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A State Property Tax for Schools — Fix Or Nix?

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A State Property Tax for Schools — Fix Or Nix? Texas Taxpayers and Research Association Page 8 Your TTARA Team (www.ttara.org): President Dale Craymer: , Policy Areas: Franchise Tax, State Budget, General Tax Administration July 2012 [email protected] Bill Allaway, Policy Areas: Economic Development, Transportation Finance, Property Tax, Franchise Tax [email protected] A State Property Tax for Schools — Fix or Nix? George Christian: Policy Areas: Property Tax [email protected] Once again the state’s school finance system is un- In response to the West Orange Cove ruling, the der challenge in the courts. Among the contentions Legislature passed legilegislationslation in 2006 that John Kennedy: Policy Areas: State and Local Sales Tax Issues, Property Tax, General Tax Administration, Budget Challenges Loom is that the localBudget school prpropertyoperty tax hasChallenges become a de “compressed” Loomschoolschool districtdistrict maintenancemaintenance and and oper- op- [email protected] facto state property tax—a tax which is prohibited erationsations tax tax rates rates to totwo-thirds two-thirds of ofthe the rate rate imposed imposed by Texas has now joined the vast majority of states that face some very daunting budget challenges. Sheryl Pace: Policy Areas: School Finance, School Property Tax underTexas Article has now 8, Section joined the1-e vastof the majority Texas ofConstitu- states that facebyeach someeach district districtvery in daunting2005, in 2005, and budget replaced and replaced challenges. the forgone the forgone prop- With the Legislature in session, the numbers have moved from speculation to reality. The [email protected] tion.With Over the theLegislature years some in havesession, advocated the numbers address- have propertyertymoved tax fromrevenue tax revenuespeculation with statewith toaid.st atereality. Therefore, aid. Therefore,The all school all Comptroller’s revenue estimate has been released. House and Senate spending bills have been ingComptroller’s this challenge revenueby amending estimate the statehas beenConstitutiConstitution released.on Houseschooldistricts and districts that Senate imposed that spending impos an M&O edbills an tax have M&O rate been of tax $1.50 rate perof Ryan Ash: Web Site, Membership, TTARA Events introduced. Governor Perry has laid out his priorities. Legislative committees are rolling up their to introduced.impose, rather Governor than prohibit, Perry has a statelaid outproperty his priori taxtax ties. $1.50$100 Legislative valuationper $100 committees sawvaluation that are ratesaw rolling compressedthat uprate their compressed to $1.00. [email protected] sleeves and getting to work. to sleevesfinance andschools. getting Butto work. in truth, such a proposal toDistricts $1.00. were Districts given were access given to anaccess additional to an $0.17addi- Brent Goleman: Membership would be only a partial “fix” for the legal challengeschallenges tionalthat they $0.17 could that theyaccess could for accessenrichment for enrichment purposes, The Texas budget is a complex piece of legislation—more than 1,000 pages long and weighing [email protected] to Theour schoolTexas budgetfinance is system. a complex Inequities piece of in legislation— school purposes,therebymore than giving thereby 1,000 them pagesgiving “meaningful long them and “meaningful weighing discretion” discre- over over 6 pounds. It is divided into separate articles for the major functional areas of Texas fundingover 6that pounds. are a key It partis dividedof the lawsuits into separate would re-rarticlee- s tion”theirfor therates.over major their The rates.functionalfirst four The pennies firstareas four ofcan Texaspennies be levied can with be Contact any of us by phone at (512) 472-8838 government and appropriates money to over 200 state agencies and institutions of higher education maingovernment unless lawmakers and appropriates rewrote moneyschool tofunding over 200 for- state agenciesleviedonly school with and boardinstitutionsonly schoolapproval, of board higher but voterapproval, education approval but votermust from a variety of funds and revenue sources. mulas—somethingfrom a variety of thatfunds coulcould andd berevenue done independentlysources. approvalbe obtained must to levybe obtained the remaining to levy 13 the pennies. remaining 13 of a state property tax. AAndnd because some districtsdistricts pennies. But as complex as the document is, two simple factors explain the state’s fiscal challenges: 1) the offerBut local as complex exemptions as the that document others do is, not, two a simple“revenue“reven uefacto rs Theexplain de factothe state’s state fiscalproperty challenges: tax question 1) the has risen 2-8838 * Fax 512-472-2636 512-472-2636 Fax * 2-8838 512-47 Phone * 78701 TX Austin, 400, Suite Street, 400 West 15 West 400 loss of one-time money used to finance the current budget has created a structural gap for 2012-13, th neutral”loss of state one-time property money tataxx usedwould to meanfinance higher the current taxes budgetTheagain has de in created factoa new state aseries structural proper of lawsuits, tygap tax for question along2012-13, with has const riseni- and 2) the nation’s worst economy since the Great Depression has hammered state revenues while TTARA forand some, 2) theand nation’s lower taxes worst for economy others—an since especially the Great Depressionagaintutional in has challengesa new hammered series related of state lawsuits, to revenues funding along whileequity with andconsti- ad- increasing spending demands. Texas Taxpayers and Research Association controversialincreasing spendingresult given demands. voters would have to ap- tutionalequacy (seechallenge Tables 1).related Over to one-half funding of equity the state’s and th prove the amendment. adequacyschool districts, (see Table educating 1). Over over one-half two-thirds of the ofstate’s the 400 West 15 Street, Suite 400 As lawmakers get ready to tackle the 2012-13 budget, they’ll have to deal with some leftover As lawmakers get ready to tackle the 2012-13 budgetschoolstate’s, they’ll studentsdistricts, have to areeducati deal now withng joined oversome intwo-thirds leftover a consolidated of the Austin, Texas 78701 business from the current budget. While certified as balanced when it passed two years ago, the Schoolbusiness districts from currentlythe current levy budget. property While taxes certified total-total- as balancedstate’scase before students when Travis it arepassed County now two joinedDistrict years in Courtago, a consolidatedthe Judge John economy has proven to be worse than forecast, taking its toll on sales, franchise and other state tax ingeconomy $22 billion has — proven $17.6 to billion be worse for maintenancethan forecast, and takin g itscaseDietz. toll before on sales, Travis franchise County and District other Courtstate tax Judge John revenues. This January, Comptroller Combs advised lawmakers that Texas faces a $4.3 billion operationsrevenues. and This $4.4 January, billion Comptrollerfor debt service. Combs StateStat advisede Dietz. lawmakers that Texas faces a $4.3 billion deficitdeficit by bythe theend end of theof the2011 2011 fiscal fiscal year. year. That That would would be thebe thelargest largest projected projected deficit deficit in thein thehistor history y law places a “cap” on local tax rates.rates. TwiceTwice thethe Su-Su- The plaintiffs argue that over 200 school districts are of the state—worse than the $1 billion lawmakers faced in 1987 and the $1.8 billion in 2003. premeof the Court state—worse has ruled than that thebecause $1 billion so many lawmakers school fa cedTheat in the 1987 plaintiffs $1.17 and theM&O argue $1.8 ratethat billion overcap in (see200 2003. schoolTable 2),districts and thatare districts were at the rate cap, the local tax was forfor all atthe the revenue $1.17 per M&O weighted rate cap student (see raisedTable by2), over and 80%that Fortunately for lawmakers, Governor intentsFortunately andand purposespurposes for lawmakers, aa state state property property Governor tax, tax, and andAlso violAlso vio- inat- inthis thisthe ofissue: these revenueissue: districts per weighted is still less student than theraised average by over amount 80% Perry, Lt. Governor Dewhurst and lateded Perry,the the Constitution. Constitution.Lt. Governor The The firstDewhurst first of ofthese theseand rulings rulings wa wass in of theserevenue districts available is still to districtsless than not the at average the $1.17 amount cap. HouseHouse Speaker Speaker Straus Straus have have already already RememberingRemembering 2006: 2006: Property Property Tax Tax Relief. Relief. Intended Intended in1992 1992 when when the theSupreme Supreme Court Court ruled ruled that thatthe taxthe lev-tax ofFaced revenue with availablea reduction to distin statericts notfunding at the imposed $1.17 cap. by taken corrective action. At their to be a net tax cut, there is substantial confusion leviediedtaken by bythe corrective the188 188 County County action. Education E ducation At Districts,their Districts, to created be cre- a net taxFacedthe cut, Legislature there with is a substantial reduction in 2011, inconfusion these state districtsfunding cannotimposed rai byse direction, over $800 million in atedby direction,the by Legislature the Legislatureover in $8001991, in 1991,constitutedmillion constituted in a statetoday a todayprostate overp- over thethe their the2006 Legislature2006 rates property property to recoup taxin tax2011,relief reliefthe initiative.th lostese initiative. districtsrevenue. cannot Therefore,
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