STATE

State GOP leaders seek to limit property tax hikes

Asher Price,Julie Chang
asherprice@statesman.com
Lt. Gov. Dan Patrick, left, Gov. Greg Abbott and House Speaker Dennis Bonnen, R-Angleton, announce Thursday at a Capitol news conference that they agreed on legislation to limit local property tax increases. [RICARDO B. BRAZZIELL/AMERICAN-STATESMAN]

The top three power-brokers at the Capitol — Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, R-Angleton — announced Thursday they had agreed on legislation that would place strict limits on how much school districts, cities and counties can raise taxes.

Identical bills filed Thursday in the Texas House and Senate would require voters to approve property tax increases that lead to collections that are more than 2.5 percent higher than the previous year.

Local leaders and Democrats said the plan could cripple local government services and leave schools with fewer dollars. They vowed to fight the cap, setting up what likely will be the biggest battle of the 140-day legislative session that began last month.

The cap would not apply to small taxing units — ones with less than $15 million in combined property and sales tax revenue.

"As they are grappling with the challenges of paying ever-skyrocketing tax bills, we’re here to reform a property tax system in Texas that's costing Texans way too much," Abbott said at a Capitol news conference.

Pledging to rein in property taxes has become a popular refrain at the GOP-controlled Capitol, but local government and school district officials say doing so would severely hamper their ability to repair potholes and pay teachers, among thousands of other expenditures.

Classrooms are at the center of the tug-of-war over property taxes. School districts make up the largest part of property tax bills.

With Texas cutting money to fund schools — a decade ago, the state provided 48.5 percent of education funding, compared with 38 percent this year, according to the Legislative Budget Board — districts have increasingly turned to local property tax revenue.

The House last month proposed increasing discretionary spending for public education by $7.1 billion over two years; the Senate proposed an increase of $4.3 billion, most of which would go toward a plan to give all Texas teachers a $5,000 salary increase. It's not clear whether the extra education dollars would make up the expected declines in districts' local revenue as a result of the property tax relief plan, or whether the net result of both plans would be a boost to funding for schools.

State leaders have said that school districts would not be harmed financially by a property tax relief plan, but officials have not yet said how they would find long-term funding for their tax plan.

"We're very confident in the governor's plan of 2.5 percent that we will pass it, we will find the funding to fund it, and we already have many ideas along those lines," Patrick said Thursday.

Public education advocates sounded an alarm about the tax relief plan.

"Because more than 400 school districts are already taxing at the maximum rate allowed by the state, capping property tax revenue without identifying additional, consistent sources of funding could be devastating to Texas students," said Dax Gonzalez with the Texas Association of School Boards.

Teacher representatives said they feared a repeat of the 2005 Legislature, which compressed school property tax rates and created a new business tax to make up the difference. That swap fell short, and the plan led to a $5.4 billion cut to public education in 2011.

"The state needs to make its priority putting more money into schools, and the natural effect will be that school boards and superintendents can take the foot off the gas at the local level," said Louis Malfaro, head of Texas American Federation of Teachers. "But putting this chokehold on local school districts for a one-time infusion of funding is a recipe for long-term underfunding of schools."

Last year, Abbott's office and state Sen. Paul Bettencourt, R-Houston, who chairs the Senate Committee on Property Tax, had suggested using severance taxes from oil and gas production to fund property tax relief and school funding. However, Comptroller Glenn Hegar has said multiple times that that revenue source is volatile.

2017 attempt

Some property owners have looked to lawmakers to ease their annual tax bill pain.

Two years ago, Patrick pushed a Senate plan that would have required cities and counties to win voter approval before collecting more than 4 percent more in property tax revenue than the previous year. Currently, state law allows local governments to collect 8 percent more in property tax revenue before they can be forced by petition to hold an election. A 2017 House plan would have required a vote on property tax collections of more than 6 percent. The proposals died when the chambers couldn’t agree on a final figure.

The new 2.5 percent figure "came from the governor," Bettencourt said Thursday.

"With the House at 6 and Senate at 4, he was going to compromise with 2.5," he continued with a laugh. "And that’s called real leadership."

Hinting at a strategy to bring Democrats who represent urban areas on board, Bettencourt said the legislation would help address “gentrification” — a term that describes, in areas like East Austin, the departure of older residents, often of color or fixed income, who have trouble affording rising property taxes.

The legislation would be “a tremendous step forward to solving that problem,” he said.

Democrats on Thursday said the Legislature should do a better job funding schools to relieve school districts from levying ever-higher taxes.

State Rep. Eddie Rodriguez, D-Austin, said he wasn't opposed to a tax cap, just not one as low as 2.5 percent.

It's "a nonstarter. School finance is the top priority. I don’t see how we can look at a bill like this without understanding what school finance reform is going to look like," said Rodriguez, who sits on the House Ways and Means Committee.

Local officials wary

If a 2.5 percent revenue cap had been instituted this year in Travis County, the average taxpayer would have seen savings of $33.50 in the county portion of property taxes, said Deece Eckstein, the county's intergovernmental relations officer. The hit to the county's budget, however, would have been in the millions.

Pushing against the property tax plan is the county's top legislative priority this session, Travis County officials have said.

“If state politicians pay their fair share and stop shifting blame and costs to the homeowners of Travis County, we can have a win-win this session,” Travis County Judge Sarah Eckhardt said.

Austin Mayor Steve Adler said a 2.5 percent cap would hamper city services, particularly public safety which makes up 70 percent of the city's budget. He also warned that under the proposal, the city would have insufficient funds to cover cost-of-living increases, salary and benefit adjustments for employees or any new programs.

"I hope there's not a serious expectation that this will end up at the 2.5 percent cap on revenue increases because that would be so damaging to local governments and the services they provide," he said.

Bastrop County Judge Paul Pape, a Republican, said the county's residents don't want the state restricting what local governments can do to serve their communities.

"Their solution is solving a problem that doesn't exist so that they sound like they're saving the taxpayers of Texas in this sweeping legislation," Pape said.

Conservative praise

The plan received praise from conservatives long calling for property tax relief.

The bills will “give taxpayers greater transparency and a stronger voice in the process,” said Kevin Roberts, executive director of the conservative Texas Public Policy Foundation.

The bills filed Thursday also:

• Require local governments to provide property owners with a plain language comparison to the rate they are proposing, so taxpayers can see how their new bill will compare to last year’s.

• Create a property tax advisory board in the comptroller's office to recommend ways to make the property tax system more effective and efficient.

• Expand opportunities for property owners to protest or appeal their appraisal value through after-hours protests and require notices from appraisal districts to be issued electronically.

Staff writers Taylor Goldenstein and Elizabeth Findell contributed to this report.