EDUCATION

Texas Senate committee OKs proposals to lower school taxes, increase state funding share

Keri Heath
Austin American-Statesman
Sen. Paul Bettencourt looks through paperwork and talks on the phone during a hearing at the Capitol on Thursday in Austin. Bettencourt, R-Houston, introduced Senate Bills 3 and 4, which passed unanimously Wednesday out of the Senate Finance committee.

The Senate Finance committee this week approved a package of bills that could deliver $16.5 billion in property tax relief, including lowering how much Texans pay school districts, and forwarded the proposals to the full Senate for a vote.

The bills drastically cut how much Texans will pay in property taxes to local school districts and shift the financial burden to the state to make up through other means, such as sales tax.

Senate Bills 3 and 4, both introduced by Sen. Paul Bettencourt, R-Houston, passed unanimously Wednesday out of the Senate Finance committee.

SB 3 increases the homestead exemption for school district taxes from $40,000 to $70,000 and increases the extra homestead exemption for disabled and elderly people from $10,000 to $30,000, according to the bill.

A homestead exemption reduces the value of a home that may be taxed and applies to the property in which the owner lives.

SB 4 lowers the tax rate school districts can levy by about 7 cents, according to the bill. If applied to a home with a $70,000 exemption, the measure would save the average household $756 the first year and $798 in every other year.

This year, districts can set a maximum base property tax rate of $0.8941 per $100 of valuation. Districts can also add tax rates to cover bond debt or other things.

That maximum base tax rate is slated to drop to $0.8052 per $100 of valuation in the 2023-2024 academic year. If the proposed bills pass, that maximum rate will drop an additional 7 cents, according to the bill.

“This type of tax relief is just unprecedented,” Bettencourt said.

This type of compression will likely push school district property tax rates down to a range roughly between 70 and 75 cents per $100 valuation, said Dale Craymer, president of the Texas Taxpayers and Research Association, during the Senate Finance committee hearing Wednesday.

“There is no denying the fact that our school rates by 2025 will be half what they were at their previous peak and that is a tremendous accomplishment,” Craymer said.

The last time Texans received a direct cut to their school-related property tax rates was in 2019, when the Legislature approved House Bill 3, which lowered district tax rates by 20 cents over about four years.

The lower tax rates saved Texans collectively about $7.6 billion, according to estimates from the business-backed taxpayers association.

While Texans will be paying less to local schools, districts shouldn’t notice a change in their revenue, Bettencourt said. Instead, the state will step in to make up for whatever money the district may lose, he said.

“It dramatically raises the state share, of course,” Bettencourt said.

In districts like Austin — where the district collects more from local taxes than the state determined it needs to educate its students — administrators will have to send less money back to the state through its recapture program, or the mechanism in place meant to support school districts with less property wealth per student, because the district will ultimately collect less revenue from property owners, he said.

The state will cover the extra funding for schools through sales taxes and other non-property forms of taxes, Bettencourt said.

“It’s coming from increased general revenues,” Bettencourt said. “We believe its sustainable.”

House Bill 2, proposed by Rep. Morgan Myer, R-Dallas, and other lawmakers, provides similar tax relief as in SB 4.

Bettencourt’s proposed legislative package also include SB 5, which provides tax relief to business owners by allowing them to write off $25,000 from business-related property.  

Bettencourt's three bills aren’t yet a done deal. They have to get approval from the full Senate and House chambers.

Because the bills require constitutional amendments, voters would then have the final say on Bettencourt's proposals.