Texas Legislature’s Tax Rate Shuffle: Who Will Pay The Price For School Funding?

Education policy experts in Texas are voicing concerns over the possible long-term repercussions of property tax cuts proposed by the Republican-led state Legislature. While the aim of these cuts is to alleviate the financial burden on local school districts, there is mounting apprehension regarding the future financial sustainability of schools.

Republican Governor Greg Abbott and the Texas House are advocating for a $12.3 billion plan centered on tax rate compression – which would allocate state funding to schools to cover maintenance and operational costs.

Texas schools are already severely underfunded, and education advocates are warning that property tax compression will further heighten school districts’ reliance on state funding over time. What happens during the next Legislative session when Texas lawmakers don’t have a historic $32.7 billion surplus?

These same advocates fought for the Legislature to increase the basic allotment (per-student funding) and increase teacher salaries, but ultimately failed because Gov. Abbott’s main priority was a private school voucher program that would divert per-student funding away from public schools. 

Chandra Villanueva, a policy expert with the left-leaning think tank Every Texan, warned the San Antonio Express-News of the potential ramifications of the tax rate adjustments, stating, “Not only do we not know where the money is going to come from in the future to replace this, but then we’re not going to be able to make any improvements. Instead of raising the basic allotment which would allow districts to keep more money, they started messing with the tax rate.”

Under the current system, the state determines the amount of revenue schools are entitled to collect. If districts levy more property taxes than the allocated amount, they must return the excess funds to the state for redistribution among other districts, a process known as recapture. However, rather than enriching schools, this redistribution merely results in cost savings for the state.

Critics argue that compression predominantly benefits businesses and high-income households. The Senate, engaged in a standoff with Governor Abbott and the House over property tax relief, favors increasing the homestead exemption, which reduces the taxable value of owner-occupied homes without affecting businesses or renters.

While education spending constitutes a significant portion of the state budget, the Legislature still needs to pass a school funding package despite the historic surplus.

Amanda Brownson, a policy expert with the Texas Association of School Business Officials, emphasized the need for the Legislature to consider school finance alongside tax policies.

She stated, “The conversation they’re having right now is really a tax policy conversation, but we would hope they also have a conversation about school finance and the basic allotment. The tax policy conversation, while important, doesn’t drive dollars to classrooms.”