AUSTIN — A massive property tax overhaul — one lawmakers say will help home and business owners who are buried by skyrocketing tax bills — is nearing its final approval, much to the dismay of city leaders who have for months warned the legislation will hurt public safety funding.
The Texas House on Tuesday evening passed Senate Bill 2, which slows how fast property tax bills increase by limiting how much local governments can collect in revenue. A version of the bill has already passed the Senate and is likely headed to a conference committee for the chambers to hammer out the differences.
As the House author presented the bill Tuesday, he stressed an important reality: This legislation will not make property tax bills smaller.
“It gives our taxpayers more control over their taxes,” said state Rep. Dustin Burrows, R-Lubbock. “This bill doesn’t lower anyone’s property taxes. It was never designed to do that, and I never promised it would.”
The bill’s passage, after more than seven hours of debate on Tuesday, represents the last major obstacle for one of Gov. Greg Abbott’s top priorities. Abbott campaigned on the promise to deliver tax relief by capping property tax revenue for local governments and school districts at 2.5%. The House and the Senate ultimately landed at capping the city and counties at 3.5% annual growth. School district property taxes will be addressed in a separate bill.
“For too long, Texans have watched their property taxes skyrocket while being reduced to tenants of their own property. That is not the Texas way,” Abbott said in a statement after the vote. “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.”
Approving revenue caps for cities and counties also represents a dramatic evolution from lawmakers on this issue — particularly by House members who just two years ago stood with mayors and refused to accept setting a cap lower than 6% for cities and counties, while the Senate was pushing for 4%.
On Tuesday, the House approved the bill 107-40, meaning several Democrats joined Republicans to approve the bill.
The bill passed the House relatively unscathed after an onslaught of more than 60 amendments, many of which were filed unsuccessfully to give local governments varying degrees of budget flexibility.
Dallas Democrat Eric Johnson attempted to protect public safety budgets from the revenue cap to ensure police and fire couldn’t be adversely affected.
“People will be harmed. Property will be stolen. People will be killed,” Johnson said of the impact of limiting local government budgets. “Criminals don’t care about rollback rates.”
Burrows rejected the amendment, saying it would undo the impact of the tax savings because public safety is the majority of city budgets. He also said he trusted that cities would put public safety first before cutting their budgets.
“Our voters are smart,” he said. “They know the difference between needs and wants.”
For months, mayors, county judges and council members of some of the largest municipalities in Texas have rallied to fight the bill. Property taxes make up the majority of their revenue.
“The revenue caps in Senate Bill 2 could threaten our ability to respond to our citizens’ needs, especially when it comes to the most important matter we all face: funding our police and fire departments,” Dallas Mayor Mike Rawlings said in a prepared statement. “Our costs to serve our constituents are rising at a higher rate than 3.5 percent.”
Here’s what’s in the latest version of Senate Bill 2 as passed by the House:
- 3.5% revenue cap on local governments. This means cities and counties can collect only up to 3.5% more in property tax revenue than they did the previous year. The original versions of the House and Senate bills had a 2.5% cap. Local governments can exceed the cap if they hold an election and voters approve the additional tax hike. Currently, they can increase property tax revenue by up to 8 percent a year without the threat of an election.
- Schools districts are included under the cap, but only “symbolically.” In the original versions of the bills, school districts were also included under the 2.5% cap — which the House Ways and Means Committee changed to 2% last week. Burrows said that legally, the cap doesn’t hold water in their bill and has to be addressed in school funding legislation. The Senate’s version of the school funding bill includes a 2.5% cap. School districts make up more than half of a property owner’s tax bill.
- No exemption for rural and small districts. The original version of the bill excluded small cities and counties that collect less than $15 million in revenue. This was an important carrot for rural Republicans in the Senate to get on board. But the House committee cut the exemption. “All property tax bills big or small deserve property tax reform,” Burrows said.
- Exemptions for hospital and community college districts. The cap as originally written applied to special taxing districts, which include utility districts, community colleges and hospital districts. The House Ways and Means Committee carved out the latter two because of a concern that community college tuition would increase and because hospitals endure high medical inflation costs, Burrows said.
- Passage of property tax overhaul tied to passage of House school funding bill. The House’s No. 1 priority this session is a massive $9 billion bill that increases funding for schools, gives teachers raises and rewrites how school districts receive money. The bill ensures that if the school funding bill does not pass, the property tax bill doesn’t go into effect. Burrows said this is significant because the school bill also includes property tax relief, and capping cities and counties alone isn’t enough to make a meaningful impact.