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Texas House approves property tax reform bill, setting up negotiations with the Senate

The Texas House gave preliminary approval to a priority property tax reform package Tuesday, teeing the chamber up for negotiations with the Senate, and impelling the opposite chamber to act on an omnibus school finance measure.

Together, the education and tax overhaul bills have been the top policy issues of the 2019 legislative session, and they are ultimately expected to be ironed out behind the scenes — and perhaps simultaneously.

Tuesday’s vote marks a small milestone for House leadership, which has muscled its must-pass budget, public education and tax reform bills to passage, all before the last month of session begins. But the House and Senate will next need to reconcile notable differences between the three measures, and the upper chamber has yet to move the school finance bill out of committee.

Senate Bill 2 was approved on a 107-40 margin after a half-dozen hours of debate. Several Democratic lawmakers broke party ranks to support the measure, which has garnered adamant opposition from city and county officials since its introduction.

A top imperative for state leaders, SB 2 offers wholesale reforms to the property tax system, and limits the ability of cities, counties and other taxing units to raise property tax revenue. As passed, it forces cities, counties and emergency service districts to hold an election before raising 3.5% more property tax revenue than the previous year. Hospitals and community colleges have an 8% election trigger in the version passed by the House.

“Texas taxpayers are frustrated by rising property taxes. They’re often confused by the process and many are scared of losing their homes,” said state Rep. Dustin Burrows, the bill’s author and chair of the tax-writing Ways and Means Committee. While the bill makes the tax process more transparent, “it does not lower anyone’s property taxes.”

“It was never designed to do that and I’ve never promised anyone that it did,” said Burrows, a Lubbock Republican.

Few attempts to make major changes to the bill were successful Tuesday.

One amendment, from state Rep. Charlie Geren, R-Fort Worth, seems to bar anyone but licensed attorneys from representing taxpayers in the property tax appeal process on a contingency fee basis. The change would likely affect the author of SB 2, state Sen. Paul Bettencourt, a Houston Republican and a property tax consultant.

“It affects a lot of people. We’ll talk about it in conference,” Geren said. He added, “I don’t believe in contingency fees, but if we have to have contingency fees to do this, then I want the lawyers to do that.”

Another change lets taxing units factor indigent healthcare costs into their revenue growth calculations.

Texas’ top Republicans, including Gov. Greg Abbott and the leaders of each chamber of the Legislature, have pushed for property tax and school finance reform since the beginning of the session, though the Senate and House have respectively prioritized one over the other, if ever so slightly. Movement on both pieces of legislation slowed down this month, as both chambers eyed each other warily and waited for the other to move on their priorities.

House leaders have indicated that they believe property tax reform legislation should run on a parallel track with the school finance bill, since the issues are so closely intertwined. Ahead of Tuesday’s debate on Senate Bill 2, Speaker Dennis Bonnen, R-Angleton, told the two party caucuses in separate meetings as such — signaling that the House won’t act any further on property tax reform negotiations until a school finance bill is passed by the Senate, according to multiple people with knowledge of the meetings.

House leaders have also reworked the property tax bill to make it contingent on school finance reform passing.

But state Sen. Larry Taylor, R-Friendswood, said earlier Tuesday that the Senate Education Committee he chairs would likely not vote out the school finance bill until this Thursday, if not next Tuesday. He rejected suggestions Tuesday that he was slow-walking the legislation for political purposes.

“It’s just hard,” he told The Texas Tribune, referring to the technical changes necessary before the legislation, House Bill 3, can be voted out of his committee.

Meanwhile, there are few differences between the House’s version of the property tax package, and the bill passed by the Senate earlier this month. Perhaps the most significant point, is that the House offers community colleges and hospitals an 8% election trigger, while the Senate has reduced them to 3.5%.

In addition, the Senate had required voters in small taxing units — those that bring in less than $15 million combined sales and property tax revenue — to opt in to some of the bill’s provisions. The House’s revision eliminated that provision, and inserted a new allowance to let all taxing units increase their property tax levy by $500,000 without triggering an election.
The Senate also permitted the costs of providing indigent people defense lawyers to be factored into the revenue growth calculation. The House removed that language, but included a similar clause that protects cities and counties from being penalized if they offer homestead exemptions to their residents.

Finally, the lower chamber’s version includes a provision that lets taxing units bank unused revenue growth for five years, allowing them to surpass the 3.5% trigger in some of them.
Currently, cities, counties and other taxing units can raise 8% more property tax revenue before their voters can petition for an election to roll back the increase. SB 2 would make those elections automatic, and make a battery of reforms designed to increase transparency and utility for taxpayers.

State leaders had said property tax reform is necessary to protect Texans whose property tax bills are growing faster than their incomes. Abbott has said on Twitter that “skyrocketing property taxes must be fixed,” and that a previous increase to the homestead exemption was quickly “eroded by rising appraisals and rates.”
But Democrats and ultra-conservative lawmakers have clamored for weeks over how much control the state should exercise over local property tax revenue growth, and whether the bill should include school districts.

Schools levy the bulk of property taxes across Texas, and ultra-conservative lawmakers and activists have argued property owners will feel no relief if schools are exempted from the bill.
The House had initially tried to strip schools from the measure, saying their school finance bill, HB 3, was the appropriate vehicle. Burrows later reinserted schools into the property tax measure — with the caveat that it was a symbolic move that does “absolutely nothing” in practice.

“If we’re going to have property tax reform, we can’t do it with just cities and counties. We also have to do it for school districts,” Burrows said, referencing HB 3. But he said those changes need to be made in the state’s education code, not the tax code.

An attempt to decouple the property tax bill from the school finance legislations Tuesday earned an impassioned rebuke from Burrows and state Rep. Dan Huberty, a Houston Republican and the author of the school finance bill.

“Mr. Speaker, members, listen up, I think this is a very important vote coming up,” Burrows said, after state Rep. Jonathan Stickland, R-Bedford, introduced his proposal.

After Huberty and Burrows suggested passage of both bills was critical to meet the House priorities laid at the start of the session, the amendment sank on an 143-5 margin. Even the Speaker took the rare step of casting a vote in opposition.

The most consistent opponents of the property tax reform effort have been Democrats and city and county officials, who have asked for a higher election trigger or for certain costs to be exempted from the calculation.

Efforts to exclude public safety expenses, economic development expenditures, and spending on flood risk mitigation from the revenue growth calculation all failed to progress Tuesday.
City mayors have maintained the bill imposes an election trigger that is not practicable.
The Fort Worth mayor, Betsy Price, said a “a 3.5% revenue cap would create unintended consequences,” and would “hamstring cities” without providing meaningful tax relief to residents.

Sylvester Turner, the mayor of Houston, which already operates under a revenue cap, also said the proposal would have little impact on taxpayers’ bills.

“Last year, revenue caps saved the average Houston homeowner less than $10 a month,” he said, “and resulted in 1,152 fewer police on the street.”

Cassi Pollock and Aliyya Swaby contributed reporting.

This story originally appeared on the Texas Tribune. To read this article in its original format, click here.

Shannon Najmabadi, The Texas Tribune
Shannon Najmabadi, The Texas Tribune
Shannon Najmabadi is the higher education reporter at The Texas Tribune.


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