EducationStatewide NewsTaxes & SpendingPublic School Districts Seeking Tax Increases That Offset State Compression, Increased Homestead Exemption

With school district Maintenance & Operations taxes constituting the bulk of property tax bills, the state legislature has taken several actions in recent years to reduce the burden on property owners while maintaining school district revenues.

Last year’s state budget included using surplus funds to buy down a portion of M&O taxes, a process known as “compression,” and in the third special session, lawmakers approved an increased homestead exemption for school districts from $25,000 to $40,000.

Now, state Sen. Paul Bettencourt (R-Houston) has warned that some school districts are seeking increases that will offset the relief measures provided by the legislature and approved by voters.

“Even though the state is buying down the M&O tax rates all over the state, individual school districts may be absorbing that decreased rate,” said Bettencourt in a statement.

West of Houston, the Katy Independent School District (ISD) is asking voters to approve a tax rate identical to last year’s at $1.3517 per $100 of a property’s appraised value. Rising property values, however, will increase taxes on property owners above the cap of 2.5 percent set by Texas law, and thus the district must seek voter approval to keep the rate.

Even if voters reject the request for the $1.3517 rate, the district will still increase revenues by $42 million. But if the proposal passes, Katy ISD will capture another $23 million for a total revenue increase of $65.3 million.

That also means that instead of benefiting from a tax reduction due to the state compression and increased homestead exemption, homeowners will pay more. According to Bettencourt, the owner of an average $301,000 home will pay an additional $141.17 more in property taxes.

Katy ISD trustees approved a budget increasing expenditures by 9 percent for Fiscal Year 2022-23, about $18 million above projected revenues. Trustees say they anticipate an increase in enrollment, pointing to a 5 percent increase last year that brought the total to 88,368, but the district has not yet reported enrollment numbers for the 2022-23 school year. The district says the tax increase will provide a pay raise for teachers and staff.

Fort Bend ISD is also seeking to offset the reduction implemented by state tax relief measures, and will ask voters to approve a tax rate of $1.2101 per $100 of valuation. This will generate an additional $47.66 million for the district, but the owner of an average $301,000 home will pay $220.03 more in taxes.

The district says the increase will address a $47 million budget deficit, provide pay increases for teachers, and provide funding for safety measures. The state provides a school safety allotment of $9.72 per student and approved an emergency budget transfer of $100.5 million for school safety measures last June.

School districts across the state have also received federal Elementary and Secondary School Emergency Relief (ESSER) funds for recovery from the COVID-19 lockdowns. Katy ISD has been allotted $102.4 million and Fort Bend ISD has $94 million.

Beaumont ISD east of Houston is also seeking voter approval for a tax rate increase of more than 10 percent that will add $88.08 to property taxes for a $301,000 home.

While Bettencourt notes that there is no currently available central database compiling a list of school districts holding tax ratification elections this year, many other districts around the state are hoping to increase revenues and property taxes with TRE and bond elections. Pflugerville ISD near Austin is asking voters to approve both a tax increase and a bond package totaling $367.6 million.

Three weeks before the November 8 election, the Texas Bond Review Board will publish a list of districts holding bond elections this year.

“In a year of record appraisal increases, to have a Tax Ratification Election (TRE) in November is a really bad deal for taxpayers if it passes,” said Bettencourt.

State Rep. Brian Harrison (R-Midlothian) has called on officials in his district to adopt no-new-revenue tax rates, noting that some homeowners were selling their homes “because they can no longer afford the taxes, and inflation has only exacerbated their pain.”

Bettencourt says he is sounding the alarm because taxpayers should be fully informed about what these TREs mean.

“This was not the spirit, nor the intent, or the expectation of passing property tax relief when districts are planning to increase property tax bills by hundreds of dollars,” said Bettencourt.

Update: This article includes new information regarding Katy ISD’s enrollment numbers for the 2021-22 school year. Community Impact originally reported that the enrollment numbers had not changed, but has now reported there was a 5 percent increase in the student population.