Always beware revenue caps

They’re always a bad idea.

Flanked by the state’s top legislative leaders, Gov. Greg Abbott announced Thursday that both chambers of the Texas Legislature will push to curb property tax growth by limiting how much money local governments collect without voter approval.

Fellow Republicans Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, as well as the heads of both chambers’ tax-writing committees, joined Abbott in making the announcement. Their news conference followed the filing of identical bills in both chambers, Senate Bill 2 and House Bill 2.

Abbott said it was “completely unprecedented” for lawmakers to be so closely aligned on such an important issue this early in the session.

“Most importantly, it’s a testament to the voters in this state,” he said. “The voters demanded this, and this demonstrates that the Texas Legislature is responsive to the needs of our voters.”

But two Democrats who sit on the House Ways and Means Committee said the proposed legislation is far from being a done deal. And an advocate for city governments said there are plenty of unintended consequences that need to be worked out. Chief among them is ensuring that cities aren’t suddenly unable to afford police officers and firefighters.

Thursday’s bills seek to require voters to approve tax rates that allow government entities like cities, counties and school districts to collect an additional 2.5 percent in revenues from existing property compared with a previous year. The threshold would not apply to small taxing units — those with potential property and sales tax collections of $15 million or less.

Currently, cities and counties can collect an additional 8 percent in revenues without involving voters. But even then, residents must collect enough signatures to force an election. The new pair of bills would automatically trigger what’s called a rollback election. If voters shoot down the measure, the government entity would have to set a tax rate that allows it only to collect revenues from existing properties that are less than 2.5 percent more than the previous year.

The rollback rate is also based on the appraised value of properties within a taxing unit’s borders. That means a city or county could hit the rollback election threshold without changing its tax rate — or even if it lowers the tax rate — if there is a significant increase in local property values.

The legislation does not apply a cap to individual property tax bills. Because it would limit only how much government entities can collect in property tax revenues before getting voter approval, an agency could stay below the rollback election rate, and that portion of a property owner’s tax bill could still increase.

Local officials are almost certain to to push back. Bennett Sandlin is the executive director of the Texas Municipal League, which advocates for city governments. His organization estimates that about 150 of the state’s largest cities would be affected if the legislation passes. He said that the rollback threshold is lower than inflation and could prevent cities from paying for first responders’ raises, filling potholes, and keeping recreation centers or libraries open.

As the story notes, this is more ambitious than what Abbott and Patrick pushed for in 2017, and they’re doing it with smaller majorities. On the other hand, these are the highest-priority bills they have (hence the HB2 and SB2 designations), and they’re no doubt going to go all out. It’s very possible they could succeed.

But here’s the thing. This is what they rolled out after making big promises about reforming school finance and giving more money to schools. Did you notice what was missing in this rollowt?

They were so tuned in to their harmonic convergence, they didn’t talk much about what their legislation would actually do, leaving the details to the bill sponsors to explain later.

They did say they were going for a 2.5-percent growth limit on property taxes in local school districts, cities, counties and other government bodies. It’s aimed at overall taxes, a leash on the overall mix of property values and tax rates that determine what happens to the average taxpayer’s bill. Anything that increases a local government’s property tax revenues by more than that would trigger an automatic November election asking voters for permission.

You might wonder how public education is going to get more financial help, as proposed by this same group of elected officials, if the state is going to limit school districts’ ability to levy taxes.

The short answer is that the state’s going to pay for it. The House’s proposed budget for the next two years adds billions to what the state is spending on schools. The Senate’s plan doesn’t spend as much, but the increases are significant (and in one case, more specific: Patrick has proposed $3.7 billion in teacher pay raises). Abbott floated the idea of holding down local taxes and tax increases — an answer to loud and persistent complaints about property taxes — and increasing state spending to fill the gap. And Comptroller Glenn Hegar, the fourth official at those weekly breakfasts, has proposed requiring the state to pay at least 40 percent of the cost of public education, along with any increases due to inflation.

But they haven’t said where the state money will come from. Nobody in the state government’s high places has proposed raising a tax, cutting other state spending to produce money for education, or weeding through the state’s tax exemptions and loopholes to shore up the state’s share of the public education load.

In other words, right now it’s all underpants gnomes. I don’t know about you, but I’m not expecting much more in the way of details about how this is supposed to do all the things they say it will do.

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12 Responses to Always beware revenue caps

  1. Bill Daniels says:

    School taxes are the overriding issue for most homeowners, as that is the biggest percentage of their tax bill. Slowing the growth of school taxes to 2.5% per year is better than nothing, but it’s not a solution at all. Someday I’d like to retire and not have the school district seize my house for non payment of exorbitant taxes levied against it.

    The skyrocketing taxes put people in the position of rooting for another housing meltdown, just so they can see some relief on their tax bills. It shouldn’t be that way.

  2. TASB has already fired back on “where’s the school money”?

    Other portions are more insidious yet. I’ll be talking about those on my blog next week.

  3. mollusk says:

    The school district won’t seize your house for nonpayment of taxes (exorbitant or otherwise) if you’re over 65. Homestead exemptions increase at that point – including a freeze on school taxes – and you have the option to defer tax payments until you die or move. They’ll bear interest at 8% in the meantime.

  4. Bill Daniels says:


    I was aware of that. So the school district is kind enough to let you stay in your home, at deferred loan shark rates. Great. So an older person can stay in the home, but the heirs lose the house to taxes anyway.

    Home ownership is one of the primary ways people build wealth, one of the primary ways working families can help each succeeding generation do a little bit better. Not so much if confiscatory taxation robs families of that.

    You know how Bernie wants to confiscate the wealth of the rich when they die? Here’s the exact same thing going on, but with ordinary workaday people.

  5. David Fagan says:

    Thank the business community, not the voters, for this pattern of tax sequestration. If the caps pass, the loopholes follow, the boards of directors of special areas direct the funds. One question should be is this privatization of the whole taxing government? Are people interested in privatizing their representation as it relates to their taxation? Or is it just being forced through the legislature?

    If people don’t like higher school taxes, quit voting for all the bonds that go to construction companies, finance banks, and developers while excluding raises for teachers. $800 million for Spring Branch? If you voted for it, don’t complain about it.

  6. Ross says:

    @David, then we end up like HISD was, with a bunch of crumbling buildings not suited for the intended use. And, the taxes for bonds and operating costs are separate, with a hard statutory limit on operating costs tax rate.

  7. mollusk says:

    tl;dr: Texas has a convoluted, inefficient, rigged tax system that Rube Goldberg would be proud of – but Heaven forfend that any actual structural change take place.

  8. David Fagan says:

    Ross, maybe there are some alternatives to maxing out the available debt liability for a given area to the point they cannot support the teachers inside the buildings they intend to build. Buildings don’t teach people, teachers teach people. Finance institutions propose a considerable amount, $800,000,000 for the area the size of spring branch is considerable, and who is going to vote against school bonds, which equate to voting against children. There has to be an alternative that supports well made classrooms and well paid teachers.

  9. Ross says:

    @David, what makes you think SBISD can’t support the teachers now? Are SBISD teacher’s salaries below average? Does the district have difficulty getting enough teachers to fill the open positions?

    The SBISD bond elections to replace all of the district’s schools have been going on for some time. The 2017 bond election was 4-1 in favor of raising the bonds to rebuild schools. At some point, the voters voted to raise the M&O rate over $1.04 to the current $1.11. I am not seeing a lot of opposition here.

  10. Manny says:

    What are you testing Paul?

  11. Faith says:

    I don’t know a whole lot about taxes, but I just looked at the HISD compensation tables and it looks like they make at least $75,000 and more for 2018-2019. What’s wrong with this salary? Am I looking at it wrong? Kids don’t need NEW schools, fix up and add to the ones that are already there. Only if they’re really bad should new ones be built. A fancy school building doesn’t make kids grades better. In Houston we voted for Prop B to pay our Firefighters more because their salaries are nothing compared to our Police. They all save our lives every day and they are the ones that should be making at least $75,000 not Teachers. Like I said, I don’t know a lot about taxes, so input would be appreciated.

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