Tasked with trying to fund public education and relieve pressure on local property tax payers, top state officials are moving forward with legislation meant to limit tax rate growth.
Senate Bill and House Bill 2 would require cities, counties and school districts to hold an election if they seek to raise ad valorem rates above 2.5 percent from the previous year. These proposals would not affect smaller taxing units that do not collect more than $15 million in revenue.
In Hays County, the proposed bill would affect San Marcos, which collects more than the $15 million threshold. The possible impact on Hays County school districts, however, leads local officials to oppose the bills as they’re detrimental to small taxing jurisdictions when faced with fast growth or natural disasters.
State Rep. Erin Zwiener (D-Driftwood) said the bills do not directly address the issue of public education funding in the state, which has left public schools to rely heavily on property taxes to stay afloat.
“Taxes are going up because the state hasn’t invested its fair share in funding,” Zwiener said. “Hays CISD is receiving less money from the state because of high property values, and with the growth of the district, they need those dollars.”
Zwiener said the state is putting school districts in the impossible predicament to educate more students with less money. The only way to address that is for the state to invest more of its dollars in public schools, Zwiener said.
Currently, cities and counties can raise the tax rate up to 8 percent without the consent of voters. Raising the tax rate above the 8 percent threshold would trigger an election and approval by the voters, by a petition and signatures.
But the new pair of bills would trigger this election, and if denied at the polls, would require the municipalities to set a tax rate to collect revenues less than 2.5 percent more from the previous years.
“I’m a little confused because I thought the call for this session was school finance and property tax reform, yet here we are, in a situation where the proposal would reduce the amount of local control,” said Eric Wright, Hays CISD superintendent.
Wright said the tax caps would hinder fast-growth school districts like HCISD to prepare for future growth, which includes the construction of campuses and other operations.
Proponents of the bill said the measures would protect taxpayers from skyrocketing rates. At a Jan. 31 press conference, Texas Gov. Greg Abbott said the bills would limit how much taxing jurisdictions can collect without voter approval.
But Wright said those tax increases must be approved by the voters, so the public has the ultimate say.
First unveiled in late 2017 by Abbott, the tax cap of 2.5 percent has been a controversial topic of discussion for both cities and school districts.
To local officials, the bills place a band-aid on an issue that has plagued the state for over a decade. School districts are relying heavily on property taxes to survive, while the state is continuously decreasing the amount it invests in public schools.
This in conjunction with the state’s recapture, or “Robin Hood,” system, where “property wealthy” school districts must give money back to the state to be reinvested in poorer districts.
Although San Marcos is the only city immediately affected by the proposals, Kyle and Buda are not far behind.
In Buda, officials are monitoring the bills’ progress, as the city may be affected in the next five years.
“It (2.5 percent) is an artificially low number, and quite frankly, political rhetoric not addressing the real issue of public school finance,” said Buda Assistant City manager Micah Grau. “We need the ability to have the flexibility to set that tax rate in the case of an emergency.”
Grau cited previous attempts to instill tax caps. During the last session, the House and Senate could not agree on a rate, landing at four and 6 percent respectively.
Grau said the city has never been close to reaching the 8 percent threshold and continuously has some of the lowest tax rates in the county.
However, in the case of an emergency or natural disaster, like the 2015 Memorial Day Flood, the proposals would limit a city’s ability to raise the tax rate to fund emergency operations.
The “artificially low cap” would not allow a city to respond quickly and efficiently, Grau said.
“It’s really frustrating to see the legislature try to attack one problem and cause unintentional consequences,” Wright said. “If they really want to lower property taxes, they must restructure the way schools are funded. The discussion needs to start from ground zero.
