Oklahoma lawmakers target property tax relief with ballot measure

Oklahoma Legislature

The Oklahoma Legislature, which wrapped up its session earlier this month, put a proposed constitutional amendment on the November ballot to tighten caps on property assessed value increases — a move that would impact local government and school district tax revenue.

The Republican-controlled legislature also passed bond-related bills for charter schools and development districts, along with a fiscal 2027 budget.

The ballot measure asks voters to lower annual property assessment growth caps from the current 5% for most real property and 3% for homesteads and agricultural land to 4% and 1.75% respectively, starting in tax year 2027, under an amended Senate Joint Resolution 39. The initial legislation called for tighter caps of 3% and 1% – levels that sparked concerns about local government and school general obligation bonds.

"It will impact the ability to get bonds and pay them back," Senate Democratic Leader Julia Kirt said in March about the original measure. "Those bonds are based on growth revenue. I think we're going to create a real problem for local government bonding and for our schools being able to bond with this change."

House Speaker Kyle Hilbert, who along with Senate President Pro Tempore Lonnie Paxton, sponsored the measure, said the amended cap percentages grew out of meetings with municipal bond professionals and others. 

"I'm not going to stand here on the House floor and say that every single one of those entities love the bill and endorse it, but many of them have expressed that they would rescind their opposition," he said ahead of the chamber's April 15 vote on an amended SJR 39. "I believe this is a strong support for taxpayers, because again, this would give us the lowest cap on growth of a homestead property in the entire country."

If passed by voters, the result would be the largest cut to education and public service funding in Oklahoma history, according to Aanahita Ervin, fiscal policy analyst at the Oklahoma Policy Institute, a nonpartisan research organization.

"It will set property tax revenue growth below inflation rates," she said in a statement. "This guarantees an annual budget crunch that threatens essential community functions."

Annual revenue loss estimates for school and county operations provided by the institute range from an initial $42 million to $575 million in 10 years. Oklahoma cities cannot levy property taxes for operations, but can obtain voter approval for property tax-backed GO bonds.

The constitutionality of a citizen-initiated ballot measure, seeking to phase out homestead property taxes by 2029, is being challenged in court, according to Ballotpedia. 

Charter schools will get help for financing capital projects from the creation of revolving loan and credit enhancement programs overseen by the Statewide Charter School Board and supported by a third-party financial administrator, under a bill signed into law by Gov. Kevin Stitt on April 30 with an effective date of Nov. 1. 

Bond issuance will be allowed for charter schools through the Oklahoma Finance Authority under the credit enhancement program, which includes an intercept of a school's state aid funding to first cover debt service payments.

The law requires participating charter schools to fund a debt service reserve with a minimum of 12 months of principal and interest payments. In the case of a default and the subsequent use of the restricted reserve, money from appropriations and other sources deposited into a new state treasury credit enhancement fund could be tapped to replenish the reserve. The total amount of outstanding bonds is capped at $250 million.

Lower-interest loans for capital projects will be available through the creation in the state Treasury of a revolving loan fund, which will receive state appropriations. 

"This gives charter schools a real shot at building and improving their facilities without being at a disadvantage," the bill's sponsor Republican State Rep. Rob Hall, said in a statement. "If we expect these schools to deliver for students, they need the same kind of opportunities to invest in their classrooms and campuses." 

The Building Utilities and Infrastructure for Long-term Development, or BUILD Act, became law this session, authorizing master development districts, overseen by cities or counties, to finance infrastructure.

Opponents of Senate Bill 2060 noted a proposed constitutional amendment placed on the November 2024 statewide ballot by the legislature to allow the creation of bond-issuing public infrastructure districts was defeated by 61.6% of voters.

The bill's sponsor, Republican State Rep. Mark Lawson, said unlike the ballot measure, which would have allowed PIDs to issue property tax-backed bonds, the bill calls for property assessments to pay off debt.  

"This bill is completely statutory and allows much more flexibility," he said ahead of an April House vote. "What this bill also does is fleshes out what districts shall be, how they shall be formed, how they shall be governed. None of that was in the state question." 

Development-related special districts, which place the burden of paying for necessary infrastructure such as water, sewers, and roads on the property owners within the districts, have proliferated in states like Texas and Colorado, where district voters approve property tax-backed bonds.

The state enacted a $12.78 billion budget for the fiscal year that starts July 1, along with the creation of a Taxpayer Endowment Trust Fund that will invest $200 million of existing reserves that would grow over time.

The term-limited Stitt, who called for the move in his final State of the State address in February, said the fund will help enable the state to eventually eliminate its income tax, which has been the target of rate cuts, mostly recently in 2025 when the top personal income rate was reduced to 4.5% from 4.75%, while a mechanism was put into place that could lead to future cuts.

The governor's proposed fiscal 2027 budget projected the state will end the current fiscal year on June 30 with $1.776 billion in reserve funds and nearly $1.53 billion in unspent cash, along with more than $1 billion in other fund balances. 

The big financial cushion contributed to Oklahoma's three bond rating upgrades since 2024, with the latest coming from Fitch Ratings in March. 

Unlike most states that expanded Medicaid coverage, Oklahoma locked the move in through a voter-approved constitutional amendment in 2020. 

Ballot measures proposed by lawmakers to give the state more flexibility ahead of looming federal cuts to Medicaid eventually morphed into Senate Joint Resolution 50, which failed to pass. That measure would have asked voters to repeal certain sections of the 2020 constitutional amendment if the federal medical assistance percentage match currently at 100% falls below 90%.

The fiscal 2027 budget boosts public school funding by $232 million, including $100 million for teacher pay raises. Meanwhile, the state also expanded its tax credit program for private school expenses.

Lawmakers lifted the annual cap on the state's Parental Choice Tax Credit to $275 million in fiscal 2027 from $250 million in fiscal 2026. The program, which launched in December 2023, provides a refundable income tax credit of $5,000 to $7,500 for eligible taxpayers who pay qualified expenses, such as tuition and fees, to an eligible private school. 

The legislative session, which ended May 14, marked another unsuccessful round of reform bills aimed at the Oklahoma Turnpike Authority in the wake of its bond-financed $8.2 billion, 15-year ACCESS Oklahoma (Advancing and Connecting Communities and Economies Safely Statewide) program to widen existing toll roads and build new ones.

"We were unable to get any legislation passed that would have offered relief to Oklahomans that are being subjected to the draconian use of eminent domain laws as practiced by the OTA," Randall Carter, a spokesman for Oklahomans for Responsible Transportation, said in an email.