Published date: October 11, 2024 15:22
Author: Texas AFT
The Texas Legislature has prioritized property tax relief over fully funding public education over the past few years, despite the COVID-19 pandemic, historic inflation, and record state budgets. He has shown that he cannot walk and chew gum at the same time. Surplus items. The impact on our public schools has been dire.
At an interim hearing of the Senate Finance Committee on September 4, some state leaders, politicians in the Texas Legislature, and conservative think tanks shared a common commitment to abolishing the school property tax. This highlights the politicization of recent actions by the Texas Legislature. Local assessment and property tax system.
Property taxes and public schools
Texas public schools are funded through a complex system that combines local property taxes and state funding.
Local property taxes remain an important source of funding for schools, and school districts rely heavily on these tax revenues for operating expenses such as school staff compensation, student programs and services, classroom resources, and facility maintenance. Masu. As real estate values rise, so does the potential for local funding for schools.
Texas is one of nine states without a state income tax, so the state funds a portion of its public education primarily through sales tax revenue to supplement local property taxes. Sales taxes are considered a more volatile and riskier source of revenue compared to property taxes because collections are sensitive to economic downturns. This state contribution is intended to ensure a baseline level of funding for all districts and helps alleviate some of the disparities created by fluctuations in real estate values across the state.
Despite this combination of approaches, funding inequalities persist between “asset-rich” and “property-poor” districts. To address these inequalities, Texas instituted the “Robin Hood” plan, officially known as “Take Back,” in 1993 in response to a court ruling that the state’s school funding system was unconstitutional. carried out. The purpose behind recapture is to redistribute funds from more affluent districts to less affluent districts.
Originally intended to equalize educational opportunity, growth in state collection revenue has been used primarily to pay for charter school expansion. Charter schools have no local tax base and receive all their funding from the state. The cost of funding Texas charter schools is projected to increase from $2.03 billion in 2016 to $5.3 billion in 2025, with charter schools accounting for 17.7% of the state’s total public education funding. , but will only serve 8.1% of the state’s students.
Misplaced legislative priorities
House Bill 3 was the last major school finance bill passed by the Texas Legislature in 2019. The bill made significant changes to the school financing system, including increasing the base allocation to the current $6,160 and establishing a mechanism requiring districts to spend at least $30. The percentage of additional income that teachers and school staff receive when their base allocation is increased due to pay raises.
Since then, Congress has completely ignored the evolving needs of public schools.
Instead, the Texas Legislature is focused on providing property tax relief to property owners across the state, especially homeowners. The main features of this property tax relief include expanding the homestead exemption and using state funds in place of local funding for public schools to artificially lower property tax rates for local school districts. Includes “compression”.
The homestead exemption reduces the taxable value of a homeowner’s principal residence on the school district’s property taxes. In Texas, this exemption allows homeowners to deduct a certain amount from the assessed value of their home before property taxes are calculated.
Increasing the homestead exemption amount would impact public schools by reducing their local property tax revenue and potentially increasing their dependence on state funding and collection costs. The homestead deduction is considered a more equitable way to reduce your property taxes.
Unlike the homestead exemption, the school district property tax compression reduces property taxes by directly lowering the tax rate that a school district charges and replacing local revenue with state revenue.
Despite the $32.7 billion budget surplus and $14.2 billion rainy day fund available to the 88th Texas Legislature, the final version of the 2024-2025 budget ultimately resulted in additional school funding and increases. Only $4 billion was allocated, and the amount was nowhere near the estimated amount. Adjusting the base allocation to account for inflation would cost $14.5 billion. To make matters worse, that $4 billion is not being made available to schools because it has become hostage to Gov. Greg Abbott’s ill-fated voucher scam. Providing this funding to schools and updating school finance formulas would have provided taxpayers with property tax relief and reduced the amount of revenue that many school districts facing budget deficits would have to pay to the state.
Instead, on top of the billions of dollars needed to maintain the property tax rate compression passed in previous Congresses, the state will receive additional funding, primarily through further compression and expansion of the homestead deduction. Spent $12.7 billion on property tax relief. Senate Bill 2, an omnibus property tax relief bill that was ultimately passed in the second special session, was the result of months of negotiations and political posturing between state leaders and both chambers of Congress. In addition to modest property tax relief provided through homestead exemptions, property tax rate reductions, and a temporary “circuit breaker” for properties under $5 million, the 57-page bill would require Made other important changes to the property tax system. .
One change in particular could have a negative impact on public schools. SB 2 changes the way local assessment district boards are selected in counties with a population of 75,000 or more to include three members who are directly elected in local nonpartisan elections. Previously, all eight members of these boards were appointed by local tax departments, including school districts, which assess property taxes within their jurisdictions to provide critical services to residents. These board members are responsible for overseeing the operations of the appraisal district, adopting the annual budget, appointing the chief appraiser, and ensuring fair and accurate property valuations for tax purposes. As we will read later, the introduction of elections to these important posts politicized the evaluation process.
There’s a saying: “The budget is a moral document.” When Congress decides how to spend Texans’ tax dollars, it reflects the priorities and values of the institution and its constituents. Despite the rhetoric of many politicians in the Texas Legislature and state leadership, public education has not been a priority. Rather, it has been used as a political football to further the cause of taxpayer-funded vouchers.
Politics of property tax reduction
In recent years, there has been a movement on the right wing of the Republican Party to completely abolish local property taxes, including school property taxes. While this idea may sound appealing to some, it could have devastating effects on public education funding and community services.
Repealing the property tax would require a major overhaul of Texas’ tax system, which could have far-reaching implications.
Property taxes are a major source of revenue for public schools and local services such as fire departments, police, and infrastructure. Removing them would create large funding gaps that would need to be filled through other means, threatening the quality and availability of these critical services.
Public schools are also particularly sensitive to changes in local and state funding structures. Increased reliance on state funding, which can fluctuate depending on economic conditions, could reduce the stability of school funding. The risk of running out of funds also increases. Without a direct link between local property values and school funding, state allocations may not be able to keep up with school districts’ growing needs.
According to testimony from the Legislative Budget Board (LBB) during a recent preliminary hearing of the Senate Finance Committee, state sales taxes must be The tax rate needs to be raised from the current 6.25% to approximately 6.25%. At 22%, Texas has the highest rate in the nation. Such a dramatic increase would disproportionately impact low-income residents and harm local businesses.
A shift from local property taxes to state-level funding increases would also lead to a loss of local control over schools and other community services.
Fortunately, members of the Senate Finance Committee, Democrats and Republicans alike, were skeptical about the feasibility of repealing the property tax because of its impact on state finances, critical public services, and local control.
Recent actions by the Texas Legislature are already impacting the property tax landscape.
LBB stated at the Senate Finance Hearing that total school property tax collections have declined in recent years, primarily due to compression efforts and an increase in homestead exemptions, and that school property tax revenues are the sum of property taxes collected. He testified that it exceeded the by other local taxing units.
Finally, the newly implemented appraisal district director election was addressed at the public hearing as senators discussed changes adopted by the Tarrant Appraisal District Board to the appraisal plan.
In an effort led by newly elected members of the Tarrant Appraisal District Board of Directors, the board will change the burden of proof required to increase the assessed value of a property by more than 5% and change the valuation of residential properties every two years. Approved to proceed with the process. Rather than an annual process.
Tampering with the evaluation process could harm public education funding even more than other local taxing units. School districts lose state funding if the local assessed value of real estate within the school district is more than 10 percent lower than the state-calculated assessed value. Instead, states use their own values to determine a school district’s funding eligibility and require school districts to shoulder a greater funding burden. These changes also risk harming the school district’s ability to meet long-term bond obligations, potentially requiring higher tax rates to pay off the bonds.
Several Republican senators have criticized these actions, and SB 2’s author, Sen. Paul Bettencourt (R-Houston), even suggested they violate the law.
Similar changes were also recently proposed by newly elected members of the Bexar Appraisal District’s board of directors, following in the footsteps of the Tarrant Appraisal District.
Texas AFT local leaders and other stakeholders understood the threats to public school funding and reached out to board members to convey their concerns. Fortunately, the newly elected legislators pushing for the changes were unable to secure enough support to pass them. Instead, a compromise was reached in which homeowners who successfully challenged their assessments would carry forward their property values from the previous year.
what happens next
Property tax relief is popular and affordability is a key issue for many Texans, but the complexities of school finance and local government funding require careful consideration and attention. is. Any major changes to the property tax system must be balanced against the need for stable and equitable funding for public education and essential community services. Additionally, meaningful and sustainable property tax relief must come from the Texas Legislature and should not be achieved without significant additional state support for public schools and elected assessment district boards. Members should not try to take matters into their own hands.
As discussions continue, educators, parents, and community members should stay informed and participate in these discussions to ensure that reforms do not come at the expense of Texas public schools and their students. is important.
