the case. School funding is based on formulas approved by the legislature. The Basic Allotment guarantees (“entitles”) $6160/student, supplemented by a variety of factors including poverty, Special Education, and Career and Technical Education. This increases the state average to about $10,500/student. Due to its lower poverty rate, Boerne ISD is appropriated $8900/student.
Texas’ constitution limits the state’s annual spending growth to combined inflation and population growth. Yet, by not updating school funding formulas since 2019 to account for inflation, the state prevents local school districts from doing the same. Since 2020, BISD’s enrollment has grown 16%; combined with 14% cumulative inflation this totals 30%. After paying recapture, BISD’s general fund budget has grown by 16%, or 14% below the state’s constitutional metric. It would be nice to have some extra money to fund the recommendations made by Governor Abbott’s Task Force on Teacher Retention.
Any property taxes generated in excess of the Basic Allotment and supplemental “entitlement” funding is sent to the state. This is called recapture. After HB 3 passed in 2019, BISD went several years without paying recapture. Due to rapid appraisal growth, this year BISD will send almost $9 million of local taxpayer dollars to Texas’ general fund. This averages $400 per homeowner. This thievery must end! The best way to do so is dedicate the state’s massive surplus to reduce school M&O rates.
People may wonder why BISD doesn’t reduce its M&O tax rate even more than it has, but by law it cannot. HB 3 includes an equity tax floor of 10% below the maximum rate. BISD is at that equity floor.
This background explains why BISD Trustees included property tax relief when adopting their legislative priorities in August 2022. Much volunteer time has been spent in Austin, at no cost to taxpayers, to encourage legislators to enact both property tax relief and updated funding formulas. Fortunately, our local legislators Sen. Donna Campbell and Rep. Ellen Troxclair have been supportive of our efforts.
Now it is time for the “Big 3” – Governor Abbott, Lt. Governor Patrick, and House Speaker Phelan to work together to salvage the legislative session. Quit the bickering and finish the people’s business!