How will Texas' property tax relief plan affect school budgets?
AUSTIN (Nexstar) — The Texas Senate unanimously approved key components of the $18 billion dollar property tax relief package on Wednesday, making the anticipated deal one step closer to hitting the governor's desk, as it is expected to pass in the House Thursday.
Senators stood and cheered after unanimously passing Senate Bill 2, the property tax relief piece, and Senate Bill 3, a franchise tax cut piece.
The upper chamber's property tax aficionado — Sen. Paul Bettencourt, R-Houston — lauded the bill as a win for taxpayers.
"That's what we do in Texas, is come up with Texas-sized solutions to Texas challenges," he said on the Senate floor. "And there's nothing better to be able to say, for every taxpayer in the state, their property tax rate is coming down substantially for every home state and the state."
Sen. Sarah Eckhardt, D-Austin, also had high praise for the historic package, but raised concerns about one of its key components and its impact on school districts in the long run. Part of the proposal includes allocating $12 billion for school districts so they in turn can lower their local tax rates.
$12 billion for school districts to lower their tax rates
Local property taxpayers will see a reduction through rate compression, which is when the state gives more money to school districts so they in turn can lower their tax rates. Rate compression does not give districts additional funding, but merely redistributes the obligation for public school funding to fall more heavily on the state rather than local taxpayers.
"The property tax benefit of this bill will be erased, erased if we don't continue to make state investment in public education, so that we do not have to rely on local property taxes to make up the delta," Eckhardt said. "I vote for this in hopes that the state continues — even after this one time surplus — to pay its fair share with regard to public education, so that we don't go back to a past where we allowed the local property taxes to increase so that we could fail to meet our obligation at the state level."
In a Tuesday one-on-one interview with Lt. Governor Dan Patrick, Nexstar asked him to respond to concerns that compression is not sustainable. Prior to the House and Senate striking a deal, Patrick had been less supportive of the compression plan than the House and Gov. Greg Abbott.
"I've said this over and over in the last couple of months that compression is not a guarantee," Patrick said. "So could you have, you know, an adjustment in any given year...yes, you could. But over time, we will continue to grow."
At a conservative think-tank event last month, Abbott said that tax cuts via compression are sustainable, noting the state is receiving increasing amounts of revenue from sales and franchise taxes due to population and business growth.
But public education advocates worry about this model in the future, once the $12B for districts dries out and if there's another major economic downturn.
Mark Wiggins, a senior lobbyist with the Association of Texas Professional Educators, points out that over the years the state has decreased its contribution to public school funding, meaning school districts have had to rely on local property taxes to fund the majority of their budgets. He expressed concern that in future sessions, Texas might not be able to maintain paying for the lion's share of districts' funding if the state budget decreases dramatically.
"It is just changing the ratio between the state and the local share of funding. It is not increasing the total level of funding," he said. "Most of the school districts that are having problems right now that are unable to keep staff, that are unable to provide pay increases in order to attract and retain staff — they're still in that same boat. This is not going to help those districts."
Teacher bonuses stripped from deal
At the end of June, senators amended the tax relief bills to include a $3.2 billion supplemental pay package for teachers to receive bonuses, however, that was ultimately removed from the final deal.
The plan would have provided a $2,000 check for full-time classroom teachers in districts with more than 20,000 students and a $6,000 check for teachers in districts with fewer than 20,000 students.
Sen. Roland Gutierrez, D-San Antonio, proposed the teacher amendment in June. On the Senate floor Wednesday, he asked Bettencourt if it was House Speaker Dade Phelan or Rep. Will Metcalf, who worked on the property tax deal, who decided to ultimately remove teacher bonuses from the final package.
"I just want to know which one of those two people decided to abandon the teachers of Texas and not give them a pay raise?" Gutierrez asked.
"Without speaking for them, I think the intent is clear that they wish that that issue to be brought up in the next special session with education," Bettencourt replied.
The lieutenant governor told Nexstar he expects Abbott to call lawmakers back in October for a third special session related to creating a school voucher program and that they'll also seek to address teacher pay raises then — despite opponents' criticism of tying the two together.
"We already have 5 billion set aside in the budget and part of that is for teacher pay raises. So I believe we'll get to them in October when we address the other education issues," Patrick said.
Texas school districts have to finalize their budgets for the 2023-24 school year before students and staff return.