(Austin) The major tax reform legislation championed
by state leadership moved towards negotiations between the chambers after the
House granted preliminary approval to the measure on Tuesday night. Both the House and Senate filed identical
versions of SB 2 in January, but the bill passed by the House contains
differences that must be resolved in conference committee. Nevertheless, the action represents significant
progress towards achieving a goal laid out by Governor Greg Abbott, Lt.
Governor Dan Patrick and House Speaker Dennis Bonnen at the beginning of the
session: limiting property tax growth. “In the final days of the legislative
session, I am confident this historic legislation, combined with additional
reforms working their way through the system, will reach my desk where I will
sign them into law,” Abbott wrote in a statement released following
passage.
There is agreement between the bills on one key number, the rollback rate for cities, counties and other non-school taxing districts. That rate, currently eight percent, is as much as an entity can raise property taxes in a year before from affected taxpayers have the opportunity to weigh in via a tax ratification election. Both bills would lower that rollback threshold to 3.5 percent. Current law requires voters to petition for a ratification election, but both the House and Senate would make that process automatic. Both contain significant transparency and taxpayer-engagement measures intended to demystify the process for property owners, as well as a number of reforms to the appraisal process.
Where the two versions differ is on which entities would be subject to the new rollback rate. The version passed in the House would exclude hospital and community college districts, to account for the unusually high rate of growth in tuition and healthcare costs. The Senate version wouldn’t include smaller taxing entities, those that raise less than $15 million annually, unless taxpayers in those jurisdictions voted to opt in. The Senate would let counties and cities account for increased yearly costs for indigent defense in the rollback rate calculation, a provision not in the House bill. The House version would allow districts that don’t raise taxes as high as the rollback rate in a given year to “bank” the difference. They could carry that balance forward for up to five years and apply it to future increases above the rollback rate. The Senate doesn’t include such a provision.
Bill author and Lubbock Representative Dustin Burrows addressed the issue of local school property taxes, the largest part of most peoples’ tax bill, but said that he doesn’t believe that this bill can make the necessary changes to the education code to change those rollback rates. He included, however, language in the bill suggesting a 2 percent rollback rate for school districts, half a percent less than the Senate’s proposal. This, he said, reflects the House’s commitment to lowering school property taxes, something he said can only be accomplished in HB 3, the comprehensive school finance reform bill currently before the Senate Education Committee. A provision in the House bill would make passage of SB 2 into law contingent on passage of the school finance reform bill. “We cannot leave this session without tackling both school finance reform and property tax reform,” said Burrows. The Senate committee is prepared to vote on that measure Wednesday. If approved by the panel, the bill would be eligible for consideration by the full Senate later this week.
SB 2 will face a final vote in the House this week and then, unless Senate author and Houston Senator Paul Bettencourt moves to concur in all changes, the bill will go into negotiations between the chambers. Last session, both chambers couldn’t agree on a rate for counties and cities, with the House favoring a six percent rate and the Senate backing a rate of four percent. That both bills include the same rollback rate removes a significant obstacle to agreement on what has been a top priority for state leadership.
