On Texas’ High Property Taxes, There’s Plenty of Blame to Go Around

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Marjorie Kamys Cotera for The Texas Tribune

A lawmaker reads a flyer with property tax information that was distributed to Texas House members' desks on Aug. 12, 2017.

Texas state senators are touchy, touchy, touchy when it comes time to hand out blame for rising property taxes.

They’ve spent a decade hacking away at the State’s share of public education spending, and their current refrain is that the local districts have run amok by raising property tax bills.

What they don’t like is having anyone – especially an official someone – pointing out the relationship between the State’s declining per-student education spending and the rise in local property taxes.

To cap that, the latest flare-up came from Tarrant County, the most populous red county in the Republican state of Texas – a big jewel in the GOP’s crown and an exception to the trend of urban counties becoming more Democratic.

The official someone, this time, was Tarrant County Judge Glen Whitley, a Republican who’s been on the commissioner’s court for more than two decades. According to the Fort Worth Star-Telegram’s Bud Kennedy, Whitley told a local crowd last week that the increases in their property taxes were driven by the State’s failure to pay its share of public education costs.

He put a page from the current state budget on screen for the crowd so they could read this increasingly infamous gem on page III-5: “Property values, and the estimates of local tax collections on which they are based, shall be increased by 7.04 percent for tax year 2017 and 6.77 percent for the tax year 2018.”

Sounds awful, right? Be fair: It’s not the State dictating a tax rate, but the State’s estimate of what the school districts are going to do. The local tax revenue helps determine state spending on education.

A small pack of local state senators, in a letter sent to the Star-Telegram and copied to the rest of the state news media, said Whitley was “dishonestly” suggesting that the State was setting local property tax rates.

“Let’s set the record straight,” they wrote. “Local property tax rates are set by locally elected officials. Period. They are not determined by an informational rider in the state budget as Judge Whitley dishonestly suggests. He well knows our school finance formula dictates that local property tax revenue go into the system first, with state funding added on top. This has been the case since the 1940s. Local property tax collections dictate the state’s share of education funding – not vice versa.”

That’s correct, as far as it goes. But local public education spending – and the property taxes that fund it – have risen over the last decade as the state’s share of public education has fallen. “Dictate” is a strong word to use on school districts trying to make up for the state’s spending cuts.

And here’s a pro-tip for students of subterfuge: Tell the truth while you’re lying. Those senators say, truthfully, that state spending in the current budget is up significantly – $5.8 billion more than it was in the previous two-year budget, according to the Legislative Budget Board. They don’t say, however, that the State’s share is sliding from 43.7 percent of the total Foundation School Program spending in 2016 to 38 percent in 2019. Or that the State covered 48.5 percent of the total as recently as 2008 – 10 years ago. Or that, thanks to the ever-increasing number of Texas school kids, state spending per student has fallen even as total state spending has risen.

Local spending in 2008, according to the LBB, was 51.5 percent of total local-state education spending. In 2019, it’ll be 62 percent.

One more set of numbers to round this out: Local spending, according to the LBB, is rising $6.9 billion from the 2016-17 biennium to the current 2018-19 biennium. The State’s part is actually dropping $1.1 billion from the first two-year budget to the second.

Spending from state tax dollars is down. Spending from local tax dollars is up. Overall spending, which does go through the state budget and funding formulas – giving state lawmakers scads of political wiggle room – is up.

Student populations are exploding, too, but that’s a set of numbers for another day.

The bottom line is that Whitley has a strong argument. State lawmakers are not solely to blame for the increasing burden on local taxpayers, but they are certainly as responsible as anyone else. The senators are right about this: There’s certainly no reason to let local school boards, county commissioners, and city council people off the hook, because those are, in fact, the people who levy property taxes.

But don’t let state senators skate, either, even though they seem to be better at it than most of the people competing in PyeongChang right now. When the State stops paying its share, locals – the property tax folks – have to find the money somewhere. They’re finding it by taxing property owners.

Blame all of them. It’s only fair.

 

9 thoughts on “On Texas’ High Property Taxes, There’s Plenty of Blame to Go Around

  1. Finally, someone is willing to call out the legislature for something we, in and out of education, have known for years. Even the “robinhood” money doesn’t go into a dedicated fund for education, but goes into the general fund which can be used for infrastructure and other issues unrelated to education. It is time for representatives…both Democrat and Republican…to admit that school children don’t belong to any political party. The students deserve the very best education that their parents’ and the states’ money can buy.

  2. Just like the federal government, Texas cuts spending in areas that benefits the majority of its citizens and finds ways to give that money to special interest groups. Trump past a tax cut that mainly benefited the wealthy and now is proposing a $.25 a gallon gas tax increase that will disproportionately affect the middle and lower income families. Would the gas tax be necessary if the corporate tax cuts and other benefits to corporations and the wealthy were not enacted?

    By the way, the Texas legislature has done the same thing with higher education funding that is why tuition and fees have skyrocketed.

  3. And don’t forget about the ease with which commercial properties can fight their appraised values. JW Marriott & BCAD:

    The “reported cost of construction came in at more than half a billion dollars in 2010…” but “…The hotel’s noticed value was $268,823,680, the ARB value was reduced to $245 million, and the litigated value, argued on the grounds of equal and uniform, dropped to $215,500,000.”

    Or Valero and their jets: Claimed value of $0, but sold for $40 million each.

    https://www.county.org/magazine/features/Pages/2016%20March/Appraisal-Woes.aspx

    He’s right, blame all of them.

  4. Joe and Ken,

    While I share your concern and frustration with the current taxation system, and the burden it puts on both homeowners and commercial property owners, as someone in the industry I just wanted to help clarify, using your example of the JW Marriott, that the appraised value of a property is not based on construction costs alone. Yes the property may have cost more than half a billion dollars to build in 2010, but that number includes things such as soft costs and entrepreneurial profit (a certain amount of money the builders and developers require to take on the risk of constructing the property). Therefore, the half billion you mentioned is not the value of the improvements themselves, which is what is appraised by BCAD. Also, you have to factor in a certain amount of depreciation between 2010 and 2016, which can be quite high on a property with that level of complexity.

    With regard to equal and uniform, it is important that commercial property owners are assessed fairly in comparison to other similar properties, just as individual homeowners are. As for your example of Valero and their jets, that is not considered real estate, instead being personal or business property, and is therefore not included in their assessed value.

    I certainly understand your concerns, and hope this provides a little clarification. And I can assure you that disputing taxes is not easy for commercial property owners, as it involves many parties contributing much time, effort and analysis to ensure fair assessments.

  5. The comment about the tax cut is false. It is my understanding that any gas tax goes into the highway fund which would then be used to improve infrastructure.

    • Which gas tax? Texas or Federal?

      In Texas, currently, it’s diverted to several accounts; including school funding.
      http://bettertexasblog.org/2015/01/where-does-the-gasoline-tax-go/

      At the federal level, it depends. Currently, yes, 100% of the motor fuels tax (MFT) goes to the Highway Trust Fund (HWTF); but the devil is in the details. The last two times it was increased (1990, H.W. Bush & ’93, Clinton) All or some of the increase went to “deficit reduction” and not to infrastructure. It has since been directed back into the HWTF.

      Using the non-specific numbers released so far – if the MFT were to be raised by $0.25/gallon – and assuming no decrease in consumption – that would more than double the current annual MFT revenues from $35 Bn/yr to well over $70 Bn/yr. But the infrastructure plan only calls to spend $200 Bn in Federal money over 10 years.

      If the revenue generated is $700 Bn, but outlay for all infrastructure is only $200 Bn, then there’s $500 Bn surplus somewhere. Where is that money going?

  6. I definitely do not understand how rising property taxes “dictate” the state’s share of education funding? That implies that if school district’s in Texas as a whole collect more funding through property taxes then that “FORCES” the state to fund less. The state is choosing on their own, for whatever reasons they want to claim, to decrease their share of education funding. That means the state is choosing to place a cap on the total funding (property taxes and state share combined) that the education system can have so that if others (school districts via property taxes) raise most of that money then the state will have to provide a smaller share to get to that cap.

    • I forgot to add, the fault is more so on the state as far as the poor state of our educational funding because they have chosen to place that cap and choose not to raise it or place a minimum value they must fund.

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