Jasper, Texas – Every summer, Jasper County Judge Mark Allen begins to worry about two very different storms brewing: hurricanes and the county budget.
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Allen and thousands of other local government officials across Texas entered this year’s budget season facing historical inflation rates and a severe labor shortage. Complicating the budget process, provinces and other tax agencies say they cannot raise taxes to cover the rising costs of employee salaries and raw materials because their hands are tied by public pressure and recent legislation.
“It’s a situation where local governments have to start drawing down their emergency reserves, or they won’t be able to provide services to people,” said Allen, who has been the East Texas county’s top elected official for more than 15 years. “We are losing qualified employees to the private sector, as they go and try to find jobs with better salaries and better benefits.”
In 2019, state lawmakers passed two legislation to address rising property taxes, they said, to create more transparency for Texas homeowners. Bills, which were signed into law by Gov. Greg Abbott, requires tax authorities such as counties and cities to win voter approval if they want to increase property tax revenue by more than 3.5% of the previous year’s tax base. Under the new legislation, school districts are essentially limited to 2.5% growth in tax revenue each year.
This means that although home values are rising, government agencies are not necessarily reaping the benefits of this growth.
Now, as counties, cities and school districts press to finalize their budgets before the new fiscal year begins on October 1, they face tough questions. Many are calculating whether it is worth seeking voter approval to increase tax revenue beyond the 3.5% cap. Others are choosing to adopt a so-called new income tax rate to provide relief to taxpayers – many of whom are similarly struggling to adjust to the new economic reality of rising prices.
Jasper County, one of the most eastern counties in Texas with a population of 35,000, made the latter’s decision last week, agreeing to a tax rate that will bring in the same amount of property tax revenue as the last budget. On average, most Jasper homeowners will only see minor changes to their bills from the county.
“We did it as an attempt to keep the peace,” Allen said, explaining that taxpayers were upset when they saw historical growth in the assessed values of their homes and assumed those higher values would translate into higher tax bills.
“The reality is the work is getting harder,” Allen said. “It’s hard to look at your employees and say, ‘OK, we know the cost of living is 8.9% higher this year, but we’ll only be able to give you all a 2% cost of living adjustment. “”
More power for taxpayers
Texas local governments rely heavily on property tax revenue to pay police officers and firefighters, as well as government services including roads, libraries, and public schools.
Unlike most other states, Texas does not impose an income tax, and property tax bills are among the highest in the country.
Each year, appraisal districts evaluate home values and then notify homeowners of the value of their homes. Later, local governments decide how much money they will need to provide public services. Then they set the property tax rate that will allow them to collect the amount of revenue needed. Some governments have access to additional sources of income—for example, school districts receive state and federal funds, and some districts receive sales taxes.
According to the Comptroller’s Office, Real estate tax collection It has risen more than 20% since 2017.
“Historically, where there has been a significant increase in total assessed value, some tax jurisdictions have left their property tax rates the same as in the previous year,” said Charles Gilliland, an economist at the Texas Real Estate Research Center. This results in huge increases in property taxes for Texas homeowners.
A couple of bills in 2019 tried to address this. house bell 3, school finance billincluding about $5.1 billion earmarked for reducing Texas property tax bills.
Meanwhile, Senate Bill 2 set most other tax units at 3.5% revenue growth, unless a majority of voters agree to a higher tax rate in an election. Prior to 2019, tax entities could increase revenue by up to 8% each year. If a county wants to go above that rate, voters can petition for an election to bring the tax rate back down to a rate that only generates 8% growth.
according to evaluation From the Texas Taxpayers and Research Association, a business trade group focused on tax and fiscal policy, these two pieces of legislation have helped reduce property taxes for Texans. In 2021, the property tax bills totaled $73 billion. According to the analysis, they could have totaled $79 billion without the legislation.
More important than these savings is the role voters now play in setting tax policy, said Dale Cramer, president of the union.
“Legislation gives the public a greater say in their property taxes,” he says. “It gives the public a tool to restrict taxes.”
Early successes in asking voters for more money
Some districts and school districts have exceeded revenue growth with elections. Last year, Lubbock County voters agreed Increasing the property tax to fund the increase in the salaries of deputy mayors.
This year, Lubbock County agreed to the maximum tax rate it can set without holding an election.
“If you keep increasing everyone’s taxes by 8% every year, that’s a problem,” said Lubbock County Commissioner Jason Corley. Corley voted against this year’s proposed tax rate, saying he wants to keep tax rates lower.
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However, counties have to get creative when it comes to figuring out how to provide the same level of service to their constituents amid rising prices and labor shortages, he said.
“People say, ‘I can’t hire a plumber,'” Corley said. “Well, I also can’t appoint a lawyer to the DA office.”
Lubbock found cost savings in employee benefits by relying on private contractors. West Texas County has also saved on utility costs by holding certain hearings virtually in court rather than in air-conditioned courts.
Many school districts, including Fort Bend Independent School District And the Katie ISDdecided to hold a property tax rate election in November to bring in more revenue.
Other school districts have adopted budgets that include millions of dollars in deficits. Lufkin ISD’s Board of Trustees last month adopted a $4.3 million shortfall for its new budget.
“With inflation and rising costs, our dollars aren’t stretching as far as we need to,” Charlotte Bynum, Lufkin ISD’s chief financial officer, said in an email. “Our goal is to hire and compensate teachers well, but with all the costs that seem to be increasing in every annual budget, it’s a challenge.”
State Senator Paul BettencourtThe Houston Republican who set the local government tax cap called on school districts holding tax rate elections, saying they shouldn’t take more dollars from voters this year.
“I refuse to assume that they are under pressure,” Bettencourt said, noting that school districts have received additional state dollars and even more money from the federal government during the COVID-19 pandemic.
Bettencourt also emphasized that cities and provinces can achieve annual growth of more than 3.5% with new real estate developments, which is excluded from the 3.5% calculation.
“The SB-2 is designed to operate at low inflation time and high inflation time,” he said.
Cramer, the tax policy executive, said it would be reasonable for the state to adopt an upper limit on revenue during years when inflation is particularly high.
“I am certainly sensitive to the concerns of local jurisdictions about inflation,” he said.
Texas Tribune is a non-profit, nonpartisan media organization that educates – and interacts with – residents of Texas about public policy, politics, government, and statewide issues.
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