TALL ORDER: Property tax relief, hike in school funding a difficult balance
AUSTIN — Mary Nethery used to complain when the yearly property tax bill hit $5,000 for her 1,900square-foot home in San Antonio. Now it’s pushing $9,000.
In recent years, Nethery and other homeowners have shouldered an increasing burden for funding public schools in Texas, where property taxes climbed to the sixth-highest in the nation.
Now a Republicanbacked plan to tamp down those escalating tax bills could save Texas homeowners an average of $326 a year by placing strict limits on year-over-year tax increases for school districts across the state, according to a data analysis by Hearst Newspapers.
Homeowners in the San Antonio school district, where Nethery lives, would save an average of $247 a year over nine years, the analysis shows. Those with more expensive homes would save even more.
But the tax reform also means siphoning tens of billions of dollars away from schools as the taxpayer savings and the lost education funding continue to grow over time. The Hearst analysis shows that if the plan were implemented in 2008, later there would have been $7 billion less annual revenue for schools statewide in 2017.
It is unclear how the state would make up for those lost dollars. The tax plan’s author, Gov. Greg Abbott, has proposed tapping oil and gas tax revenues. A special committee floated increasing gas or alcohol taxes, though those ideas are unlikely to gain momentum in the Republican-controlled Legislature.
Democrats say the governor’s tax plan could derail efforts to increase funding for education, another priority.
The stakes are high for lawmakers to find a solution this year. The legislative session comes as the Republican majority itches to give voters meaningful tax relief ahead of the 2020 elections.
Senate Education Committee Chairman Larry Taylor, R-Friendswood, rejects the notion that education will take a back seat to property tax reform.
“This isn’t just tinkering around the edges. This is going to be a major school finance reform the likes of which you only see every 30 or 40 years,” said Taylor.
However, taxpayers are overburdened and the state has limited funds to fix that, he said. Lawmakers will have to figure out how to get more bang for their bucks, he said, such as reallocating how money is spent in schools.
Nethery, a design consultant in San Antonio, bought her home for $80,000 in the King William neighborhood in 1990 and never expected her property taxes to climb so high. But the prized historic neighborhood is in the city’s now trendy Southtown, and taxes are climbing to fund the nearby school district; she fears future bills will soon hit $11,000 unless something changes.
“This is my forever house, and I plan to live a long time,” said Nethery, 60. “It’s very disheartening.”
Savings for Houstonians
The Hearst analysis of historical data offers a first glimpse at the tax relief homeowners might see from the governor’s plan and how capping property taxes would alter school funding.
The cornerstone of Abbott’s plan is placing a 2.5 percent cap on year-over year increases to the property tax revenue districts collect for maintenance and operations. Under current law, districts can collect up to 8 percent more property tax revenue each year without going to voters to ask for the increase.
Money collected for maintenance and operations is the primary source of funding for school districts, contributing to teacher’s salaries, electricity, security and other costs to run schools.
For the analysis, Hearst Newspapers calculated a decade’s worth of tax bills for homeowners in more than 1,000 Texas school districts based on a home value of $200,000 in 2008.
The analysis does not consider school tax increases related to bond issues, or taxes collected by cities and counties.
It found that homeowners would save the most in districts where property values grow substantially year over year.
Homeowners who live in Houston Independent School District, for example, would have saved an estimated $3,622 on their property taxes — over $400 a year — by 2017 had Abbott’s tax plan been enacted in 2008.
Over the same nine-year period, school districts in Harris County would have collectively faced a $6.6 billion shortfall without additional state aid.
Some findings of the Hearst analysis echo findings from the Texas Education Agency, which projects Abbott’s plan would result in $3 billion less in property tax revenue for schools by 2023. The Hearst Newspaper analysis looked at the impact over a longer period of time and found school districts would have collected a total of $43 billion less in revenue had the governor’s plan been implemented in 2008.
Lawmakers failed to approve a similar property tax relief plan in 2017. That proposal would have required voters to approve significant city and county property tax increases. The bill died amid haggling between the House and Senate over how high a property tax increase should warrant an election: 4 percent or 6 percent.
Abbott’s plan to limit property tax growth to 2.5 percent is far more conservative.
“It is a much more restrictive plan. The challenge is ‘can the governor sell that?’ ” said Dale Craymer, president of the Texas Taxpayers and Researcher Association, a nonprofit group made up of business and trade associations. “It is a steep uphill climb.”
‘A big question’
Abbott and lawmakers in both parties say they will prioritize property tax relief and reform how Texas funds schools. However some say the governor’s plan would favor tax relief and derail efforts to pump more money into schools.
Besides covering the gap in funding, it would take an even bigger investment from the state to boost teachers salaries, institute full-day prekindergarten, increase funding per student or any of the other myriad changes that lawmakers are proposing to better prepare children for college and careers. Texas has no state income tax.
“This is the part where we open the hood and start to try to do some real work. If something doesn’t work, hopefully we toss it aside,” said Rep. Diego Bernal, a San Antonio Democrat. “I don’t think that anyone imagines that we’d undertake an effort that leaves districts worse off.”
Abbott has said the state needs to spend more money on education and has pledged, “This session, we will do just that.”
Abbott’s office declined to comment about the Hearst analysis without doing its own review of the data used.
Texas educates 5.3 million students, roughly 10 percent of the nation’s public schoolchildren.
As school districts rely increasingly on property taxes, lawmakers have cut the state’s contribution to education. The state is projected to chip in 38 percent of school districts’ costs this year, down from 46 percent in 2012, leaving local property tax payers to make up the difference.
“I believe people are being distracted by the focus that’s being placed on property tax caps, as if that is the answer as opposed to how property taxes have been allowed to supplant what the state had historically been putting in to public education,” said Rep. Donna Howard, a Democrat from Austin. “Without the state putting more in, it has hogtied the local school districts from being able to provide any property tax relief because there’s no guarantee that they would have that gap filled by the state.”
The Hearst analysis found that homeowners in Clear Creek ISD would have saved around $1,378 in property taxes since 2008 had the state implemented the tax cap a decade ago. Under the plan, the district would have collected $263 million less to fund school operations over that time.
“I wonder if that can be sustained. That’s a big question. I don’t know if that’s sustainable,” said Greg Smith, president-elect of the Texas Association of School Administrators and Clear Creek ISD superintendent, responsible for more than 42,000 students.
He predicted the loss of money without additional aid from the state would raise the ire of residents, parents and homeowners in his area who expect a lot out of their public education system.
“I’ve got to make sure we’re able to keep up,” he said.