Another Texas Legislative session has come to an end, and the state’s lawmakers have left Austin after four-and-a-half months of debate and negotiations. One of the topics that grabbed headlines before the session began in January was property tax reform, which gave hope to Austin homeowners who have dealt with the steady, unrelenting rise of their annual tax bills.
Since property taxes are tied to school funding in Texas, any changes to those tax rates also required adjusting the formula for school funding, a topic that has been a regular feature of the legislative session for at least the past decade. After a failed attempt to increase the state’s sales tax to offset property tax reductions, it seemed that the issue would not be addressed. However, with less than a week remaining before the session’s end date on May 27, the leaders of both chambers agreed with the governor on a plan to spend some $9.5 billion over the next two years, with $4.5 billion going into classrooms and the rest for property tax relief.
The new legislation would lower payments that property-wealthy districts pay to the state to help support property-poor districts (aka “the Robin Hood” formula) by an estimated $3.5 billion. Property tax rates for schools would be reduced by an average of eight cents per $100 valuation in 2020 and 13 cents per $100 valuation in 2021. And beginning in 2021, school districts would not be allowed to collect more than 2.5% in property tax revenue from year to year, which would limit the rate of property tax increases for homeowners. The state would then make up any shortfall in school funding from other sources. Another bill that was part of the agreement would require voter approval of any property tax increase of more than 3.5% over the previous year.
Although this plan, which has yet to be signed into law by Governor Abbott, does not actually reduce property taxes in the way that Texas homeowners might have hoped, it does look to slow the steep annual increases. How this may or may not impact funding for local projects that rely on property taxes remains to be seen.