Legislative update: February 15, 2019 »
Senate Property Tax Committee approves tax cap bill
On Monday the Senate Property Tax Committee approved a revised version of Senate Bill 2 in a 4-0 vote. SB 2 would trigger an automatic local election if a municipality’s revenue from property taxes increased by more than the “rollback rate” of 2.5 percent. The sole democrat on the committee, Sen. Juan "Chuy" Hinojosa (D-McAllen), abstained from voting. The committee adopted 15 mostly technical amendments to the original bill, however maintained the 2.5 percent threshold. Opposition testimony at the hearing noted that Texas ranks 46th among states in overall tax burden according to the Tax Foundation, and were concerned about salaries for city personnel and emergency responders. Many representatives in the House have indicated they will wait to see any school finance legislation before they decide on property tax relief.
The Senate Finance Committee also met on Monday to discuss the upper chamber’s proposal for school funding, which would provide $2.4 billion in additional revenue to cover enrollment growth. Their budget would also appropriate another $6 billion to cover teacher salary raises and to offset the costs of property tax relief. The committee’s revised version of SB 2 will now go to the Senate Floor for discussion and a vote. If approved, the bill will go to the House for committee referral.
Bills expand and maintain economic development incentives
The Skills Development Fund supports partnerships between private Texas businesses and local community or technical colleges. Businesses that expand or relocate to Texas can apply for funding to develop customized, rapid job-training programs for employees. House Bill 700 by Rep. Ryan Guillen (D-Rio Grande City) and Senate Bill 352 by Sen. Beverly Powell (D-Burleson) are identical bills that would expand the Skills Development Fund to include workforce development boards, public libraries and school districts as qualifying partners. SB 352 has been referred to the Senate Natural Resources and Economic Development Committee.
The Property Tax Abatement Act, found in Chapter 312 of the state Tax Code, allows cities, counties and special districts to exempt the increase in a company’s property value from taxation. Local governments can use these tax abatements to attract new industries or to retain and develop existing businesses. Once new employers are established, they continue to tap into the surrounding workforce, contribute to future tax revenue and strengthen the local economy. Chapter 312 also allows cities to apply for funds to improve reinvestment zones, or areas that are in serious disrepair, present public hazards or create an economic liability.
The Property Tax Abatement Act is set to expire this year. House Bill 499 by Rep. Angie Chen Button (R-Richardson), House Bill 360 by Rep. Jim Murphy (R-Houston) and Senate Bill 118 by Sen. Royce West (D-Dallas) are identical bills that would extend its expiration date for another 10 years, until 2029. Senate Bill 350 by Sen. Beverly Powell (D-Burleson) would remove the expiration date, making the act permanent. SB 118 and SB 350 have been referred to the Senate Natural Resources and Economic Development Committee.
Legislators support apprenticeship and internship programs
Expanding apprenticeships and internships has been proposed to combat the state’s skills gap, or shortage of skilled workers. Apprenticeships train high school or postsecondary students in skills specific to that industry, producing skilled applicants who are ready to enter the workforce upon graduation. Legislators can promote the creation of these opportunities by offering tax credits to employers who hire paid interns, or by establishing a grant program to reimburse companies for costs associated with new interns.
House Bill 580 by Rep. Shawn Thierry (D-Houston) would allow local school districts to reimburse private employers from the Foundation School Program for paid internships with their district’s students for career and technical education programs. Senate Bill 508 by Sen. Borris Miles (D-Houston) would establish a separate grant program to reimburse private employers for paid internships with public school students. SB 508 was referred to the Senate Education Committee on Thursday.
House Bill 966 by Rep. Harold Dutton, Jr. (D-Houston) would give businesses with interns employed for less than 48 months a sales-and-use tax refund or franchise tax credit of either $2,500 or half of the intern’s wages. The franchise tax credit could cover their total tax due if five or more interns are employed, and if half of their combined wages is equal to or less than the total tax. Senate Bill 570 by Sen. Brandon Creighton (R-Conroe) would also provide a franchise tax credit of $1,000 for each public school student who completes an eligible internship program.
Throughout the session, we will update you about the progress of important bills in the legislative process. Every bill must pass through a series of reviews, revisions and votes before the governor will have a chance to approve or veto the final version. The Legislative Budget Board, under the House of Representatives, publishes a helpful primer on the life of a bill. The House Research Organization (HRO) also released a guide on how the Texas state budget is written.
Sources: Texas Legislature Online (TLO), Texas Office of the Comptroller
Legislative update: February 8, 2019 »
Governor Greg Abbott names emergency items
On Tuesday, before a gathering of the Texas Senate & House, Governor Greg Abbott delivered his State of the State address. At the start of each legislative session, the governor uses the State of the State address to list his priorities as well as any emergency items. Normally legislators cannot vote on legislation until the filing deadline, March 8; however, bills that are designated emergency items by the Governor are fast-tracked for committee floor debate and approval.
Governor Abbott's six emergency items for the 86th Legislature are:
- School finance reform;
- Property tax relief;
- Teacher pay raises;
- School safety;
- Mental health programs; and,
- Hurricane Harvey disaster response.
Some of these priorities have legislation already filed, such as property tax reform (SB 2 & HB 2) and teacher pay raises (SB 3). The other items will likely be addressed in the top bills of both chambers, House Bills 1-20 and Senate Bills 1-30.
Property tax bill heard in committee
Senators quickly addressed one of the governor’s emergency items, property tax relief. The Senate Property Tax Committee met on Wednesday to discuss Senate Bill 2, or the newly named Texas Property Tax Reform and Relief Act of 2019. An identical bill, House Bill 2, has also been filed by Rep. Dustin Burrows (R-Lubbock).
SB 2 would make significant changes to property tax law, including:
- Decrease the rollback rate from 8 percent to 2.5 percent. If a city or county’s local tax revenue increases by more than 2.5 percent, an automatic “rollback” election would be triggered for citizens to vote to approve the additional revenue.
- Exclude cities and counties that collect less than $15 million in combined property and sales and use tax. This caveat will exclude more than half of Texas cities and counties from SB 2, but will include more than 60 percent of the state population.
- Create a new, online “real-time tax rate notice” to inform residents of local tax rate proposals. Property owners would be able to see their local tax rates, how much they will owe in taxes, and how much they would owe based on a proposed tax rate, a tax rate that would produce no new revenue for cities or counties, and the rollback tax rate. There would also be a required email address for local governments so that citizens could voice their opposition or support toward tax proposals.
- Reform the appraisal review process. In counties with one million or more residents, Appraisal Review Boards (ARB) would hear protects for commercial properties that exceed $50 million in value. The bill would also create a Property Tax Administration Advisory Board in the Texas Comptroller’s office to oversee the entire property tax process.
The new rollback rate would apply to many North Texas cities, including Richardson and Plano. The fiscal note for SB 2 notes that tax revenues for school districts would decrease and costs to the state through school funding formulas would increase. However, the exact cost to school districts and the state cannot be estimated, as well as the savings per household.
The legislature is warming up for the 86th session. The Senate has begun referring bills to committee. More than 800 Senate bills and more than 1,900 House bills have been filed so far.
Sources: Texas Legislature Online (TLO)
Legislative update: February 1, 2019 »
Comptroller recommends that state contribute 40 percent of public education finance
Texas Comptroller Glenn Hegar, who manages the state’s finances, released a Fiscal Notes report this week that broke down public school funding formulas with new numbers. His message overall was that school funding formulas must change fundamentally to generate impactful school finance reform. He suggested that the historical average of state contributions to public school funding, 40 percent state to 60 funding local funding, is “reasonably attainable” and would significantly mitigate the pressure on local districts.
Public school funding in Texas depends largely on three variables: the number of students in a district, local property values and property tax rates. Increasing the basic allotment, or amount of money per student based on the average daily attendance (ADA), has been an effective strategy for increasing state spending based on enrollment. The calculation based on property taxes, however, has been more problematic.
The report highlighted the cycle of decreasing state contributions and rising property taxes. Currently, state spending decreases as a percentage of overall public school funding as local tax revenues increase. The Foundation School Program (FSP), which the state uses to fund public schools, counts local revenues first. The state then supplements the remainder, so that any increase in local tax revenue decreases the overall share of state spending. While property tax rates have increased in small amounts, property values in Texas have risen sharply. As a result, local tax revenues have increased with a corresponding decrease in the share of state spending each year. This often compels districts to raise local tax rates, perpetuating the general dissatisfaction with rising property taxes.
This pattern, which is written into the current public school finance formulas, has placed increasing burdens on local communities to pay for their schools. In 2018 the state contributed 36 percent of public school funding, down from 46 percent in 2008. During the same decade, after accounting for inflation, per-student public school funding from local sources rose by 29 percent, while funding from state sources fell by 8 percent. Hegar noted that one of the chief issues with the current formulas is their failure to account for inflation, which could alleviate much of the pressure on school districts to cover rising costs of materials like books and office supplies.
School funding from property values is also subject to wealth equalization and recapture. Revenue from “property-wealthy” districts is “recaptured” and redistributed to less wealthy districts. Disparities between districts can be extreme. For example, the highest property wealth per ADA is $16.9 million in Westhoff ISD, between San Antonio and Victoria. The lowest is $65,476 in Tornillo ISD, outside of El Paso (TEA). Large cities such as Austin have complained about the recapture calculation because of losing large portions of their budget. Plano ISD returned $105 million in recapture revenue in 2017, the second highest recapture in the state. Removing this equalization, however, would result in gross discrepancies in funding per student among districts, and potentially open the Texas public school system to litigation.
The report also highlighted the problematic ways that state and local funding shares are calculated by the Legislative Budget Board (LBB) and the Texas Education Agency (TEA). The LBB is controlled by the Texas Legislature, while the TEA is led by the governor’s appointees. Both organizations include recaptured payments as state contributions, even though they are derived from another district’s property tax revenue. The recapture of local taxes made up 3.9 percent of public school funding in 2018. Hegar used his own numbers in his report, which count dollars from local taxes as local funding.
Hegar further warned that the rising number of economically disadvantaged or higher-needs students is outpacing general enrollment. Economically disadvantaged students already make up 59 percent of the state’s 5.4 million public school students and are often more costly to educate per student. He also advised legislators to consider the volatility of funding sources. Some tax revenue, such as severance taxes on oil and gas, can vary up to 50 percent annually. Sales and use tax revenue is also much more susceptible to economic downturns than property taxes.
Both chambers file bills to reduce rollback tax rate
Rep. Dustin Burrows (R-Lubbock), chairman of the House Ways and Means Committee, and Sen. Paul Bettencourt (R-Houston), chairman of the Senate Property Tax Committee, filed identical bills to curb the growth in local property tax revenue. House Bill 2 and Senate Bill 2 would require voter approval for any property tax revenue growth above 2.5 percent. Lawmakers failed to pass a similar measure last session with a threshold of 4 percent. However, Governor Greg Abbott, Speaker Dennis Bonnen and Lieutenant Governor Dan Patrick expressed optimism that their unity will allow this attempt to succeed. Currently, local property tax revenue in municipalities can increase by 8 percent year over year before triggering voter approval. This rollback rate of 8 percent is independent of the actual property tax rate. For example, a vote could be required if appraised property values increase tax revenues by 8 percent even if the rate stays the same or decreases. School districts, cities and counties pushed back, saying that local revenue sources make up for reduced state spending on education. Cities also expressed concern about funding public safety measures if a lower revenue cap is passed.
Bills have not been assigned to committees yet. The House Appropriations and Senate Finance committees have begun meeting daily for the extensive budget-writing process. The House Public Education Committee met on Wednesday, and Chairman Rep. Dan Huberty (R-Houston) announced a schedule for the next few meetings. The Texas Commission on Public School Finance will present their report on Feb. 6, and the committee will begin hearing bills on Feb. 19.
Sources: Texas Legislature Online (TLO). Fiscal Notes is a review of the Texas economy from the office of Glenn Hegar, Texas Comptroller of Public Accounts.
Legislative update: January 25, 2019 »
The House and Senate released their committee assignments this past week. The makeup of a committee is crucial to the fate of a bill. Once a bill is assigned to a committee by the Speaker of the House or the Lieutenant Governor, the chair decides which legislation the group will discuss and often revise. If a majority of committee members vote in favor of the final bill, it can be scheduled for a hearing by the full chamber. Modified legislation can diverge drastically from the original bill, and legislation can easily halt at this stage if the committee chair or members do not favor the legislation.
Lt. Gov. Dan Patrick released the Senate committee assignments late Friday afternoon. Freshman Senator Angela Paxton (R-McKinney), who won the open seat for Senate District 8 last November, was assigned Vice Chair of the Senate Property Tax Committee, as well as a seat on the Business & Commerce, Education and Natural Resources and Economic Development committees. Senator Nathan Johnson (D-Dallas), who won against incumbent Don Huffines, was assigned to Administration, Health and Human Services, Veteran Affairs and Border Security, and Water and Rural Affairs.
Other highlights for North Texas senators included:
- Senator Bob Hall (R-Edgewood) – Vice Chair, Veteran Affairs & Border Security; seats on Education and State Affairs
- Senator Kelly Hancock (R-North Richland Hills) – Chair, Business & Commerce; Vice Chair, Transportation; seats on Finance, Natural Resources & Economic Development, and Property Tax
- Senator Royce West (D-Dallas) – Vice Chair, Higher Education; seats on Education, Finance and Transportation
- Senator Jane Nelson (R-Flower Mound) – Chair, Finance; seat on State Affairs
- Senator Brian Birdwell (R-Granbury) – Chair, Natural Resources & Economic Development; Chair, Sunset Advisory; seats on Finance and State Affairs
- Senator Pat Fallon (R-Prosper) – Vice Chair, Administration; seats on Education, Intergovernmental Relations, Natural Resources & Economic Development, and State Affairs
Several committees with North Texas representation will see bills that impact our legislative priorities. Nearly half of the Senate Education Committee will be from North Texas, including Senators Paxton, Pat Fallon (R-Prosper), Bob Hall (R-Edgewood), and Royce West (D-Dallas). Sen. Jane Nelson (R-Flower Mound) will chair the Senate Finance Committee. Senators Angela Paxton and Senator Kelly Hancock (R-North Richland Hills) will sit on the Senate Property Tax and Business & Commerce committees, with Sen. Paxton as vice chair of the former and Sen. Hancock chairing the latter.
Speaker Dennis Bonnen revealed his chamber’s committee assignments this week. The Speaker of the House assigns the members to House committees. See highlights from the North Texas delegation below:
- Rep. Rafael Anchia (D-Dallas) – Chair, International Relations & Economic Development
- Rep. Angie Chen Button (R-Richardson) – Chair, Urban Affairs; seat on Higher Education
- Rep. Eric Johnson (D-Dallas) – seats on Higher Education and Urban Affairs
- Rep. Julie Johnson (D-Carrollton) – seats on Insurance and Judiciary & Civil Jurisprudence
- Rep. Jeff Leach (R-Plano) – Chair, Judiciary & Civil Jurisprudence; seats on Pensions, Redistricting, and Investments & Financial Services
- Rep. Morgan Meyer (R-Dallas) – Chair, General Investigating; seats on Public Education and Judiciary & Civil Jurisprudence
- Rep. Thresa "Terry" Meza (D-Irving) – seats on Agriculture & Livestock, Human Services and Resolutions Calendars
- Rep. Victoria Neave (D-Dallas) – seats on Corrections and Judiciary & Civil Jurisprudence
- Rep. Candy Noble (R-Allen) – seat on Ways & Means
- Rep. Ana-Maria Ramos (D-Richardson) – seats on Natural Resources and Defense & Veterans' Affairs
- Rep. Scott Sanford (R-McKinney) – seats on Public Education and Ways & Means
- Rep. Matt Shaheen (R-Plano) – Vice Chair, Urban Affairs; seat on Ways & Means
- Rep. John Turner (D-Dallas)– seats on Appropriations and Environmental Regulation
The House Committee on Higher Education has a few North Texas representatives, including Rep. Angie Chen Button (R-Richardson) and Rep. Eric Johnson (D-Dallas). The House Committee on Urban Affairs will be chaired by North Texas officials Rep. Button and Rep. Matt Shaheen (R-Plano). The larger House Appropriations Committee has only one rep from the Dallas area, Rep. John Turner (D-Dallas), in its roster. The Public Education committee includes Rep. Morgan Meyer (R-Dallas) and Rep. Scott Sanford (R-McKinney). Rep. Sanford, Rep. Shaheen and Rep. Candy Noble (R-Allen) will represent North Texas on the Ways & Means Committee.
The House filed their appropriations or budget bill, House Bill 1, on Wednesday. House and Senate bills will be referred to a committee by the Speaker or Lieutenant Governor, respectively, now that the committees have been assigned. The deadline to file most bills and joint resolutions is Friday, March 8. The House Appropriations Committee will begin meeting next week. The Senate Finance Committee, which will address the budget, has begun meeting daily.
Sources: Texas Legislature Online (TLO)
Legislative update: January 18, 2019 »
House and Senate reveal new budget proposals
On Wednesday, Sen. Jane Nelson (R-Flower Mound) filed Senate Bill 1, the upper chamber’s budget for the 2020-21 biennium. The Senate proposed a base budget of $243 billion, an increase of 12 percent from the 2018-19 budget. The bill would also increase the Foundation School Program (FSP), the state’s source of public school funding, by $4.7 billion.
The lower chamber’s proposed budget, which will be House Bill 1, has not been filed. The Legislative Budget Board (LBB) published a report on Monday that proposed $247 billion over the next biennium, with $7 billion more allocated toward the FSP. The increase is about $3 billion more than the Senate’s public education allocation. The lower chamber’s budget would increase funding for primary and secondary schools by about 17 percent, for a total of $70.6 billion. The LBB estimate included funding from federal and state funding as well as local property taxes, which are projected to decrease as the state’s contribution increases. The House only proposed a 1.6 percent increase in higher education funding. The new budget would draw about $633 million from the Economic Stabilization Fund, better known as the Rainy Day Fund or Texas’ savings account.
Public school finance has been a primary concern for many years as the state’s share of education funding has declined. For a thriving economy, Texas needs a reservoir of qualified, educated workers. Improving our workforce starts with a strong education that meets the needs of its students and businesses in the community. The leaders of the Texas legislature have declared public school finance reform as one of their top priorities during the 86th session.
Teacher pay raises
SB 1 also included a $3.7 billion allocation for mandated teacher pay raises. Sen. Nelson filed Senate Bill 3, which contains the first across-the-board pay increase for Texas teachers in nearly 20 years. The bill would provide full-time teachers with a $10,000 pay raise by Fall 2021, with a $5,000 salary increase in Fall 2020 and an additional $5,000 the next year. Lt. Gov. Dan Patrick endorsed the proposal during his inaugural address. Gov. Greg Abbott also emphasized the importance of improving public education funding in his inaugural speech, stating, “Our students deserve better…It is time for Texas to deliver real education reform.”
No House or Senate committees have been assigned. Lt. Gov. Dan Patrick said Senate committees would be assigned next week. House committee preferences were due on Tuesday, with assignments planned by the end of January. Bill assignments will begin after the committees are announced. No bills can be passed the first 60 days of the session unless the governor declares emergency items.
Sources: Texas Legislature Online (TLO), Legislative Budget Board (LBB)
Legislative update: January 11, 2019 »
The 86th Legislature convened on Tuesday and is off to an exciting start. More than 1,000 bills have been filed since November of last year. Governor Greg Abbott, Lieutenant Governor Dan Patrick and the newly-elected Speaker Dennis Bonnen committed to collaborate on key issues during the upcoming session. Texas Comptroller Glenn Hegar announced an additional 8.1 percent will be available to lawmakers for the next budget.
Rep. Dennis Bonnen of Angleton will be the next Speaker of the House
One of the most pressing questions for the next session has been who will replace former Speaker of the House Joe Straus. The leader of the state House of Representatives, like the lieutenant governor, has enormous power to steer the legislature. Among other duties, the speaker appoints committees and their leadership, refers all proposed legislation to those committees, and decides which bills come to a vote on the floor. This authority allows the speaker to negotiate bipartisan agreements, ensure that committee chairs and vice chairs share his or her priorities and interests, and even halt opposed legislation.
In November of last year, a majority of representatives pledged to elect Rep. Dennis Bonnen (R-Angleton) to be the next Speaker of the House. Governor Abbott, Lieutenant Governor Patrick and Speaker Bonnen held a joint news conference on Wednesday to reassure Texans with the “very strong, profound and unequivocal message” that they are united on key issues. Each of them highlighted school finance and property tax reform during their campaigns. When asked if he would push Bathroom Bill legislation that plagued lawmakers in 2017, Lieutenant Governor Patrick stated he did not plan on reintroducing a battle that has “been settled…been won.”
Rep. Bonnen was 24 years old when he won the open 1996 Republican primary runoff by ten votes. He was the youngest member at that time. In 2013, Rep. Bonnen became speaker pro tem under Joe Straus, the Speaker’s second-in-command. The following session, he was appointed to chair the powerful Ways & Means Committee. He became known as the “House’s top advocate” and a “bulldog” during this time for his work on the House’s tax cut proposal. In 2017, Rep. Bonnen became a key mediator of the growing tension between Lt. Gov. Patrick and former Speaker Straus. Last year, Rep. Bonnen was not even a candidate for Speaker when more than 100 out of the total 150 House members pledged to support him. His experience in House leadership, rightward-leaning views and reputation as a skilled arbitrator contributed to his victory.
Rep. Bonnen studied political science at St. Edward’s University in Austin. After college, he interned for former Rep. Greg Laughlin, a conservative Democrat who would switch to GOP the following year. During his tenure in public office, he worked in various industries until he settled as president, CEO and chairman of Heritage Bank in 2008. See the Texas Tribune’s profile on the new Speaker for additional background.
Comptroller announces Texas will have nearly $9 billion more to spend in the next budget
The budget is the only bill that state lawmakers must pass each session. Policy priorities are born or buried in the state budget each year. Key issues such as reforms to public school funding formulas, research at state universities, tax relief and job training programs must be written into the budget to be enacted. Bills that require state funding are contingent on inclusion in, and passage of, the appropriations bill each biennium.
Texas Comptroller Hegar has the job of estimating the state’s economic condition for the next two years to determine the state budget. On Tuesday he released his biennial budget report for 2020 and 2021. His evaluation of the Texas economy was “cautiously optimistic,” with 8.1 percent more funding for lawmakers to distribute. A total of $119.1 billion will be available for the budget, an increase from $110.2 billion for 2018 and 2019. The state’s Economic Stabilization Fund, more commonly known as the Rainy Day Fund, is also at a record high of $15 billion.
The Texas Comptroller has an especially difficult task because he is asked to predict the state’s available funds over a longer period than most states, who normally meet each year. After delivering the positive outlook above, he warned that “we’re unlikely to see continued revenue growth at the unusually strong rates we’ve seen in recent months.” However, lawmakers will still have significantly more funding available than the previous session to spend on top priorities such as public school financing and property taxes.
More than 800 House bills and 300 Senate bills have been filed since last November. Lawmakers will continue to introduce new legislation until the deadline on March 8. The top spots, House Bills 1 through 20 and Senate Bills 1 through 30, are reserved for the top priorities of the Speaker and the Lieutenant Governor respectively and have not been filed. The upper and lower chambers alternately file the appropriations bill each session, and this year will be the House’s turn with House Bill 1. The Speaker and the Lieutenant Governor will assign committees likely later this month or early February. Once the committee appointments are announced, lawmakers will start meeting to work on legislation.
Tech Titans will track bills relevant to our Legislative Agenda, where you can find our positions on policies that are vital to the North Texas technology community. Each week we will continue to highlight bills and developments that matter to you and the high tech industry. Stay tuned!
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