The school financing plan adopted by the Texas Legislature in 2006 that was designed to cut school taxes by $7 billion over two years really did work, according to a new report, despite the fact that Texans are paying $1.7 billion more in total property taxes than they did in 2005.
HB 1 of the 2006 Legislature required school districts to reduce their maintenance and operations tax rate — which had been capped at $1.50 per $100 of assessed valuation — by a third over two years. To compensate the districts for a revenue loss estimated at $2.5 billion a year, lawmakers revised the business tax, increased the tax on cigarettes, and promised to allocate surplus state revenues to a property tax relief fund.
A study by the TTARA Research Foundation said local school property taxes would have increased $4.7 billion without HB 1. With the passage of the school tax reform package, total school taxes actually fell $2.3 billion.
“The average Texan’s total property tax bill in 2007 was 20% lower than what it likely would have been had there been no tax relief initiative,” the study said.
Texans haven’t noticed a significant drop in their total property taxes because of rising valuations, the need to service school district debt, and the higher tax rates imposed by other taxing entities, including cities, counties, and special districts.
“In fact, Texans do not pay a property tax,” the study said. “They pay a myriad of property taxes that are typically combined into a single tax bill.”
Debt service by school districts will continue to increase as they finance the facilities needed to accommodate an additional 80,000 students each year, the report said.
The study said total debt service on Texas school district bonds jumped from $900 million in 2005 to $3.3 billion in 2007, a 37% increase.
“Over the next several years debt service taxes will increase even more dramatically because local voters approved a record amount of bonds in 2007,” the study said.
Texas voters in 2007 approved a total of $12.8 billion of the $14.5 billion of school bonds requested.