86th LegislatureEducationIssuesState HouseState SenateTaxes & SpendingProperty Taxes, Teacher Pay Raise: What the 86th Legislature’s New Budget Means for Texans

Part of that increase is due to the $11.6 billion used to address the session’s biggest two issues: property taxes and school finance.

The combination plan was announced last Thursday at a celebratory press conference on the Governor’s mansion lawn. The plan comprises of $6.5 billion in new school funding and $5.1 billion for a property tax buydown.

The school finance portion is a general increase in per-student funding for each district, with the provision that 30 percent of the increase each year goes towards pay raises and benefits for non-administrative employees. Just how much is left to the school district’s discretion.

Lt. Governor Dan Patrick made headlines earlier this session when he endorsed a $5,000 across-the-board pay raise for Texas teachers and other staff. The final plan doesn’t quite reach Patrick’s desire, but it does amount to roughly a $4,000 per year raise on average plus benefits — should the school districts use the entire portion of the allotment for that purpose.

Other aspects of the bill include $140 million to establish an optional merit-based pay system (but not tied to standardized test scores), providing a boost to retirement benefits, and instituting taxpayer-financed all-day pre-k to low-income populations.

Another notable facet of the plan is a 47 percent reduction of the “Robin Hood” program which distributes funding from wealthier school districts to poorer ones.

Texas’ schools are significantly funded by local property taxes, and as the cost of education has ballooned, so has the property tax burden on Texans. Schools are funded in tandem by the state and local school districts. The share of the latter increases or decreases based on the share of the former.

Until this year, the state curtailed the growth of its education spending, and so the school districts increased property tax rates in response. For the 2020-2021 biennium, however, the state increased its overall share of the total education expenditure, therefore buying down the “need” for property tax increases above their threshold.

That threshold for school districts is 2.5 percent and for localities, it is 3.5 percent. To go above that, taxing entities would need to get voter approval through a ratifying election. Additionally, school districts will need to go through an efficiency audit should they aim to raise taxes above 2.5 percent.

The funding gap was made up by taking money from existing revenue sources, such as the $6.1 billion taken from the state savings account. Estimates say that taxpayers could see a reduction in their tax bill the next two years — to the tune of $184 in 2020 and $299 in 2021 for a property owner at the median household value of $230,000.

This would occur with the reduction of prospective tax rates above cap-level, to below the caps for the next two years.

To help pay for the costs after this biennium, as well as increases that may come, the bill establishes the Tax Reduction and Excellence in Education (TREE) fund.

Money will be diverted into the TREE fund to pay for future costs.

The bills now move to Governor Greg Abbott’s desk for an all but guaranteed signature.

He has until June 16 to sign or veto the bills sent his way.

Update: A previous version of this article said the percentage change from the last biennium was 16 percent instead of 6 percent. That information stemmed from an LBB chart denoting figures after the biennial budget passed.  However, there are routinely variances to agency expenditures that differ from what is appropriated by the Legislature. The piece has been updated to reflect this fact.