The Senate Committee on Finance met to take up bills related to property tax relief on March 2. After opening comments and invited testimony, the committee laid out several bills for discussions.
Opening remarks
- Sen. West asked about structure – what is going to be order of bills passing
- Chair Nelson said big dollar items have been identified and she will have workgroups which will be announced this week
- West asked about funding public education – will that be addressed before looking at property tax relief?
- It’s my intention – but wants to vote out tax relief bills when members are comfortable with budget discussions
- Sen. Watson confirmed timeline
- Sen. Whitmire would like to hear overall budget – is concerned about putting tax relief before identifying all the needs available
- Nelson wants members to be comfortable based on input to everyone – will not be able to afford all exceptional requests
- Base bill already includes $4b in tax relief
- Made good first stab at transportation
- Will put resources in education – that is my commitment
- The committee will decide where to prioritize
- Sen. Eltife – hard to come away from $4b since that number is out there and not sure how they are covering everything – would you consider having a vote to go over the spending cap on tax relief?
- Nelson – would consider anything but ridiculous that tax relief is goes against the cap
- Eltife – would you consider putting in SJR that tax relief doesn’t count against the cap
- Nelson – yes
- Sen. Seliger noted very little instruction from Judge Dietz regarding school funding
- Sen. Bettencourt – support of HB 1 and public is aware of need of tax relief
- Sen. Kolkhorst – support of bill
- Nelson noted driver to budget is Medicaid
Comptroller – Invited Testimony
- Staff gave an overview of property taxes and exemptions
- Sen. Taylor – asked about value study
- Staff – if values are too low it could possibly affect the school funding, it is possible for schools to file for grace period
- Taylor discussed value study – state is also driving part of train, pressure to keep values in line
- West – asked about those units providing homestead exemptions
- Over 1million offered – up to 20% of home value
- List of entitles will be provided
- Connie Rose with LBB stepped up to note tax ceilings can be done by the entity or elections
- List of entities providing tax ceilings that they have – will be provided
- Sen. Hinojosa – discussion on if appraisal are too low or too high
- There are studies that say property has been over appraised
- In regards to question, if there is pressure to lower the amount – cannot answer
- Seems there is a pressure to increase values
- Discussion continued if it is an occurrence
Legislative Budget Board – Invited Testimony
- LBB staff testified on the appraisal process and property taxes
- Hold harmless for the first year for school districts may be considered and may want to continue a hold harmless provision to ensure no district takes a loss due property tax change
- Watson – how hold harmless has worked? Watson wants to increase homestead exemption for schools – need to be careful that do not create a situation or foundation for cutting school finance. Wants to make sure they are not building a foundation for cutting.
- Nelson said the hold harmless language in SB 1 is very different from before
- Watson worried about hold harmless when looking at snapshot of 2015
- Watson – how much in property values are funding public education?
- LBB staff – approaches $50 b in 15-16 biennium.
- Watson- how much of that is an increase due to property taxes?
- LBB net increase of $4.5 b that is offsetting state aid
- Bettencourt notes property taxes impact the budget but does not affect recapture – do we have an 8.5% of total property tax revenue? 8.7% in 2014
- Bettencourt points out property tax increases over time
- Bettencourt asked about TEA estimates impact of increase is 1%
- LBB would need to review – total M&O around $20 billion, thinks 1% growth turns out $200 million – different ways it will play out in the system
- West – hold harmless is expected to expire in FY18 – state has been responsible for paying the amount that has not been met since. Does not take a snapshot year but moves forward year to year and compares it to what they would have gotten had homestead exemption increase not incurred.
- West – if appraisal caps are reduced, is there a relationship between funding education and an appraisal cap?
- There may be an impact that first year but ongoing, the state would make it up
- West – if state makes up for the lag – has anyone calculated how much it would cost? West asked about the public school finance lawsuit, appraisal caps that could impact the budget, hold harmless, would state estimate the difference? How to quantify it?
- LBB can run scenarios given certain situations and provide back to committee
- Nelson – SB 1 hold harmless is neutral in terms of state law changes?
- Correct
- Kolkhorst – All chapter 313 agreements don’t flow through formula
- LBB – they are accounted for in basic FSP
Bills Laid Out and Left Pending
SB 744 – By Zaffirini, Judith. Relating to the form of a motion to adopt an ordinance, resolution, or order setting an ad valorem tax rate that exceeds the effective tax rate.
- Zaffirini lays out the bill – third paragraph of fiscal note would not impact revenues to local government
- Bettencourt – intention for once someone exceeds the tax rate – bill is very clear
SB 1 & SJR 1 – By Nelson, Jane. Relating to certain restrictions on the imposition of ad valorem taxes and to the duty of the state to reimburse certain political subdivisions for certain revenue loss and proposed constitutional amendment.
- Nelson noted the goal is to allow tax relief to Texas Homeowners
- Watson likes the hold harmless provision and it being indexed
- Watson asked why language is using an effective day different from the effective day of budget bill
- Effect of using Jan 2015 instead of Sep 2015 is that state is tied to school funding formula
- Golden penny yield is tied to Austin ISD and SB 2 just reflects that statute
- Watson asked IF SB 2 increases yield it doesn’t matter which date? Then Austin Yield will apply no matter what?
- LBB said it’s a fair point – but the budget generally stays close to estimates but they would need to look into it
- Watson – asked about true hold harmless under those circumstances
- LBB could look into Austin ISD yield and how effective dates impact
- Watson – what happens to additional INS pennies (ie spring election and tied to Jan 2015 formula, they will have to increase INS debt because not holding harmless – what happens if increase debt service requirements between Jan and Sep)
- LBB believes hold harmless would be based on lessor of – so additional tax efforts passed between now and date of the bill would not be covered by any hold harmless
- SB 1 would hold schools to tax rates in effect for 2014
- Watson – doesn’t current law allow for fluctuation?
- No fluctuation in current law
- Watson – could you find districts not being held harmless on INS end of it?
- LBB – correct
- Watson inquired about fixing the hold harmless language as they move forward – but agrees with Nelson in the intent of trying to address fractional funding
- Nelson is willing to change effective date to Sept. and her intent is to make sure the districts are held harmless
- Watson – Give tax payers a break from pain inflicting on them – but by tying it to Jan 2015 values, would that mean the tendency would be to just look back to 2015?
- Watson – could be in position where we are cutting school funding
- Bettencourt said increase in Austin Yield was over 22% but LBB agrees it is a substantial increase – possible outcome for additional funds
- Hancock – why there may be an ever so slight decrease possible, those using Austin ISD Yield may be better – their numbers have increased statewide contribution of $2.8 b into statewide education
- Hancock – thinks net result is that they would be helping them considering Austin ISD vs statewide average
SB 278 and SJR 21 – By Watson. Relating to an increase in the amount of the residence homestead exemption from ad valorem taxation by a school district and the increase of the exemption amount in subsequent years to reflect inflation and proposed constitutional amendment.
- Watson lays out the bill and resolution
- Would set a placeholder to increase homestead exemptions
- As look at SB 1 – give consideration for better way to go with hold harmless
SB 279 and SJR 20 – By Watson. Relating to the authority of the governing body of a taxing unit other than a school district to adopt an exemption from ad valorem taxation of a portion, expressed as a dollar amount, of the appraised value and proposed constitutional amendment
- Watson lays out the bill and resolution
- Would allow for flat amount for homestead exemption
- Keep decision making authority in hands of local officials
SB 182 – By Bettencourt. Relating to the calculation of the ad valorem rollback tax rates of certain taxing units.
- Bettencourt did not lay out the bill since the FN said values cannot be estimated, but they now think the values can be estimated and will bring it forward once all data is in
SB 516 & SJR 29 – By Bettencourt, Paul. Relating to increasing the period of time for exempting freeport goods from ad valorem taxation and proposed constitutional amendment.
- Bettencourt laid out bill
- Will help big business and all manufactures to remain competitive
- Fiscal note is modest
- Allow Freeport inventory exemption to be extended – accelerate one year
- Nelson said bill is a good example for additional tax relief but the question is what ones move forward
SB 758 & SJR 35 – By Bettencourt, Paul. Relating to the exemption from ad valorem taxation of certain tangible personal property used by the owner of the property to manufacture, process, or fabricate tangible personal property for ultimate sale and proposed constitutional amendment.
- Bettencourt laid out bill
- Bill designed to exempt manufactures who have sales tax exemptions but also can be used for property tax exemption
- Fiscal note on it is fairly hefty at $1.5b
- It is an interesting study on potential future tax breaks
- If they get the sales tax exemption, why not on property tax
- Nelson aware of how wonderful the bill would be as former manufacturer
SB 762 – By Bettencourt, Paul. Relating to the exemption from ad valorem taxation of income-producing tangible personal property having a value of less than a certain amount.
- Bettencourt lays out the bill
- Most de minimis fiscal note
- Takes rendering property exemption to more rational number of $2,500
- Business waste time on rendering and public may not reap much cost on collection
SB 763 & SJR 36 – By Bettencourt, Paul. Relating to the exemption from ad valorem taxation of certain income-producing tangible personal property and proposed constitutional amendment
- Bettencourt lays out the bill
- Allows a $50k for business inventory exemption
- Raising floor for business inventory values