The reason for rising property taxes may not be what you think

By Vicki Fullerton and Jaime Lee

It didn’t feel good, did it?

It’s the biggest check you’ll likely write all year. You just paid your property taxes.

It’s no longer a matter of if your property taxes went up, it’s how much … but this doesn’t have to be the case.

Take a second to review your property tax bill and you’ll likely see that the largest portion goes to your school district.

In fact, more than half (53.97%) of all local property taxes paid by Texas property owners in 2015 were levied by school districts, according to the Texas Comptroller’s most recent Biennial Property Tax Report.

Texas properties are in high demand, which translates to increased market value and higher appraisals, making Texas real estate a wise investment. Some blame skyrocketing local property taxes on these increased appraisals.

It’s safe to say all Texans want their properties to rise in value, so let’s not vilify increasing appraisals. But we also want a sustainable way to fund our state’s public school system.

There is a way we can realize increasing appraisals, decrease our local property tax burden, and still fund our public schools: Increase the state’s contribution to public education so property owners aren’t bearing the brunt at the local level.

This won’t be an easy task, but we at the Texas Association of Realtors agree with former State Rep. John Otto, who chaired the House Appropriations Committee in the 2015 legislative session, about how to start.

“A discussion needs to take place to determine the proper way to share public education costs between the state and local property taxes,” Otto said. “And once that goal is achieved, school districts should be able to lower their tax rates when the state no longer receives the benefit of growth in property values.”

The state used to pay a much larger share of the cost to fund public schools. It was only a few years ago that Texas public schools were funded 50% by local property taxes and 50% by the state.

Today, your share of the funding through local property taxes is about 62% and the state’s share is about 38%. This imbalance is largely because the state is benefiting from increased property values. Translation: You are paying more in local school property taxes because your property value went up as the state share decreased.

Over the next two years, it’s estimated that Texas public schools will see an additional 165,000 students at an added cost of $2.65 billion.

Over that same two-year period, the state will receive the benefit of your local school property taxes growing by $3.56 billion simply because properties increased in value. This will further reduce how much the state contributes to fund schools, which will then further increase your share – and the cycle will continue. 

If the Texas Legislature doesn’t act to balance state and local contributions to public education, who will pay this cost? You will.

To further complicate matters, depending on your ZIP code, your money may not stay local. There are mechanisms in place to distribute school property taxes from some so-called “property wealthy” school districts to “property poor” school districts. 

So how do we resolve this situation?

Our school finance system has become so complex that taking any steps toward reform will require addressing several other areas of funding. Maybe you’ve heard terms like Robin Hood, ASATR, recapture, and golden pennies, all of which play a role in the system.

There is no easy answer to comprehensive reform, but we have to start the discussion.

Former State Sen. Florence Shapiro witnessed this firsthand when she served as chair of the Senate Education Committee from 2003-2012. “There are many issues that need to be resolved in the Texas school finance system. We have discussed fairness and distribution in the system for decades, yet an equitable solution has not been enacted.  Furthermore, the imbalance of state vs. local share of public education funding has become an increasing problem as we rely more and more on local property taxpayers’ money.  The Legislature must significantly reform the public school finance system.  There are many voices to be heard and this Legislature seems poised to listen and take action, for which I commend my former colleagues.”

The leaders with the power to change this system are meeting right now. The 181 elected members of the Texas Legislature are responsible for determining the state’s budget, including the state’s share of public school funding.

It’s a great sign that the House set aside $1.5 billion in its proposed budget specifically to address recapture, ASATR, and equity, thereby ensuring that public school taxes are devoted to public schools and not spent on something else.

And we agree with former Sen. Shapiro and former Rep. Otto that it’s time to discuss the proper way to share public education costs between the state and local property taxes. Once that goal is achieved, school districts should be able to lower their tax rates and give local property owners the break you deserve.

It will take a lot of work to revamp our school finance system, but we believe Texas schoolchildren and taxpayers are worth it.

Vicki Fullerton is chairman of the Texas Association of Realtors.

Jaime Lee is governmental affairs communications manager for the Texas Association of Realtors.