When Senate Finance Committee Chairman Jane Nelson, R-Flower Mound, and Lt. Gov. Dan Patrick stepped up to a Capitol microphone on Jan. 27, they promised a 2015-16 state budget that would include “meaningful” tax relief that Texans “will actually see and feel.”
They even put figures on it: $3 billion in property tax reductions and $1 billion in business tax relief.
They left out the “how” part, leaving individual senators the opportunity to fill in the blanks.
That’s starting to happen, but senators should be a little smarter than they’ve been so far.
In documents posted online shortly after Nelson and Patrick made their announcement, the Legislative Budget Board staff said the designated property tax relief would be delivered through the public school property tax structure.
That’s logical. Lawmakers can quickly and efficiently affect school property taxes — they did it on a large scale in 2006.
On Wednesday, Sen. Paul Bettencourt, R-Houston, with colleagues including Sen. Konni Burton, R-Colleyville, introduced a proposal to double the minimum homestead exemption for school property taxes, moving it to $30,000 from the current $15,000.
Bettencourt said the change would save almost $200 for the owner of a home valued at the state median, which is $184,400.
But if legislators are planning on messing with school property taxes, they should remember that the Texas Supreme Court will hear arguments this fall on a lawsuit filed by more than half of the state’s school districts and other parties.
A state district judge last year declared the school finance system, which is grounded on property taxes, to be unconstitutional.
District Judge John Dietz said four factors weren’t right about the system.
Probably the most significant one in this context is the same one that the Supreme Court declared unconstitutional in 2005, after the last round of school finance lawsuits.
It’s the one on which the state is most vulnerable again. It says that state educational requirements and limitations in the property tax system designed by the Legislature in 2006 have combined so that school districts no longer have “meaningful discretion” over how they spend their property tax dollars.
When that happens, it means the state has so much control over those dollars that they effectively become a state property tax, which the Texas Constitution specifically forbids.
Bettencourt and the other senators would do a great job of delivering tax relief to homeowners, but they leave the potential liability in the school finance case untouched.
We’d be spending $3 billion on tax relief now and would have to spend billions more later if the Supreme Court rules against the state.
Maybe the state will win the case and this won’t be a worry. But if that happens, it would be the first win in a 30-year string of school finance cases that the state has lost initially at the Supreme Court level.
Senators should hedge their bets with this $3 billion investment in tax relief.
To do that, they must use the money to reduce school property tax rates. It’s not as easy as increasing the mandatory homestead exemption, but it could still deliver meaningful tax relief.
And if that tax relief opens up a margin between what school districts have available and what they must spend to meet state requirements, all the better for the lawsuit.
The other factors cited by Dietz will be more difficult for the plaintiffs to win at the Supreme Court. He said funding is inadequate for schools to meet their goals, unsuited to the way they must meet those goals and not equitably distributed to districts across the state.
If the state loses on those other issues, $3 billion will be just a start on what’s required to fix the system.
Mike Norman is editorial director of the Star-Telegram. 817-390-7830