The Senate has unanimously passed SB 26 (Bettencourt) relating to providing property tax relief through the public school finance system, exemptions, and limitations on taxes and providing franchise tax relief, and SJR 2 (Bettencourt) the related constitutional amendment. SB 26 and SJR 2 were filed this morning and then voted out of Senate Finance while the Senate Floor was in recess.
See below for a HillCo report of Senate Floor and committee conversations on the passage of SB 26 and SJR 2.
SJR 2 (Bettencourt) Proposing a constitutional amendment to increase the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads, to adjust the amount of the limitation on school district ad valorem taxes imposed on the residence homesteads of the elderly or disabled to reflect increases in certain exemption amounts, and to except certain appropriations to pay for school district ad valorem tax relief from the constitutional limitation on the rate of growth of appropriation
- Bettencourt – $100k homestead exemption, retroactive to the entire year, includes a go forward provision, approves a M&O tax compression
- A part of the record $18b property tax relief package
- Eckhardt – Is the franchise tax a part of the SJR?
- No, is in the bill; are doubling the franchise tax exemption to $2.74m
- Eckhardt – Fiscal note on that? Support this plan
- $600m in lost revenue; on top of the $18b; safe bet Texas will continue to economically prosper
- Menendez – What is the impact to our school districts? Support the legislation
- Are holding both M&O and I&S harmless
- Menendez – Retroactive?
- Would be in effect this year; hopeful the House sees the wisdom in this plan
- Menendez and Bettencourt discuss the proposal’s increase the state share in funding and reduces the local taxpayer’s share
- Menendez – If we get through this quickly, schools can budget for
- Provision in the bill would mail the bills out on a pre-approved basis and school could be budgeting for that as well
- Need to get this approved no later than August 9th so it can be on the November ballot
- SJR 2 passed (30-0)
SB 26 (Bettencourt) Relating to providing property tax relief through the public school finance system, exemptions, and limitations on taxes and providing franchise tax relief
- Bettencourt – Enabling legislation for SJR 2
- $18b proposal, added reduction in state’s collection’s limit (roll back rate), doubling franchise tax exemption, eliminating no tax new franchise tax return
- Parker – Bill goes back to the proposals during the 88th session with SB 3, SB 4, and SB 5
- Parker and Bettencourt discuss the business-oriented additions in the bill
- Eckhardt – This is a superior plan than the House’s
- Eckhardt – Business personal property and franchise tax; technically would reduce the state’s capacity to backfill the local property tax relief?
- Agree
- Hall and Bettencourt discuss the savings to homeowners under the bill
- Hall – For those concerned for shortages in the future, will not have any problem finding what we need to make up for this
- SB 26 finally passed (30-0)
Senate Finance
June 20, 2023
Senate Finance met on June 20 to discuss SJR 2 (Bettencourt) and SB 26 (Bettencourt).
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer.
SJR 2 (Bettencourt) Proposing a constitutional amendment to increase the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads, to adjust the amount of the limitation on school district ad valorem taxes imposed on the residence homesteads of the elderly or disabled to reflect increases in certain exemption amounts, and to except certain appropriations to pay for school district ad valorem tax relief from the constitutional limitation on the rate of growth of appropriation
SB 26 (Bettencourt) Relating to providing property tax relief through the public school finance system, exemptions, and limitations on taxes and providing franchise tax relief
- Bettencourt – Senate’s $18b property tax relief plan; additional $400m from previous bill; adding a roll back rate reduction and increasing compression for all taxpayers MCR $0.10 cents additional
- Have $100k homestead exemption
- If approved by voters, tax bills will go out with exemption on them
- Have a catch-up feature for the over 65s for their proportional share of the vote held in May
- $12.7b property tax relief for all taxpayers
- Two business-oriented additions in this bill: doubling of state franchise tax exemption; no tax new franchise tax return is now waived
- Huffman – Reducing the roll back rate is in perpetuity? Cost of that?
- About $225m for the first biennium and will grow over time; is an important inflation hedge
- SB 2 and HB 3 last year saved $11b at the previous roll-back rate; will save even more
- Huffman – Will ensure we keep the state share higher?
- Correct; benefits school districts as they will get $642m per biennium as we are covering the debt rate payments
- It is hold harmless and a win on Robin Hood
- Huffman – Franchise tax is a loss of what?
- $600m per biennium and is in addition to the $18b; could grow over time; are offsets like increased businesses coming to
- Kolkhorst – No loss of revenue to school districts?
- Correct
- Kolkhorst – As we are still working on school finance, these proposals pick up a little bit of revenue as we are covering I&S
- Correct, to the tune of $642m
- Kolkhorst – Appreciate the addition of small/large businesses in this bill
- Was included in SB 5 with an inventory tax credit; this is a way to cover small businesses
- Kolkhorst – SB 26 says they would not even have to file
- Kolkhorst – Have always been for lower appraisal caps; why is this better?
- Better long term; it is the roll back rates that determine the tax bill; appraisal caps are temporary
- Zaffirini – If we had a fiscal note, would we feel we could sustain this going forward?
- This was scored by the LBB and added a specific increase in $400; comfortable that the actual cost will be $18b
- Perry – $175m for what?
- Additional compression for the $0.10 MCR
- Perry – $225m for the 1.75 buydown
- Perry – Are adding $1b in loss of revenue to the budget
- Well lost revenue does not show up in the budget – vetoes did free up about a billion
- Perry – Not going to rely on vetoes in terms of finance
- Perry – This is permanent as long as there is money; is a bigger conversation as we have other things that need to be attended to such as water; need to have a conversation about where the other priorities of the state are
- Huffman – Have a fiscal note to give to the members
- Whitmire – Are spending surplus with this; is an additional $600m; what do we do when we do not have a surplus?
- Why the homestead vote is important
- Whitmire – Talking about on the revenue side
- Is why we are using a combination of things like pulling down from GR; is sustainable
- Whitmire – How is it sustainable?
- Given the current and future economy of the state
- Whitmire – What if you are wrong?
- Will be here to work on it
- Hinojosa – Any state that has lowered their appraisal caps and that has hurt their taxpayers?
- New Jersey, New York, California, Illinois
- Creighton – In bill – local interests and sinking revenue limited to revenue required to service debt including refund of that debt – explain how that provision works
- When the state pays for an increase in exemption, makes clear that the state is holding harmless the whole M&O and I&S value moving forward
- Creighton – Is an important provision
- Campbell – Number of those moving into the state will increase the amount of taxes paid; asks about over 65s catch-up provision
- This has a permanent go-forward provision, is a catch-up provision
- Campbell – Is there an appraisal cap for businesses right now? They still run
- No
- Perry – If I have a $1m debt service, the state will pay that and becomes fungible; have a fast growth school district with a long term bond plan, this will not limit this?
- Correct; applies to recapture as well
- Perry – May encourage districts to go borrow
- Have passed some bills that
- Perry – When there is an economic slowdown, number we promise now may not be the same number
- Hancock – Have a number of school districts that would be majorly impacted if that provision was not in the bill
SB 26 voted out to the Senate floor (16-0)
SJR 2 voted out to the Senate floor (16-0)
