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Texas homeowners and businesses will get potentially thousands of dollars cut from their property tax bills in the coming years after voters Tuesday overwhelmingly approved a constitutional amendment that changes how public schools are funded.
“Fighting for property tax reform is something Lt. Governor Dan Patrick and I have been doing together for almost 20 years in the making,” the bill’s author, Houston Republican Sen. Paul Bettencourt, said in an emailed statement. “To have all of everyone’s hard work pay off, it’s fantastic to see the public finally getting the property tax reduction they have always wanted and deserved. It’s great to give people their money back from excess budget collections.”
Proposition 4, an $18 billion property tax-cut package, was approved by 84% of voters in Tuesday’s constitutional amendment election, according to Decision Desk HQ. Nearly 1.1 million voted in favor of the amendment, with 89% of estimated votes counted.
The proposition is aimed squarely at lowering school district property taxes, which make up the lion’s share of a Texas landowner’s property tax bill.
Under the proposition, school districts will get $7.1 billion to lower their tax rates by replacing local revenues they would have collected with state dollars, which lawmakers call “compression.” That will reduce the tax rates school districts use to pay for operating costs like teacher salaries by 10.7 cents for every $100 of property value.
The proposition also more than doubles homeowners’ homestead exemption on school district taxes, the amount of a home’s value that can’t be taxed to pay for public schools. The constitutional amendment raises the exemption from $40,000 to $100,000.
Together, those breaks — which will be applied to landowners’ 2023 tax bill — will amount to more than $2,500 in tax savings over the next two years for the typical Texas homeowner, with bigger savings for seniors, according to figures provided by the office of Bettencourt, a Houston-area Republican and the Senate’s chief tax-cut proponent. That comes out to a little more than $100 a month.
Despite Texas’ reputation as a low-tax state, thanks largely to the lack of a state income tax, landowners here pay some of the highest property tax bills in the nation, according to the conservative Tax Foundation. Cutting property taxes has been a top priority for the state’s highest-ranking Republicans.
This year, Republicans got the chance to take a big swing on tax-cuts, promising to use a considerable chunk of a record $33 billion state budget surplus, the result of Texas’ considerable economic growth and a glut of federal COVID-19 relief funds. After months of infighting, GOP lawmakers sent Gov. Greg Abbott the $18 billion tax-cut proposal, but voters still had to sign off on the idea at the ballot box.
The package also includes $5.3 billion to pay for tax cuts approved by lawmakers in previous years.
Voters approved other tax changes as part of Proposition 4 — including a new cap on how much certain businesses’ property values, which helps determine an owner’s tax bill, can grow each year.
Owners of commercial, mineral and residential properties — like rental homes and apartment buildings — that don’t receive a homestead exemption and are valued at less than $5 million now will have a 20% cap on their value growth each year for the next three years. Previously, businesses didn’t have such a cap, unlike homeowners, whose taxable home values can’t rise more than 10% each year under state law.
The cap on certain business properties’ value will expire in 2026 unless lawmakers and voters choose to keep it going.
Proposition 4 also expands the pool of businesses that don’t have to pay the state’s franchise tax. And the amendment allows voters in counties with at least 75,000 residents to pick three new members of their local appraisal districts’ board of directors, which have been appointed positions.
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Property tax cuts, a raise for retired teachers and billions in investments in infrastructure, research, tech and energy appeared headed for passage as voters showed their approval for more than a dozen constitutional amendments, according to early returns on Tuesday night.
But a measure to allow judges to retire at a later age appeared to be going down, with barely over one-third of Texans voting for it.
And a few others — including a property tax exemption for biomedical inventory and equipment from property taxes, were passing by only slim margins.
Voters weighed 14 constitutional amendments totaling up to $20 billion and appeared ready to approve 13 of them.
The most definitive support appears to be going to Prop 4, the $18 billion property tax relief measure, which had 87% of the vote in early returns.
Here’s a look at what the propositions will do:
Proposition 1:
Requires state and local governments to provide evidence that regulation of generally accepted farming and ranching practices is needed to protect the public from danger. For example, it would prevent a city from banning farming in an area for no specific reason, but it would allow for a government to require ranchers to put up fences for their livestock, according to the Texas Farm Bureau, which supported the amendment.
Proposition 2:
Allows cities and counties to exempt child care providers from property taxes on any facility used to run such a business. The amendment will offer relief for child care businesses that have been struggling to stay open since the start of the COVID-19 pandemic. With federal pandemic relief money set to dry up for child care businesses, some providers are preparing to close in the next year.
Proposition 3:
Forces lawmakers to ask voters for authorization before they could impose any new state taxes on residents that would be based on net worth or wealth. Several states have proposed so-called “wealth taxes” in recent months, though Texas has not. The term refers to a tax on a person based on the market value of assets they own, which can include real property and retirement accounts, minus their debts or liabilities, such as bankruptcies.
Proposition 4:
Allows the state to spend $18 billion on property tax cuts for homeowners and businesses, cut school districts’ tax rates and enact other tax changes. The package would send $7.1 billion to school districts so they can lower their property tax rates. School district taxes make up the bulk of a Texas property owner’s tax bill. The amendment would also raise the state’s school district homestead exemption — or the slice of a home’s value that can’t be taxed to pay for public schools — from $40,000 to $100,000.
Proposition 5:
Authorizes the state to create the Texas University Fund, a $3.9 billion endowment to help “emerging” research universities across the state enhance their capabilities. The university fund would gain the annual interest income, dividends and investment earnings from Texas’ rainy day fund.
Proposition 6:
Creating a water fund administered by the Texas Water Development Board to support a wide range of projects including fixing Texas’ aging, deteriorating pipes, acquiring more water sources and mitigating water loss.
Proposition 7:
Creating an energy fund allowing officials to distribute loans and grants to companies with the aim of building new natural gas-fueled power plants. This would include giving a 3% interest loan for the construction of or upgrades to gas-fueled power plants on the state’s main electric grid and paying a bonus for getting new plants connected by June 2029.
Proposition 8:
Creating an broadband infrastructure fund where $1.5 billion would be allocated to expand internet availability in Texas, where some 7 million people currently lack access. These dollars would help pay to develop and finance broadband and telecommunications services as well as 911 services.
Proposition 9:
Provides some retired Texas teachers with cost-of-living raises to their monthly pension checks. For some, this is the first raise they will see in almost 20 years. But to afford these raises, lawmakers need to ask voters to allow them to use $3.3 billion from the general revenue fund and move it to the retired teachers fund.
Proposition 10:
Exempts school districts, cities and counties from collecting property taxes on the value of equipment and inventory held by medical and biomedical product manufacturers. This amendment would exempt those taxes from a facility’s overall property values. The new exemption would cost school districts some $207 million in estimated revenue over the next five years, according to a financial analysis.
Proposition 11:
Permits conservation and reclamation districts in El Paso County to issue bonds supported by property taxes to fund recreational development and improvement. Eleven other Texas counties are already authorized to do this. Conservation and reclamation districts aid in managing stormwater storage, land irrigation and the conservation and development of forests within their designated boundaries.
Proposition 12:
Abolishes Galveston County’s office of the county treasurer, an office that exists in other Texas counties. The office’s current role is to act as a bank for the county, which includes overseeing county investments, maintaining records of deposits and withdrawals and ensuring the safety of county funds. The Commissioner’s Court of Galveston County would be allowed to employ or contract an existing county official or other qualified person to complete tasks previously under the office.
Proposition 13:
Increases the mandatory retirement age for state judges from 75 to 79 and the minimum retirement age from 70 to 75. Legal groups advocating for the change argued that more people are working later into their careers than previous generations.
Proposition 14:
Creating a centennial parks conservation fund to invest more than $1 billion to create and improve state parks. Texas ranks 35th in the nation for state park acreage per capita, according to a report by Environment Texas. This pressured lawmakers to propose investing more than $1 billion for state parks, which advocates said would create “a new golden age” for the park system.
HELENA — Across Montana, residents are starting to see their official property tax bills – for the first time since a spike in assessed property values, announced earlier this year.
As property taxes remain top-of-mind for many Montanans, the state Legislature’s Revenue Interim Committee is in the midst of studying the issue. During a meeting Thursday, lawmakers talked about their own tax bills – specifically how the increases in taxes compared to the increases in their properties’ taxable values.
That comparison varied significantly. Sen. Greg Hertz, R-Polson, said he has properties in Flathead and Sanders Counties that rose more than 40% in taxable value, but saw tax increases of 3% and 18% respectively. Sen. Becky Beard, R-Elliston, said her home in Powell County rose 46% in value, but her tax liability increased by 59%.
“What is becoming apparent, I think to everybody, is if your property went up 40%, 43%, that doesn’t necessarily equate to your taxes going up,” Hertz said. “In fact, from county to county, there are significant differences in how much tax bills went up, and I think that points to the direction as to what’s going on in that particular county, what local budgets are happening, what’s going on with other taxable values.”
In many cases, property taxes didn’t rise as much as taxable values did because local governments reduced how many mills they assessed on each property as the value of a single mill rose. However, the value of one mill depends on all classes of property – including things like agricultural land, forest land, mines and utilities, as well as residential and commercial property – so a drop in taxable value in those classes could lead to a higher share of the tax burden landing on residential property.
In addition, 49 counties voted to charge only 77.9 mills for school equalization funding, instead of 95 as in previous years, as part of an ongoing dispute between the state and counties that’s likely to be resolved in court.
During Thursday’s meeting, lawmakers talked about the challenges of comparing property tax data across counties, since they don’t all use the same systems.
“We need something that’s more uniform, understandable,” said Rep. Paul Fielder, R-Thompson Falls.
The committee also heard an update on the tax rebates that went out to Montana taxpayers this year. The Legislature approved up to $1,250 per individual in income tax rebates, and up to $675 each of the next two years in property tax rebates on Montana homeowners’ primary residences.
The Montana Department of Revenue reported issuing more than 467,000 income tax rebates, for a total of more than $482 million. Property owners had to file an application to claim the property tax rebate. Revenue leaders said they received more than 227,000 applications and approved almost 216,000, for a total of more than $141 million.
During the legislative session, an initial fiscal analysis said roughly 290,000 property owners might be eligible for the property tax rebate. On Thursday, Derek Bell, administrator of Revenue’s Business and Income Taxes Division, told lawmakers the department now believes that estimate was too high. He said it was based on a U.S. Census estimate of owner-occupied residences in the state, but that that number likely included some ineligible properties – like those owned by entities instead of individuals, people who own multiple properties, and those who didn’t live at the home long enough to qualify.
“We think we don’t have a perfect number, and to be honest with you, I don’t know that we ever will have a perfect number, but our suspicion is that 230,000 is probably pretty close to where we think we should be – and again, we’ve received 227,000 applications today,” Bell said.
Bell told lawmakers he’s proud of the work department employees did to help Montanans with questions about the rebates.
While the state released all the income tax rebates at once, the second half of the property tax rebates will come out next year. Bell said Revenue leaders plan to look over the data from this year’s rebates and see what went well and what they can improve on in the application and outreach procedures.
“It’s important for us that as we go into next rebate season, we build our successes and then we work on the things that we need to work on,” he said.
BUTTE — It’s Halloween and Butte-Silver Bow set up a spook house for the kids at the County Courthouse. It’s also the day Butte’s chief executive sent out a letter on another scary issue: increased property taxes. Something he says falls on the shoulders of the governor’s office and the state legislature, but he’s trying to handle this scary issue locally.
“I’m not trying to pick a fight with the governor, but the governor has said that local governments are the cause of the property taxes going up and that’s simply not true,” said Butte Chief Executive J.P. Gallagher.
With home appraisals seeing an average increase of 35 percent, Gallagher said local governments can’t raise property taxes that high. He claims the state could have taken action to lower the tax rate and offset the property tax increase.
“The state could have taken that upon themselves to help property owners and they chose not to make that decrease,” said Gallagher.
A state legislator said lower tax rates would have shifted the tax burden to small businesses.
“The impact to small businesses would have been enormous. The next biggest impact would have been the ag producers. If we’re talking statewide averages, it would have wiped out commercial small businesses,” said Rep. Llew Jones (R-Conrad.)
Gallagher is cutting property tax revenue by cutting $3.5 million from Butte’s 2024 budget. Governor Greg Gianforte said he’s addressing rising property taxes by proposing up to $2,000 in property tax rebates for Montana homeowners, and delivered $120 million in permanent, long-term property tax relief over the next two years.
“There are solutions, but they are not simplistic solutions and you aren’t going to calculate them in a day,” said Jones.
Still, Gallagher puts the problem on the shoulders of the Legislature.
“Hopefully the Legislative Session will go back in a year and a half and correct the tax burden that they kept on the taxpayers,” Gallagher said.
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Facing some of the highest property taxes in the nation, Texas voters could sign off on a massive tax-cut package in the Nov. 7 constitutional amendment election.
Early voting is under way for the slew of proposed amendments. Proposition 4 would allow the state to spend $18 billion on property tax cuts for homeowners and businesses, cut school districts’ tax rates and enact other tax changes.
Whether Texas can afford those tax cuts in the long term remains unanswered. Lawmakers tapped a record $33 billion surplus this year, fueled by the state’s robust economic growth and federal COVID-19 relief money, to cover an increase in the state’s contribution to public schools, a shared cost between the state and school districts.
Republican tax-cut warriors have heralded the tax-cut package, which gained bipartisan support in both chambers of the Texas Legislature, as unprecedented tax relief for homeowners and business owners. Public education advocates, meanwhile, warn that the proposal could imperil public school funding and lead to future school budget cuts. And renters would see no direct tax relief should the constitutional amendment pass.
The entire property tax-cut package is $18 billion altogether, but it includes $5.3 billion in cuts lawmakers approved in prior years. If voters approve the constitutional amendment, the state would send $12.7 billion to school districts so they could pay for new cuts to their property tax collections, which make up the bulk of landowners’ property tax bills. Of that, $5.6 billion will go toward more than doubling Texas’ main tax break for homeowners — the state’s homestead exemption on school district taxes, or the chunk of a home’s value that can’t be taxed to pay for public schools. The constitutional amendment would raise the exemption from $40,000 to $100,000.
The rest of that money — some $7.1 billion — will go toward paying school districts to lower their tax rates by replacing local property tax dollars with state sales tax revenue, a tax-cut method lawmakers refer to as “compression.” Doing that would lower the tax rate school districts use to pay for operating costs, like teacher salaries, by 10.7 cents per every $100 of property value.
Together, those measures will translate to major tax savings for Texas homeowners, proponents argue.
Had the ballot measure been in place last year, the owner of a home appraised at the state’s median sales price — $340,000 — paying the average school tax rate would have spent about $940 less on their property tax bill, according to a Texas Tribune analysis. That comes out to a little less than $80 a month.
State Sen. Paul Bettencourt, a Houston-area Republican and Lt. Gov. Dan Patrick’s chief lieutenant on property taxes, said homeowners can expect bigger savings in the next few years. The typical Texas homeowner could see more than $2,500 in tax savings the first two years, according to figures provided by his office.
“It’s their money coming back to them,” Bettencourt said. “That’s what should happen when the government has a surplus.”
Cutting Texans’ property taxes was a top priority this year for Republican lawmakers, who pledged to use a record state surplus to deliver relief to taxpayers. After months of GOP infighting over how to achieve those cuts, state lawmakers sent Gov. Greg Abbott a $12.7 billion tax-cut proposal in July. Abbott signed the proposal into law, but voters have the final say in whether to cut their own taxes.
Public education advocates worry that, in the event of an economic downturn, sales tax dollars would dry up — leading to budget cuts at the state level and leaving school districts in the lurch.
“That’s going to put our schools on a pogo stick that’s going to jump up and down with the economy and have no stability,” said Chandra Villanueva, director of policy and advocacy at the left-leaning Every Texan.
Republican lawmakers are betting that the state’s massive economic growth will allow them to maintain the cuts for the time being. Texas Comptroller Glenn Hegar recently projected that Texas would avoid a recession and have an $18 billion surplus when lawmakers return to Austin in January 2025.
“I’m quite confident that for the foreseeable future, we’ll be fine,” Bettencourt said.
But Bettencourt acknowledged that lawmakers would have to revisit the cuts if the Texas economy takes a turn for the worse — though the boost in the homestead exemption would have to remain, given that it would be written into the state’s constitution.
Beyond explicit tax cuts, the package includes other tax reforms.
For the first time, some businesses will see a limit on how much their appraised property values, a key factor in the equation of how property tax bills get calculated, can grow each year. Homeowners already benefit from a 10% cap on how much their taxable home value can grow each year. But businesses currently don’t have such a cap.
The new cap would apply to commercial, mineral and residential properties that don’t receive a homestead exemption — like rental homes and apartment buildings — that are appraised at less than $5 million. Should voters greenlight the proposition, appraisal districts could not raise the taxable value of those properties by more than 20% each year for the next three years. The cap would expire in 2026 unless lawmakers and voters decide to extend it.
Tax policy experts have doubted the effectiveness of such a cap. Property values surged in 2022 amid the state’s exploding population and job growth, according to figures provided by the comptroller’s office. But outside of 2022, that kind of value growth wasn’t typical for most types of properties, even as Texas boomed over the past decade. Owners of commercial properties in 2022 saw the market value of their holdings grow by 15% on average — short of the 20% cap.
If those property owners saw their values hit the 20% limit each year, local governments and school districts could just raise their tax rate to make up for revenue lost to lower property appraisals, said Lynn Krebs, a research economist at the Texas Real Estate Research Center at Texas A&M University — resulting in higher tax rates for all property owners.
“We tend to look at it just on face value and say, ‘Hey, we’re not going to make you pay tax on more than a 20% increase, isn’t that wonderful?’” Krebs said. “What does that mean in reality for everybody else? It means that they’re going to have to pay more to make up for that loss in revenue. The revenue is going to come from somewhere.”
The proposition would also exempt more businesses from having to pay the state’s franchise tax. If approved, the amendment would also allow voters to handpick three members to serve on their local appraisal district’s board of directors. Currently, people are appointed to those posts.
The tax-cut package before Texas voters notably leaves out a key class of Texas taxpayers: renters.
Renters make up more than one-third of the state’s households and pay one-quarter of the state’s school property taxes through their monthly rent, according to the comptroller’s office. With high rents across the state, tenants spend significantly more of their household income on keeping a roof over their heads than homeowners. Seventeen states and the District of Columbia have tax-cut programs aimed at providing property tax relief to renters, particularly seniors and low-income tenants.
But GOP lawmakers ultimately excluded any direct relief for renters when crafting the tax-cut package before Texas voters. Tax-cut proponents have occasionally argued that renters benefit from tax rate compression because their landlords won’t charge as much in rent if their taxes aren’t as high. Though property taxes make up about 20% of the rent bill, they’re not the only factor in determining rents — which are ultimately determined by the market.
“Legislators, at this point, don’t feel enough pressure yet to provide solutions for renters,” said Ben Martin, research director for Texas Housers, a housing advocacy group for low-income Texans. “Until legislators feel that pressure heat up to provide solutions for renters, it’s not surprising that they’re not going to do anything. But the data is really clear: That’’s where the need is.”
Disclosure: Every Texan and Texas A&M University have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
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According to the Census Bureau, the U.S. homeownership rate has
consistently hovered around 66% for some time, but this does not
mean purchasing a home—rather than renting—is the right
choice for everyone. The decision to rent or buy is one that can
cause heated debates, and while the American Dream was to own a
house with a white picket fence, that may not be the American Dream
for people today. With that being said, both options carry
significant pros and cons worth considering.
BUYING PROS AND CONS
Assuming you have the financial wherewithal (meaning sufficient
funds for a down payment, closing costs and insurance, for
starters), buying a home can bring several advantages,
including:
- Equity Building: A home purchase is an investment that pays off
through the accumulation of equity as you whittle down the mortgage
and, hopefully, the property value increases. You can tap equity
throughout the life of the mortgage by refinancing or obtaining
home equity loans or lines of credit. - Stability: As long as you keep up with your mortgage and
property taxes, you generally do not have to worry about
eviction. - Full Control over Home Improvements and Upgrades: You can make
your home your own. If you want to renovate or choose less
traditional paint colors and such, you have that freedom. - Tax Benefits: Homeowners can claim federal income tax
deductions that renters cannot. If you itemize, you are allowed to
deduct both your mortgage interest and property taxes.
On the other side of the coin, potential drawbacks include:
- Deduction Limits: Your deduction for state and local taxes like
property taxes is limited to $10,000 per year. You generally are
permitted to deduct mortgage interest on only the first $750,000 of
your debt. - Unexpected Costs: Homeowners incur a wide range of expenses.
You can budget for many (for example, landscaping, insurance and
HOA dues), but it is also on you when appliances break down, the
roof springs a leak or the HOA imposes a special assessment. - Price Fluctuations: If the market is strong in your area, home
prices might not be within your reach. Or you could overextend
yourself to land that dream home. Similarly, rising interest rates
could make a mortgage unaffordable. - Selling Your Home: If your circumstances change, you may find
it hard to sell your home at the price you desire.
Related Read: Five Immediate Factors to Consider Before Buying
That Real Estate “Bargain”
RENTING PROS AND CONS
Renting is often dismissed as throwing away money, but that is
an inaccurate characterization — you receive the benefit of
housing for your money. Other potential benefits include:
- Flexibility: Renting means you are much less tied down. You can
move homes or geographic areas more easily. - Lower Barriers to Entry: First and last month’s rent, plus
a healthy security deposit, can seem daunting, but it is
substantially less than the 20% down payment sometimes necessary to
avoid the private mortgage insurance requirement. The credit rating
requirements are less strict to rent than buy, too. - Predictable Costs: You know how much your housing expenses will
be every month. You will not have to cover unexpected repairs or
maintenance, or shoulder property tax increases or higher payments
on adjustable-rate mortgages. - Free Time: Renters do not have to spend time mowing the lawn or
researching plumbers. They do not have an endless list of
home-related projects hanging over them.
But renting is not without its disadvantages, such as:
- Sunk Costs: While you do get housing for your rent payment, you
also miss out on equity. You do not earn any financial
“return” on your investment. - Less Stability: With greater flexibility comes less stability.
Your landlord can decide not to renew your lease, sell the property
or convert it to condos, sometimes with relatively little
notice. - Potential Rent Hikes: Landlords also can raise your rent every
lease period (subject to any rent control restrictions), and they
generally do not take into account your income and other expenses,
so an increase could prove beyond your means. - Limited Improvements: Any improvements you make to a rental
likely will require approval and definitely will remain with the
landlord when you move.
ADDITIONAL FACTORS
Some questions you may want to ask yourself include:
- What can I realistically afford while taking into account my
income and other expenses? - How long do I plan to live here?
- What kind of loan do I qualify for?
- What are the property taxes like?
- Do I want the responsibilities that come with owning a
home?
The considerations above are not the only relevant factors.
Location, lifestyle preferences and personal goals also can affect
your decision.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Real Estate and Construction from United States
At the behest of teachers unions, Colorado Democrats repealed state protections against rising property taxes in 2020. Now, just three years later, outraged voters are demanding property tax relief.
But instead of reinstituting the old property tax protections that had worked for decades, Democrats have come up with a new plan: It’s called Proposition HH, and it would essentially repeal the state’s Taxpayer Bill of Rights spending limits, giving Democrats the ability to tax and spend to their hearts delight.
Passed in 1982, Colorado’s Taxpayer Bill of Rights set a limit on how high Colorado spending could rise each year based on the prior year’s spending limit, plus inflation, plus population growth. Under the state constitution, any tax revenue raised beyond this limit is automatically refunded to taxpayers each year. In 2022, for example, TABOR returned every taxpayer $750 in the form of a check from the government; joint filers received $1,500.
Using the drop in local tax revenue during the COVID shutdowns as an excuse, Democrats and their teachers union allies in 2020 pushed through a repeal of Colorado’s long-standing property tax protections, more commonly known in the state as the Gallagher Amendment. It is estimated the amendment saved Colorado property owners $35 billion since 1983.
With the Gallagher Amendment protections gone, however, Colorado homeowners have seen their tax bills skyrocket and they want change now. But the Democrats who control the governor’s mansion and the General Assembly are ideologically incapable of returning tax dollars to citizens.
Instead of reinstituting the Gallagher Amendment, which successfully protected property owners for decades, Democrats have placed a slickly worded proposition on the ballot that sounds like a tax cut, but is really a tax hike. Here is what the proposition says:
“Shall the state reduce property taxes for homes and businesses, including expanding property tax relief for seniors, and backfill counties, water districts, fire districts, ambulance and hospital districts, and other local governments and fund school districts by using a portion of the state surplus up to the proposition HH cap as defined in this measure.”
It is deliberately confusing and deceptive. When the proposition says “by using a portion of the state surplus,” what it means is that no Colorado taxpayer will ever see a tax refund check again. Proposition HH repeals Colorado’s Taxpayer Bill of Rights by turning what was a taxpayer refund into a slush fund for Democrats’ spending priorities.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
This is why Proposition HH is being bankrolled by the Colorado Education Association and far-left dark money groups such as the Sixteen Thirty Fund.
Colorado has historically been one of the least taxed states, which is a big reason why it has enjoyed above-average economic and population growth. Proposition HH would change all that, dooming Colorado to slow economic growth and a California-like future.
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ALPINE — For the Alpine Independent School District, being $200,000 short of a balanced budget this school year meant dipping into its savings again. It meant one more year of using plywood sheets to separate classrooms in its elementary school and looking for cheap parts on eBay to fix the middle school’s aging fire alarm system.
The yawning gap between the money the small West Texas school district needs and the funds it gets could lead to bankruptcy in a few years, Superintendent Michelle Rinehart said.
“That math doesn’t work out very well for us,” she said. “In terms of longevity, how long can you sustain that?”
Like most Texas school districts, Alpine ISD is facing critical operational challenges like stagnant student enrollment, rising operations costs and teacher shortages. But for Alpine and about 200 mostly rural districts, a kink in the state’s school funding system is worsening their financial troubles.
Whenever state and county officials disagree over local property value appraisals — which determine how much money schools should get from property taxes — school districts can end up with big holes in their budgets. It would cost the state about $700 million a year to fill those gaps in funding, said Josh Sanderson, deputy executive director of the Equity Center, which represents more than 600 school districts in the state.
The way Rinehart sees it, her district should have received about $1 million more in state funding this year. Not getting it was “a huge funding loss for us,” she said.
Lawmakers tried to temporarily address the issue during this year’s regular legislative session through an omnibus school finance proposal that would have given those school districts the money they’re missing. But the bill ultimately died as part of a dispute between the Texas Senate and House over whether to adopt a school voucher program. The session ended without a compromise on vouchers or new money for schools.
Gov. Greg Abbott is expected to call for a special session on education later this year, but it’s unclear whether helping these districts will be part of the agenda.
“It’s a problem that the Legislature could solve and only they can solve,” Rinehart said.
Texas’ pursuit of equitable school funding backfires
Texas guarantees every school district receives a certain amount of funding for each student they have, which is currently $6,160. Districts receive additional money if a student is bilingual, comes from a low-income family, attends special education classes or has certain other educational needs.
To cover their base budgets, districts are required to first raise the money through local property taxes. The state then gives school districts additional money based on the demographics of their student population.
The first step is for county appraisal districts to make an annual estimate of how much each property in school districts’ jurisdictions is worth. Property-owning Texans pay taxes based on the estimated value of their properties.
Most of those taxes usually go to pay for school districts’ maintenance and operation costs. The more money school districts get from property taxes, the smaller the state’s contribution will be, and vice versa.
But pinpointing the exact value of properties in a district is not an easy task — and problems arise when the state doesn’t agree with appraisal districts’ estimates.
Desks in a classroom at Alpine Elementary School. Students and teachers in the district’s single elementary school are still using decades-old books and furniture.
Credit:
Sarah M. Vasquez for The Texas Tribune
At least once every two years, the Texas comptroller’s office is tasked with making its own determination about the total taxable value of properties within each school district. Then, as required by law, the Texas Education Agency uses the comptroller’s figure to calculate how much state money each school district is entitled to get.
The comptroller has been double-checking appraisal districts’ estimates since the 1970s to ensure that every school district gets a fair share of state funding. In the past, the comptroller’s office says, many county appraisers were valuing property under market value, leading some school districts to receive more state funding than they were supposed to. In some cases, property-rich school districts would get larger cuts of state funding than property-poor districts that needed the money more.
Now, the comptroller’s office says the vast majority of county appraisal districts are valuing property in their jurisdiction within market value, leading to a more equitable distribution of state funds.
But the state’s effort to provide more equitable funding has had the opposite effect for school districts like Alpine, where the comptroller’s office believes property values are higher than the local appraisal district does. It’s a lose-lose situation for school districts in those cases: School districts get less state funding because the comptroller’s office believes local property taxes will cover a larger portion of their budget — but they can only levy taxes based on appraisal districts’ lower property value estimates, so they actually get less money from property taxes.
Property value estimates from the comptroller’s office sometimes differ from county appraisal districts’ figures because the comptroller’s office usually determines property values a year after local appraisal districts do their evaluations, which can allow it to gather a more complete set of data.
Most of the school districts affected by this discrepancy in property value appraisals are in small, rural areas of the state. Sanderson, with the Equity Center, said he believes this is happening because appraisal districts in rural counties tend to have fewer resources to help them estimate property values accurately, and they might be more inclined to try keeping taxes low to appease property owners in their jurisdictions, who might be unused to the steep rises in property values as population growth and housing demand have gone up in recent years.
The state gives school districts a two-year grace period in which they can continue getting state funds based on the appraisal districts’ estimates before the TEA starts using the comptroller’s figures. But school districts like Alpine find themselves in trouble if appraisal districts don’t raise their property values closer to what the state believes they should be within that time.
Mounting needs, no new money
For Rinehart at Alpine ISD, getting that extra $1 million in state funding that her local appraisal district believes her schools should get would not only let her balance the school district’s budget — it would also leave her with an $800,000 surplus that could be used to raise teachers salaries for the first time in years and renovate the district’s oldest campuses.
The district’s fuel, construction, health insurance and food service costs have steadily gone up in the last four years, Rinehart said. Students and teachers in the district’s single elementary school are still using decades-old books and furniture. The building doesn’t have a universal lock system and the key fob used to open doors doesn’t always work. Outside, the playground hasn’t been upgraded in years and it may need to shut down because the district can’t afford to put landing mats as required by state law.
Renovating the high school football field also weighs on Rinehart’s mind. The turf was installed more than 12 years ago and it’s starting to show signs of patchiness and looseness. These kinds of fields need maintenance every decade, she said.
Recent renovations have been financed through bonds, grants and donations. The school district built a new high school after a more than $20 million bond passed a couple years ago. The elementary school’s library is getting new carpet after a former student who owns a carpeting company gave the district a discount.
While bonds have helped address some funding woes, Rinehart said it would be a hard sell to ask taxpayers to put the district into debt once again after recently passing a multimillion-dollar bond.
Credit:
Sarah M. Vasquez for The Texas Tribune
Fort Davis ISD, located about 30 miles north of Alpine, has been passing deficit budgets for the last nine years. It started this school year with a $500,000 hole, and with just as much money left in the bank, Superintendent Graydon Hicks predicts the small district of fewer than 200 students will run out of money by next year.
Hicks has not given a pay raise to his teachers since 2019, and the district has been running on the minimum requirements needed to operate. It no longer has a cafeteria, or art or tech programs. Hicks said there is nothing left to cut.
In Orange Grove ISD, located about 40 miles west of Corpus Christi, Superintendent Eddie Hesseltine said his district faces the same issues. The district has had a budget deficit of $750,000 for the last two school years. Hesseltine calculates the district would have an extra $4.5 million a year if it weren’t for the difference between local and state property valuations.
Hesseltine said the situation is dire and the district could burn through its savings in the next couple of years. Substantial raises for teachers are also out of the question.
“Our people are professionals and they do a lot for our kids and I love to be able to give back but right now I’m just trying to keep the school running the day-to-day operations,” he said.
A looming special session
Abbott is expected to call lawmakers back to Austin in the upcoming months for a special session on education after one of his legislative priorities, school vouchers, didn’t get approved earlier this year.
Some legislators hope the special session will provide another chance to pass proposals public education advocates say are desperately needed, like raising teacher salaries and school funding to account for inflation.
But it’s unclear whether fixing the funding gaps created by the discrepancies between state and local appraisers’ property valuations will be part of the agenda.
Sanderson said the quickest solution would be for the state to simply cough up the cash.
“It’s really not new money that they’re giving those districts,” he said. “It’s just ensuring that those districts are getting what current law says they are entitled to.”
Rep. Gary VanDeaver, R-New Boston, a former superintendent of New Boston ISD, said the state’s efforts to make sure property values are appraised accurately help distribute state funds equitably among most school districts, but he acknowledged it’s also having unintended consequences for Alpine ISD and many other districts, including five in his rural East Texas region.
VanDeaver, a member of a special committee created by House Speaker Dade Phelan to recommend education proposals ahead of the special session, said he and several other lawmakers believe the issue needs to be addressed sooner than later. He said one possible solution could be to provide more data to local appraisal districts.
Brent South, chief appraiser for the Hunt County Appraisal District and chair of the legislative committee for the Texas Association of Appraisal Districts, said the more data that appraisal districts have, the more accurate their property valuations will be.
Getting property sales data would help, he said. In Texas, real estate agents are not required to provide sales data, something South said his organization has been advocating to change at the Legislature. But that will likely be a hard change to make.
“In Texas, we have such a high value on confidentiality, property rights and owner’s rights to not have to disclose information to the government, and I get that,” South said.
Mary Lynn Pruneda, an education policy adviser for the public policy think tank Texas 2036, said lawmakers have a chance to tackle the property valuation discrepancies in the upcoming months.
A swamp cooler is the only equipment to cool the shop room at Alpine Middle School. The yawning gap between the money the small West Texas school district needs and the funds it gets could lead to bankruptcy in a few years, Alpine ISD Superintendent Michelle Rinehart said.
Credit:
Sarah M. Vasquez for The Texas Tribune
“In crafting solutions to the problem, the state has to walk a fine line. Balancing the tensions between maintaining accurate property valuations and ensuring that districts aren’t harmed by under- or over-appraisal is a difficult one and will be the focus of much conversation this special session,” she said.
Worries also remain that the debate over school vouchers could either pull attention away from funding concerns or hold any new money hostage to the approval of a voucher program.
“How are we even talking about vouchers when we have districts like ours that aren’t even receiving their full allotment?” Rinehart said. “We should be fixing that first.”
Disclosure: Equity Center, Texas 2036 and Texas Association of Appraisal Districts have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
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Property tax bills are going up — again — for several Utahns.
You might ask: Wait, aren’t state tax laws supposed to protect against this?
Yes, but they also allow local governments to propose a higher tax rate to generate more revenue to do things like pay for new buildings or increase employee salaries.
And surging real estate prices also are hitting people right in their property tax bill.
Want to know more? Let’s break it down.
Your property tax bill is most likely going up for at least one of these two reasons:
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About 80 taxing entities across the state — from cities and towns to school districts and libraries — are seeking property tax rate hikes this year, so chances are pretty good that one or more of those increases will hit your wallet. Go online to see a table with proposed tax increases.
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The valuation of your home could be increasing your bill. Because home values are increasing more than those of commercial properties, homeowners are footing a larger portion of revenue increases.
Utah’s truth-in-taxation law limits the revenue taxing jurisdictions like cities, counties, school districts and water districts can receive. Under the law, a jurisdiction can only receive the amount of revenue it collected the year before, plus taxes from new development.
Those constraints mean tax rates automatically adjust down to offset additional revenue when property values rise.
Alta Mayor Roger Bourke said before a public hearing on the town’s proposed property tax increase that the law means officials fall behind as expenses go up — unless they change the tax rate.
If a taxing jurisdiction wants to create more revenue to pay for new services or items, officials must hold a truth-in-taxation hearing like Alta, population 216, did earlier this month.
The town at the top of Little Cottonwood Canyon proposed and passed a tax rate of 0.001043. That’s 64.25% higher than the certified tax rate and will cost the average homeowner about $425 more a year.
(Francisco Kjolseth | The Salt Lake Tribune) Alta City Clerk Jen Clancy gives a tour of the Community Center, a multiple use room on the second floor of the Alta Post Office on Tuesday, Aug. 15, 2023. Dozens of cities and towns have proposed tax hikes, and Alta hopes to use some of the money to save for a replacement building.
Though Alta’s hearing drew no public comment, the meetings usually put governing bodies in the hot seat and mean officials must explain to the public why they want to raise property tax rates.
They usually attract opposition that prevents — or at least reduces — major tax increases.
Alpine School District’s board, for example, approved a 7.8% increase after frustrated residents packed the board room and said a big increase would mean stretching budgets even more.
That was lower than the double-digit increase initially proposed. It’s also lower than last year’s rate, said Rob Smith, the district’s business administrator — though property taxes could still go up depending on a home’s valuation.
Local governments, school districts, water districts and other taxing entities have lots of reasons for bumping up property tax rates.
Alta has specifically cited a $161,000 increase in staff wages to attract and retain employees with competitive salaries.
Bourke also pointed to saving for a new community center.
Pleasant Grove voted to increase property taxes by 14.8%. That’s $56.64 more a year ($4.72 a month) for an average homeowner.
City officials went back 30 years and couldn’t find the last time Pleasant Grove increased property taxes, City Councilman Eric Jensen said.
The increased revenue will help the city add a firefighter and a library employee, increase police wages and build a new park with amenities, including a splash pad and skate park.
(Francisco Kjolseth | The Salt Lake Tribune) Dozens of cities and towns have proposed tax hikes this year. Pleasant Grove plans to use some of that money to help pay bonds funding the development of the Cook Family Park at 800 North and 600 West, pictured Tuesday, Aug. 15, 2023.
Some residents supported the entirety of the increase, while others wanted to see the park — the largest beneficiary of the revenue hike — funded another way.
One resident said he’s in favor of contributing to the city’s efforts to improve quality of life “for a fee of less than half of a Netflix account.”
Another expressed a problem in general with taxes as a burden on those with fixed incomes.
“You get your home paid off, everything’s good, you retire, and your property taxes keep on going up,” he said.
City Councilwoman Dianna Anderson said her property tax bill will go up $63 and the increase is “something that’s very real for each one of us.”
The two largest increases in the state are coming from towns with a combined population of about 1,200.
Goshen, a town of about 980 located on U.S. Highway 6 about 8 miles west of Santaquin, passed a tax increase of 198.6% and intends to use the additional revenue to buy a new fire engine for structure fires.
Wallsburg, a town of about 300 near Deer Creek State Park in Wasatch County, proposed a tax increase of 185.5%.
The notice didn’t include information about plans for the additional revenue. But a document for the public hearing said the $33,000 in additional revenue will increase the budget for street maintenance and repair, maintenance and supplies for the town hall and cemetery and increase pay for public officials and administrative staff.
There are options for homeowners to appeal the valuation of their property.
But nothing in state law automatically caps how much homeowners have to pay when residential property values increase faster than commercial property or other types.
Homeowners have until Sept. 15 to file an appeal with their county’s board of equalization. That board can agree to lower a property value for homeowners who provide a compelling basis for their appeal.
You can start the appeal process by visiting the website for your county treasurer or assessor. There’s more information about how to file an appeal available on your valuation notice.
There are still options after a rejected appeal, but they require jumping through more hoops.
The Utah State Tax Commission has a few ways of seeing if counties got property valuations right or wrong. Cases that make it to the commission have a fairly good success rate.
Homeowners can start with an informal hearing, where they tell their story, the county tells its side and a judge decides. They also can waive the informal hearing and go straight to a formal hearing.
There’s also the option of mediation, where a judge helps the homeowner and the county agree on the right property value. People who can’t reach an agreement through mediation can get a new judge and go through a formal hearing.
For people who still don’t get their desired outcome, there’s another set of options.
Homeowners can take the record from their formal hearing and send it to the Utah Supreme Court for review. They also can file the case in state district court.
There are multiple options for homeowners who simply can’t afford to pay their property tax bill.
The “circuit breaker” tax relief program is available for homeowners with low incomes. Applications are due to counties by Sept. 1.
Homeowners also can ask their county for an abatement. That process asks elected county leaders to take up to $1,110 from a tax bill for the year and requires homeowners to file a TC-90CY form with the county.
Deferral is also an option for low-income Utahns who are 75 or older the year they apply for a new program. Under this route, taxes add up each year a person defers and come out of the eventual profit from a home sale. This program also requires homeowners to apply with the county by Sept. 1.
If voters approve the new cuts, entrepreneurs who own the property their businesses occupy would see their school M&O taxes decrease by 10.7 cents per $100 valuation.
In addition, commercial properties valued at less than $5 million would be protected from excessive year-over-year value upsurges with a 20% cap on how much a property’s appraisal can go up. The cap would be in place for the next three years until lawmakers and voters decide whether to renew it.
It wouldn’t be necessary for a business to be headquartered in Texas in order to get the property tax breaks; any land it owns within the state would qualify to receive the benefits if it doesn’t exceed the value limit.
Here’s an example. A businessman in Corpus Christi saw the value of his office on a prime parcel of waterfront downtown increase by 18% from 2021 to 2022 — and then by 48% from 2022 to 2023, according to tax records. In fact, since 2019, his property has nearly doubled in value.
The property is now worth $638,000. Because that amount is under $5 million, the proposed appraisal cap would apply to his building — and it would take $123,000 off his valuation this year.
Property that doesn’t increase in value more than 20% this year won’t see any benefit from the cap.
Business owners who rent the property they use would not be able to take advantage of the proposed school tax cuts or the 20% appraisal cap, unless they are in a commercial lease that ties rent to property taxes.
But they could take advantage of some of the franchise tax savings, just like businesses that own the property they’re on.
The tax-cuts package would also double the amount of revenue a business could make before it has to start paying franchise taxes from $1.24 million in a year to $2.47 million. The move would remove roughly 67,000 additional small-to-medium businesses from the franchise tax rolls.
Businesses that don’t meet the new threshold for franchise taxes would no longer be required to file $0 tax returns, saving them administrative and labor costs.