If you own property Texas, you probably already know that property tax rates are pretty high compared to other states. While the state of Texas doesn’t collect property tax, the average county tax rate is about 1.93% before you add in other local jurisdictions, like cities and school districts. Over the past decade, we’ve seen some of the highest rate increases in the country. At the same time, state funding to public schools has decreased dramatically. In fact, school financing has become such a hodge-podge of local policies, state mandates, and short term “fixes” that a recent Texas Supreme Court ruling advised the legislators make addressing the “byzantine” school funding system a priority.
This all concerns property owners in Texas because when the state decreases funding to schools, local districts have to make up the difference somewhere. Usually that means asking for increases in local jurisdictions. Further complicating the matter is the state’s policy of compelling wealthier districts to share their collected taxes with poorer districts, also known as Robin Hood laws. Whether or not you agree with the principle of the law, if you happen to live in a Robin Hood district, it means you have less say over how your tax dollars are being spent.
Property owners also are right to be concerned about school finance reform because while state legislators can claim to have decreased the tax burden, it becomes a moot point when homeowners end up paying more out of pocket every year to cover expenses the state no longer pays. The effect of the tax breaks and budget cuts is more pressure on homeowners and the housing market.
Consider the fact that for many homeowners, the property in which they live is their biggest investment. It is in their best interest to see the value of that investment rise. The great news for homeowners is that property values are indeed rising, and quickly. On the local level, living in a great school district does tend to make the housing stock more desirable for the resale market, and increases the perceived quality of life in the area. It is in a homeowner’s best interest to have great schools nearby. Funding those great schools is becoming more expensive for homeowners because the state is paying less of the bill. Because state law requires property taxes to be based on the value of property, when values go up and rates don’t change, tax bills rise. That puts people in the uncomfortable position of not being able to afford their single biggest investment when it increases in value. That doesn’t seem right. And it doesn’t have to be that way.
Some advocates for school finance reform are calling for the state to fund half of the cost to educate each child in Texas. Others believe the state should create a voucher program which could potentially send taxpayer dollars to private or online schools as well as public and charter schools. The debate over whether the system needs a complete overhaul or a series of smaller tweaks will be raging in Austin this month. No matter what the outcome, the implication for homeowners in Texas will be massively important.
The MetroTex Association of REALTORS is the largest professional real estate association in North Texas. Comprised of more than 18,000 real estate professionals, MetroTex is celebrating 100 years of service to the community in 2017. For more information about buying, selling, or renting a home in North Texas, visit dfwrealestate.com.