The House Committee on Ways & Means met on September 30 to take up property tax relief bills HB 90 (Oliverson) and SB 1 (Bettencourt). Both bills were left pending at the end of the hearing.
This report is intended to give you an overview and highlight of the discussions on 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 and the desire to get details out as quickly as possible with few errors or omissions.
HB 90 (Oliverson) Relating to reducing school district maintenance and operations ad valorem taxes through the use of certain surplus state revenue.
- Oliverson – 6th highest local property tax burden in the US, half comes from ISD M&O
- Have tried to buy down and lower rate of growth of property taxes, but still out of control
- HB 90 attempts to put us on a pathway to lower and perhaps eliminate up to 40% of the property tax burden via a step compression
- Uses surplus revenue from the spending cap, reductions are permanent, careful in stepping down with additional revenue
- Constituents want property tax compression, makes compression a priority ahead of other spending
Dale Craymer, Texas Taxpayers and Research Association – For
- Technical issues with drafting that need to be reviewed by Comptroller & TEA, but support using excess revenue to reduce ISD tax rates
- Leaves revenues within the spending limit untouched, uses excess revenue for tax relief
- HB 90 will not ultimately eliminate school property tax, but will keep taxes under control and avoid increases over the next decades
- Suggest some type of safety valve to suspend transfer if legislature did see great need and suspended spending limit
- Murphy – What if you have a multi-year downcycle in income? Committed to compression that would crowd out other expenditures?
- Bill buys down tax rate and keeps you there, until additional revenues can buy down further
- If bottom drops out of the economy and revenues fall, would have a budget shortfall, but if you used the excess money for something else you still have that spending stream
- Murphy – Talking about what might be below the spending limit, if you do $10 billion in year one, am I obligated to $10 billion continually
- Keeps it flat, wouldn’t need to keep stepping down, also have Rainy Day Fund to deal with up and down economic cycle
- Have the tools to do this in the event there is a temporary downturn
Vance Ginn, Texas Public Policy Foundation – For
- Many constituents say property tax is a major burden
- TPPF has tried to find ways that TX can eliminate property taxes, possibly by 2033; other bills like SB 2 in past sessions have made steps towards this
- SB 1 from this year is another way, should put all of the compression into statute with HB 90; great way to move towards elimination of property taxes
- Also a debate on ARPA funding and whether this money could be used for property tax relief, need to pay for unemployment benefits @$7b, but potentially $8b on the table
- Cole – If we commit to $10b in compression and the economy goes south, do we have to commit to $10b in the next biennium?
- Yes, will need to continue that in the next biennium, like with HB 3 needing $6b to keep the 7 cent compression
- But would have Rainy Day Fund to smooth economic movement & may need to make policy decisions to put taxes first
- Schools are sitting on $20 billion in reserve funds, much of this is for cashflow but a lot is on the sidelines; also received $16 billion recently from federal funds
Cyrus Reed, Lone Star Chapter of the Sierra Club – Against
- Not against property tax relief, but concerned about GR-D funds like Emission Reduction Plan or O&G Clean Up fund; would be difficult to appropriate these funds for intended purposes with bills like HB 90 in place
- Tying hands of future legislators
Eva DeLuna Castro, Every Texan – Against
- Echoes Sierra Club concern about GR-D, should get report from Comptroller about how much GR-D is used to certify budget, last year it was $6b
- HB 90 and SB 1 put more and more of responsibility for paying for schools on consumption taxes, sales and other consumption taxes go down in a recession and have issues paying for schools, health care, and public safety
- Fiscal note on HB 90 could almost deplete the Rainy Day Fund/Economic Stabilization Fund; if you go below a certain balance in this fund you cut off State Highway Fund transfers
- Would likely need to vote to exceed Article VIII spending cap
- Spending cap on a basis that plummets during a recession creates other problems, will need to spend far more just to get back to where you were
- Moving further and further away from a stable way to pay for schools
Chandra Villanueva, Every Texan – Against
- HB 90 puts tax cuts above kids; HB 3 already provided a path to eliminating Tier 1 M&O, but already losing ground on HB 3 as we’re not keeping up with inflation
- HB 3 measures are half done; no funding for full Pre-K, special education, etc.
- Unallocated revenue is not a surplus when state has unmet needs
Adrian Shelley, Public Citizen – Against
- Mechanism in HB 90 will lead to unintended consequences, many important GR-D accounts
- Texas Emissions Reduction Plan has a $2b balance, the most effective way of reducing air pollution in TX
Alexi Sworski, Self – For
- Supports any type of property tax relief, some of those in poverty may have scraped enough together to buy a home and may have property tax payments too
- Major consider in moving in property taxes
Christy Rome, Texas School Coalition – On
- Supports lowering property taxes as this reduces recapture, but concerned about bills that tie the hands of the legislature
- Should be mindful of school needs like paying teachers a livable wage
Rep. Oliverson closes
- Should make M&O reduction permanent, don’t want to be asked why we raised taxes in the future
HB 90 left pending
SB 1 (Bettencourt) Relating to a temporary reduction in the maximum compressed tax rate of a school district and the form of the ballot proposition to be used in an election to approve a tax rate adopted by a school district that exceeds the district’s voter-approval tax rate; making an appropriation.
- Chair Meyer – SB 1 uses $2 billion of surplus funding to increase district funding and reduce M&O tax rates by 6.6 pennies, $300k homes will see $200 in property tax relief
- Amount of compression may increase up to $4 billion depending on certification
Dale Craymer, Texas Taxpayers and Research Association – For
- Legislature took an enormous step forward in returning rising value benefit to taxpayers with HB 3
- Provides chart on annual increase in school property values and levy associated, HB 3 broke that link
- SB 1 is a guaranteed $2b school tax rate cut that will provide uniform relief, continues legislative effort to lower school property tax cuts
- Concerned that additional surplus leading to $4b in tax relief may not be sustainable, danger of shocking taxpayers with return to normal rates; would prefer forgoing the surplus amount for more permanent cut
- $2b is sustainable in the long run, O&G prices are stable, Rainy Day Fund has $12b; current tax structure generated the $6b surplus, so $2b permanent commitment should be possible
- Button – Did hear some concerns about problems that people were not aware of ahead of the time; between SB 1 and HB 90, which would you prefer?
- Like both of these, would take SB 1 for the $2b guaranteed as we have the money now
- Both are affordable and urges supporting both
- Button – Rep. Oliverson’s bill is excellent as well
- Meyer – Is there a way to structure this to make it permanent, but possible to have a trigger on huge economic downturn that we would need the funds before paying $2b
- Certainly something to consider, safety valve is appropriate on HB 90
- Concern on stair step with $2b this biennium and $4b next, but could use $2b for this buy down and then build a rolling $1b into the base
- Meyer – But if we move past this surplus, maybe 8 years from now, could we have a trigger on X or Y revenue?
- Absolutely, when we dedicated revenue to the Highway Fund, you did that for a set period of time and legislature could evaluate afterwards
- Meyer – So more like a Sunset
- Button – Exactly what was on my mind; if an area has strong economic development and needs to build more schools, etc., they could still use other methods like bonds for capital improvements; can you share your thoughts on that? everyone supports reducing taxes, but also want the environment supports growth
- This is the conundrum of property tax, everyone wants relief, but votes for higher rates when asked
- There was a Senate floor amendment that would suspend TREs for 1 year
- There wouldn’t be an effect on an ISD’s ability to issue new debt, wouldn’t cause difficulty for Fast Growth School Districts beyond what they already experience
- Rodriguez – Does your organization support that amendment?
- Would like to see the rate relief made permanent, if it is the amendment would not be necessary
Vance Ginn, Texas Public Policy Foundation – For
- Texas ranks high on effective tax rate, total tax levy and ISD tax levy is up significantly over the last decade
- What was done in the past by HB 3 and SB 2, combined with SB 1 and HB 90, would work well to bring down tax bill, previous measures were offset by rising taxes in other areas and SB 2 hasn’t really had a chance to work
- Texas Constitution says state legislature will fund schools, SB 1 and HB 90 are on a path towards this
- Would love to see this made permanent, almost what HB 90 is trying to do
- Not about defunding education, about funding education based on the laws
- Should think about how ARPA funds can be swapped with GR, can be used for waste, broadband, etc. and use for additional property tax relief
- Should also look at limits on taxing entities like spending limits, other states are doing this and businesses may go elsewhere
- Meyer – Concern about permanency would be future economic downturn, any thoughts on that?
- Permanency would provide certainty for taxpayers and taxing entities
- Sunset would be a good thing, if legislature hadn’t done enough on property taxes may be able to do more things, maybe we need to go bigger
Adrian Shelley, Public Citizen – Against
- Testimony is identical to HB 90 testimony, GR-D should be spent on intended purposes
- Rodriguez – What if some changes are made like removing tax ratification and it is a $2b going forward with a trigger to stop it if we move forward, does this change your position?
- Potentially, some of the funds have had rolling surpluses, not good policy to use funds for other things aside from intended purpose
Chandra Villanueva, Every Texan – Against
- Opposes SB 1 for same reasons as opposition to HB 90, direct attack on stability of the public education system
Amanda Brownson, Texas Association of School Business Officials, Texas School Alliance – On
- HB 3 property tax compression has been popular, especially because it is paid for by the state
- Allotment is fixed until basic allotment is changed
- Recommend being thoughtful about what is sustainable and tax rates popping up in future years, school boards would need to vote on this
- Concerned about prohibition on ratification elections from the Senate floor amendment, really a 2 year ban because TRE in 2023 wouldn’t be a good idea if the rate pops back up
- Meyer – Preferring something more permanent rather than a 1-year?
- Written material has info supporting mechanisms in HB 3, could just appropriate through those mechanisms as those are permanent
- Something a little more stable and permanent, maybe not full amount
- Meyer – Would you be for instead of neutral?
- If concerns were addressed and we all were assured we could afford it, yes
Eva DeLuna Castro, Every Texan – Against
- Touched on some reasons opposing SB 1 with HB 90 testimony
- Consumption taxes subsidizing local property tax cut, even if only 1 year, is problematic
- Should get update from Comptroller on GR-D funds, should also look at tax exemptions and incentives report, families at different income levels pay different amounts
- Families below $30k pay much more for consumption taxes and benefits a small percentage of $150k and up families
- If you use $4b, the family making $157k and up will see $160 in relief, 80% of families will not see a benefit; SB 1 takes state revenue and gives it to a certain type of property taxpayer
- Issue of who pays is not getting enough attention, would do a lot more to benefit corporations and businesses, not families; families need to know children can be in school, healthy, and educated
- Murphy – Taxes we’re talking about reducing are levied on all property, the benefit would be equal and equitable; more you pay in, the more relief you would see
- Because the taxes being paid to the state come disproportionately from lower income families, sales tax is paid far more by lower income taxpayers
- Property tax itself is more progressive
- Murphy – Have had discussion with Dick Levine, People that make more money pay a lot more money
- Probably also had discussions with Dick Levine about just how much more those taxpayers make
- Murphy – Would you support increasing homestead exemption?
- Yes
- Murphy – Doesn’t that shift taxes to renters?
- Anything you do would do this
- We’ve been hearing SB 1 gives money back to taxpayers, but want people to understand it uses state revenue
- Murphy – Renters will see relief from this
- Will they though?
- Murphy – Sometimes it’s contractually obligated
- Would be happy to hear that, but if Apple gets relief they don’t lower price of iPhones
- Button – Concerning rentals, sometimes it’s supply and demand, not about affordability
Christy Rome, Texas School Coalition – On
- Supports property tax relief as this reduces recapture, would like to get to “for” on SB 1
- Concerns are the Senate floor amendment prohibiting TREs
- Sustainability of the tax relief is also important, voters would be very unhappy when tax rate jumps up in 2023-24
- Preference is sustainable tax relief which may look different than what is in the bill, a little less but longer lasting would be preferrable to taxpayers
Alexi Sworski, Self – For
- Any property tax relief is a good thing, especially timely due to effects of COVID, landlords have been going months without renter payments
- Homeowners may have lost jobs due to COVID, relief would benefit property owners
Cory Vessa, Round Rock ISD Trustee, Self – On
- Tax relief is always a good thing, but concerns have been raised about long term implications
- Basic allotment wasn’t raised last session, inflation is 5% and ISDs are dealing with less every year
- Round Rock was able to provide 1% raise, but inflation at 5% means pay is being cut in terms of buying power
- Applicants have dried up, will have serious long term teaching problem without doing something about compensation; bonus could help
- ISDs made budgets in Spring and had optimism about enrollment, anticipated students coming back and Delta meant schools did not hit enrollment projections
- Diminishment of Delta and vaccine could mean enrollment comes back in January, but schools are seeing budget deficits across the state
SB 1 left pending