Budget expert says Texas could eliminate portion of the school property tax
TEXAS (CBSNewsTexas.com) - Lt. Governor Dan Patrick and House Speaker Dade Phelan are set to meet Wednesday face-to-face for the first time in more than a month to discuss their differences over how to give Texans a break on their property taxes.
The House and Senate and Governor Greg Abbott remain at odds over the best solution.
Last week, Abbott called lawmakers back for their second special legislative session to pass a property tax relief bill and send it to him to sign.
Among his two requests, the governor wants to put the state on a path to eliminate the school maintenance and operations or M&O portion of the property tax, which is the largest part of the bill.
We wanted to find out if it can be done.
We asked James LeBas, a former Chief Revenue Officer for the state of Texas who also worked in the budget offices of former Governors Ann Richards and George W. Bush if lawmakers could wipe out the school M&O property tax without hurting school funding.
It would require lawmakers to replace local property taxes with state sales tax and other state revenues to pay for schools instead.
"The fast way would indicate we would need to have some additional state revenue come in, whether it's a new tax, some other kind of new fee, or another way of financing state government," said LeBas. "The other would be the slow way. You may be looking at a couple of decades."
It would take that long at least he said because school property tax is a moving target, and it would depend on how strong the Texas economy is.
"We have more kids," LeBas said. "We have inflation. We have occasional needs, like teacher pay raises or spending for school safety that enter into the picture. There may be times when you cannot increase the amount the state is replacing if we hit a flat spot in the economy."
Jalee Gill and his wife have called Richardson home for 35 years, and in that time, they've watched their property values and taxes go up.
"We're paying a couple of times what we had previously," said Gill. "It'd be nice to see some property tax relief."
Gill said he supports the idea of gradually eliminating the school M&O property tax.
"The gradual process to me is in general, the best way to do things," said Gill. "I mean it's slow and steady, tortoise and hare thing, which is the better move. Part of the issue is, will they stick with it."
The Lt. Governor has repeatedly called it unrealistic.
Lawmakers in both the House and Senate have approved bills that lower property tax rates so that more state revenues can be used to pay for schools.
The House plan, supported by the governor, solely focuses on this method, which they say is the fairest because it would help all property owners, including businesses, not just homeowners.
But the Senate's bill, which provides $18 billion in property tax relief and passed unanimously last week, also increases the homestead exemption to $100,000 for most homeowners and $110,000 for homeowners over 65.
That would provide most homeowners with nearly $2,600 in savings and about $3,000 for homeowners over 65 during the first two years, which is about double the relief in the House's plan.
"Who doesn't like the idea of paying less taxes, however, you do it," Gill said.
The Senate's plan would also double the business franchise exemption to $2.5 million, allowing 67,000 small businesses not to pay the franchise tax at all.
Senators also approved an amendment that would provide an additional $3.2 billion to pay for teacher bonuses.
If approved by the House, it would give teachers in school districts with more than 20,000 students an extra $2,000, and an extra $6,000 to teachers who work in districts with fewer than 20,000 students.
The money would come from the state's nearly $33 billion budget surplus.
State lawmakers may debate school funding and teacher pay raises further in a later special session called by Governor Abbott.
The governor has promised a special session on school choice legislation, which would provide taxpayer-funded education savings accounts for some students to attend private schools.
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