87th LegislatureTaxes & SpendingA Preview of the Property Tax Debate Ahead of the 87th Legislative Session

Property taxes were among the top two foci last session, but as the legislature prepares to convene in January the issue's status is less clear.
November 17, 2020
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In a twist on the old adage, there are generally three guaranteed widely discussed topics in any given Texas legislative session: abortion, property taxes, and education.

Last session, the legislature spiked the proverbial football, declaring a “Super Bowl Session” over the modest, but not insignificant, property tax reform it secured in tandem with a bolstering of school finances.

Localities developed quite a habit of squeezing out every ounce of property tax revenue they could up to the eight percent limit.

In the 85th Session, the body tried and failed to secure a halving of the limit, but succeeded in 2019 dropping it even further — lowering the percent increase threshold without voter approval to 2.5 percent for independent school districts and 3.5 percent for cities and counties.

The legislature also “bought down” school tax rates by injecting $5.1 billion from the state’s savings account into the school finance formula.

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In its wake, localities scrambled to implement a final property tax rate hike up to the expiring eight percent limit.

As fate would have it, it was not the last up-to eight percent increase.

Once Governor Greg Abbott declared a statewide disaster due to coronavirus, he triggered a loophole within Senate Bill (SB) 2, the freshly minted legislation, that raises the property tax increase limit back to eight percent for an affected area during the tax year in which it occurred.

Cities and counties which fit that bill do not have to ask voters to approve an increase up to eight percent — and, being a statewide declaration, many have taken advantage therein.

The validity of the provision to this circumstance is disputed by state leaders, however, alleging the provision applies only to “physical” and not “economic” damage. The legislature’s intention certainly reflects this, originally geared toward a situation like Hurricane Harvey.

But the law does not denote a physical damage-only bent and thus sets in a divide between the law’s intent and its text.

Running parallel to the tax rate aspect is the appraisal side of the equation, which often continues to rise unabated, thus increasing tax bills for property owners.

All of this will set the stage for the property tax issue writ large going into the 87th Legislative Session when the legislature convenes in January. After the last session, legislators were sure to emphasize that the work to be done on property taxes is not finished.

The question now becomes what reforms will make their way to the forefront of the discussion come next year.

Surely, something aimed at the loophole will materialize. It’s possible it’ll take the form of a repeal of the provision or even the insertion of a “physical property damage” qualifier. But another route has been floated by the two big movers of SB 2 last session, Sen. Paul Bettencourt (R-Houston) and Rep. Dustin Burrows (R-Lubbock).

In June, they suggested a reprimand of cities and counties which used the loophole immediately through public pressure by taxpayers. But another possibility could come by requiring a proportional decrease in a locality’s tax collections the following year.

Pointed at a different issue, but to a similar end, Abbott has suggested a property tax freeze on cities that “defund” their police departments. The verbal quarrel between Abbott and Austin Mayor Steve Adler has fed many a news headline since the city suggested, and then voted, to cut and redirect a quarter of the police department’s budget earlier this year.

The push came in tandem with the nationwide unrest after the death of George Floyd in Minneapolis. This year, Austin’s faced substantial spikes in certain violent crime categories such as murder, assault, and rape — a phenomenon preceding the city’s vote, but during a problematic APD staffing shortage.

Abbott’s threat was surely meant as a shot across the bow, but its follow-through would prove a serious punishment for cities that go that route.

With the bill pre-filing period already open, some property tax legislation has already been filed.

One of state Rep. Valoree Swanson’s (R-Spring) bills would institute a voter turnout requirement for a political subdivision to implement a property tax increase above the voter-approval rate. For any increase above that limit to apply, more than 25 percent of the entity’s voters must cast ballots in the election.

While 25 percent turnout is not hard to surpass, it could come into play if a political subdivision opts for an off-year election, hoping specific groups especially supportive of the measure can have an outsized impact on the results. 

Rep. Andrew Murr (R-Junction), meanwhile, has proposed an elimination of school districts’ Maintenance & Operations (M&O) rate. The M&O accounts for the vast majority of the subdivision’s total tax rate and school districts account for the largest portion of a taxpayer’s bill.

Murr’s legislation would eliminate that section, by and large used for general fund-type expenses, and establish a commission to navigate the change.

On the flip side, Rep. James White’s (R-Hillister) legislation looks to establish a limitation similar to that found within SB 2 and HB 3, but instead aimed at appraisals. Currently, appraisal year-to-year increases for homesteads are limited to 10 percent.

White hopes to contract that down to 2.5 percent — a substantial limitation on what amounts to, in many cases, runaway increases in appraisals that do not reflect the taxpayer’s ability to pay.

Another factor to watch is the new speaker, presumably Rep. Dade Phelan (R-Beaumont), and how much emphasis he places on the issue.

Property taxes will once again permeate deliberations under the pink dome, but due to the emergence of various other priorities — not the least of which is the pandemic — on the backburner, it may be placed.

Correction: An original version of this article misstated the appraisal increase cap. That cap only applies to homesteads. We regret the error.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.