The state’s savings account, the Economic Stabilization Fund, is projected to have just over $13.6 billion by the end of the next fiscal year.
Primarily, Patrick stated his intention to put at least $4 billion of that tranche toward buying down local property tax rates through compression. Last year, the legislature earmarked $3 billion of the state’s coronavirus aid money toward that for the 2023 session.
He also proposed:
- Increase in the standard homestead exemption to $60,000 permanently, with a goal to raise it to $100,000 down the road
- Suspend the state gas tax for the rest of 2022
- Allocate money toward teacher pay increases
- Issue another 13th pension check to retired teachers
Patrick also mentioned the ongoing border crisis, which the state has already spent billions of dollars on, as an outlet for a portion of this tranche.
“I have always believed returning money back to taxpayers does not grow government,” Patrick said in a release. “However, I believe, first and foremost, any surplus should first go back to the taxpayers of Texas. Texas homeowners must receive tax relief before we commit to any new spending.”
As Comptroller Glenn Hegar noted on Thursday, the tax collection windfall is not a sign of an unalloyed financial boom. Collections are high largely because of inflation and costly oil and gas prices. A recession is expected by state leaders, which may also play into how much of this sum the legislature actually allocates and how much is left as a financial cushion.
In May, Texas voters overwhelmingly approved a constitutional amendment raising the school district homestead exemption to $40,000, and Patrick aims to increase that again next year.
So far through Fiscal Year 2022, motor fuel tax collections have eclipsed $3.1 billion, 6 percent above the previous year. As average Texas gas prices jump above $4 per gallon, Patrick hopes for a suspension in its collection. With the legislature not set to meet until next January, Gov. Greg Abbott would have to order the suspension.
In 2019, the legislature allocated $6.5 billion toward a large school finance injection, a portion of which paid for teacher salary increases.
One property tax-related issue gaining momentum in recent months is an elimination of the school district Maintenance & Operations rate — the single largest component of local property tax bills. Abbott has indicated support for it and Patrick included it on the Senate’s slate of interim charges. On the House’s interim charges is continued compression of local rates.
Including “recapture” — the school funding mechanism by which property taxes are redistributed from wealthier districts to poorer ones — that M&O component brought in $30 billion last year. And elimination would require a replacement of the funding from the state. To swap it entirely with a state consumption tax would require an increase from the current rate of 6.25 percent to 11.5 percent, according to the comptroller.
The conservative Texas Public Policy Foundation’s plan to accomplish that feat would allocate $0.90 of every surplus dollar toward the state’s side of the school finance system seesaw — as the state’s portion of the funding rises, the local side lowers.
Property tax relief, in some fashion, has remained high among state leadership’s priorities since the conclusion of the marathon special sessions last year. It’s safe to assume it will remain there when the body reconvenes in January, but its final form is yet to be determined.
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Brad Johnson is a senior reporter for The Texan and 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.