Analysis: The challenge of reining in property taxes at no cost to schools

Texas Legislature 2019

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

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The Texas Senate’s property tax fervor shouldn’t come as a surprise. That’s where state-imposed limits on local tax increases got traction two years ago, and the leaders there — Lt. Gov. Dan Patrick and Paul Bettencourt, who replaced Patrick in the Senate — were both flying the property tax flag for years before they were elected to state office.

Voters want cuts. Texas, with no income tax to lean on, had the 13th-highest per capita property taxes in the country in fiscal year 2015 and the 9th-highest per capita sales taxes, according to the Tax Foundation. That outfit also ranks Texas 46th among the states for overall state-and-local tax burden, a fact that doesn’t seem to do much to temper the outrage.

No surprise here: The property tax activist at the head of the Texas Senate appointed a Committee on Property Tax that reflects his activism, with four Republicans and one Democrat. Texans will find out in a matter of weeks whether the full Senate is willing to go along with what the committee appears certain to approve as early as Monday.

The next obstacle after that will be in the House, where the link between school finance and property tax legislation seems stronger. The Senate is all about property taxes; Bettencourt said during a break in his committee’s hearings last week that he doesn’t see any need to wait to see what’s in the school finance legislation before his committee votes out the property tax bill.

Others — including many in the House — are waiting to see what that as-yet-unfiled school finance bill does with public school property taxes before they decide on state limits to local tax increases. Those are paired proposals, after all, and the property tax bill doesn’t say how the state would cover any losses to schools from the limits on local tax increases.

As a matter of politics, throttling revenues for school districts is more dangerous than doing it to cities and counties.

It didn’t help that city and county officials put up feeble defenses in testimony before Bettencourt’s strikingly hostile committee in a meeting that was equal parts spanking line and public hearing.

Property tax legislation in both chambers would require voter approval for property tax increases of more than 2.5 percent — increases in revenue, that is, and not just increases in rates. Bettencourt and Co. have argued that local officials would still be allowed do anything they could sell to their local voters, with the implication that anything beyond that was probably something the local governments shouldn’t be doing anyway.

That weakened the strength of an argument from many of the local officials that the state was making it impossible to govern. Their strongest remaining objections are to unfunded mandates, their term for money they spend on programs ordered — but not funded — by the state government. But there was also a fair amount of official arrogance at play: The committee’s distaste for dissent was the talk of the Capitol.

The state government wouldn’t survive its own proposal. A cursory look at state budget figures over the last 20 years shows only two instances where budget-to-budget growth was below 2.5 percent. Final tallies on the current budget won’t be in until the fiscal year ends in August, but the previous two-year budget was 6.2 percent bigger than its predecessor, and the 2014-15 state budget was 6.6 percent bigger than the one before that. If the state government was subject to the limits it has proposed for local governments, both of those budgets would have required approval from Texas voters.

But the state isn’t funded by property taxes, and voters aren’t saying much, if anything, about the sales and other taxes that feed the state. This isn’t about budgets — in fact, the legislation wouldn’t touch what local governments collect in sales taxes and fees.

It’s about property taxes. The state can’t lower them; it has tried. But it can, if it chooses, make property taxes harder to raise.

Maybe. It depends on what it wants to do with public education, which accounts for the majority of your property tax bill. And that public school finance legislation is still on a drafting table somewhere at the State Capitol.