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April 19, 2006     (512) 463-0300

FINANCE COMMITTEE DISCUSSES PROPERTY TAX CUT CONSTITUTIONAL AMENDMENT

Senators Judith Zaffirini, Steve Ogden and John Whitmire (L-to-R) discuss SJR 7, which proposes a constitutional amendment to lower property taxes and create a uniform tax rate.

The Senate Finance Committee today considered a constitutional amendment proposed by committee Chairman Steve Ogden that would permit the Legislature to set a uniform tax rate and would permanently grant a 35-cent reduction in the property tax rate. Senate Joint Resolution 7 would also increase the homestead property tax exemption from $15,000 to $22,500 and would cap yearly tax appraisal increases in school districts to five percent. This proposal, according to the author, is an attempt not only to address the constitutional challenge to the state's public school finance system, but also to increase the state's contribution to the cost of public education.

Ogden said today that the Supreme Court's October decision that the current property tax system represents an unconstitutional state wide property tax demonstrates that the state cannot continue to pay for schools as it has in the past. "The Supreme Court has repeatedly told us that for almost a generation now that it is almost impossible to maintain a constitutional school finance system as long as the Legislature continues to over-rely on property taxes to fund the schools. And each year as property values continue to climb, that over-reliance grows and grows," he said.

Ogden's plan calls for a reduction of the current property tax rate from $1.50 per $100 valuation to $1.15, which represents an annual property tax reduction of about $4.5 billion. The homestead exemption increase would give another $500 million to tax payers. Because the state would have to find a new revenue source, for instance a business tax , to cover this cut, the state's share of the cost of education would rise from about 34 percent to 50 percent. A 5 percent cap on appraisal increases would slow the growth of future property taxes. Also, allowing the state to set a uniform tax rate in the constitution would eliminate the current court challenge to the finance system.

Ogden said that it is also important that the voters have a chance to weigh in on this debate. For a constitutional amendment to be ratified in Texas, it must first pass both Houses of the Legislature by a two-thirds margin. Then it must be approved by the voters in a general election. Ogden said today that an amendment puts the choice of how to fund schools in the hands of the voters. "This amendment is to give the people of Texas the opportunity to vote on how they want to pay for their schools," he said. "It's to give them the opportunity to vote for the largest property tax cut in history, of at least five billion dollars a year."

Not every Senator is wholeheartedly behind this plan. Senator John Whitmire of Houston expressed concern that constitutionally setting a tax rate would restrain the ability of future legislatures to change that rate. He also said, if the Legislature does not approve an increased business tax to pay for the property tax cut, the burden would then fall to ordinary Texans in the form of an increased sales tax. "My main concern right now is because there is such strong influence in this town to keep that business tax so low, that with the tremendous growth this state is going to be facing, I think, there is a likelihood …that we are probably heading, with [this] amendment, to a greater dependence on sales tax, because it is the easiest, because it is in statute, we not only raise it but broaden it," he said.

The question of a uniform rate could also cause heartburn for some Senators. Those opposed to a state-wide tax rate worry that without the prospect of local enrichment, districts would feel like they had no discretion on how they paid for schools, and Texans would feel disconnected from the school finance process, said Dick Levine, senior financial analyst for the Center for Public Policy Priorities.

Responding to questions about his plan, Ogden said that whether or not lawmakers agreed or disagreed with his proposed amendment, the Legislature must come up with some solution to the court challenge facing the state's education finance system. "We have a constitutional crisis and a deadline on June 1 and that crisis is predicated by a single issue: this state over-relies on property taxes to fund its schools," said Ogden. "This constitutional amendment is an honest effort to address that issue."

Session video and all other webcast recordings can be accessed from the Senate website's audio and video archive pages.

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