public policy Archives - Waco Chamber

The Connection Between Property Tax and School Finance

By Jessica Attas

As published by the Waco Tribune-Herald.

 

2017-09-19_1543Few are the people who take delight in paying property taxes. Yet when we understand where our dollars go and have confidence they are being spent wisely on services and infrastructure of benefit to us all, the sting is lessened and, in fact, we may appreciate the quality of life and services they provide.

 

Nevertheless, when the growth of our tax burden outpaces the growth in our income, it can cause a strain that is more intimately felt. The same is true in the commercial sector. Businesses may be reluctant to make new hires (i.e., create jobs) or otherwise expand their business (which oftentimes includes a capital investment that boosts our tax rolls) if they face uncertainty on how their property taxes may increase from one year to the next.

 

In that vein, property-tax reform has been a battle cry of the last regular and special state legislative sessions. At the Greater Waco Chamber of Commerce, we stand with our members and businesses in calling for policy solutions that will offer true and meaningful property-tax relief and reform. Businesses experiencing a 200 percent increase in land valuations will not support the sustainable growth and development so many in our community have worked so long and so intentionally to foster. To discuss what those meaningful solutions could be — and what they are not — it may be helpful to widen the scope and provide a bit of context.

 

Our property-tax bill comes from the taxing entities in our jurisdiction: city, county, school districts and community colleges. Each entity determines its tax rate and may tax up to a maximum rate determined by the state government. If they want to increase over 8 percent from one year to the next, they must take this proposition to the voters for approval (this is called the roll-back rate).

 

Many taxing entities strive to lower their rates when possible. Our local county leadership has successfully done so the last two budget cycles. With that in mind, let’s consider the other piece of the property-tax system, which is the appraisal valuation.

 

Unlike the tax rate, which is set locally, the appraisal valuation is not fully within the local appraisal district’s control. State of Texas Government Code Section 403.302 requires the State Comptroller’s office (the Property Tax Assistance Division) to conduct a Property Value Study (PVS) to determine the total taxable value of all property in each school district every two years. For each study, the state selects a sample and determines what they feel are fair market values for each property.

 

For this year for Waco Independent School District, state officials looked at 400 of 26,000 properties, determined what they felt were their values and used those to set the range in which other properties in the district should fall. Interestingly, many of the properties selected were prime properties in areas of town experiencing increased development interest, such as within the Tax Increment Financing Zone, or two at Barron’s Crossing. We should remember those properties are not truly representative of all properties within WISD.

 

The state comptroller study is then used to determine appraisal district performance, with the performance metric being that the appraisal district must come within a range of 5 percent below/above the total value set by the state. Let that sink in a moment.

 

Let’s turn to another aspect. This might seem a change of topic, but read on to fully consider. On the floor of the Texas House of Representatives during the special session, a legislator asked Rep. Dan Huberty, chairman of the Public Education Committee who had proposed legislation (HB 21) to boost education funding to the tune of some $1.8 billion, if in fact the state weren’t spending more on education today than ever. While technically true, this does not recognize that the number of students we have in the system is growing at a rate that far outpaces student spending. The net effect is that the per-pupil amount of state funding is less every year, with current spending levels below pre-recession levels of 2008, before even taking into account inflation. Adjusted for inflation, in 2015 dollars, Texas was spending $10,260 per student in 2009-2010. Today we spend just $8,935.

 

Further, our demographic trends in Texas are such that our percentage of English language learners — a group more costly to prepare for success in our educational system and for post-secondary success in our workforce — is growing more rapidly than other student groups. So the need is greater now than ever, but the state dollars are slipping away from education. Texas, in fact, ranks 43rd in the nation in per-pupil spending (up from 49th in 2012). Our student outcomes reflect that. According to the U.S. Department of Education, Texas ranks 40th in percentage of fourth graders reading at grade-level (46th in the nation for Hispanic students alone) and 41st in the nation in post-secondary matriculation. While 46 percent of young adults ages 25-34 in the nation hold a certificate, associate’s degree or higher, in Texas just 38 percent of adults in that same age range do. For the Texas economy to remain competitive and grow, it is imperative we develop our talent and workforce to support the very businesses that will drive our economic growth.

 

Declining state funding

 

Historically, state support of education spending (per-pupil spending) was an even split, 45-45, between the state and local school districts (via those property taxes discussed above) with the remaining 10 percent coming from federal dollars. Over the last decade, the state’s share of per-pupil funding has been gradually declining, from about 45 percent for the last couple of decades, to around 36 percent in the upcoming budgetary biennium from the state. The balance, of course, must be made up by increased local share, which means increased local property taxes.

 

I’ve burned the midnight oil looking over budgets of years past, digging through Legislative Budget Board reports, and running numbers and scenarios, but in the interest of brevity, and for some wonderful real-life projections of impact, I simply would refer you to the excellent Texas Tribune article by Ross Ramsey, “Analysis: The state’s declining support for public education in Texas” (December 2016). One standout fact from that read is this: Had state support of education remained at 44.9 percent over the last decade, the state would have spent $18.6 billion more and school district taxpayers would have spent $11.6 billion less. But as the state reduces its share, local districts must fill the gap — and the way to do that is by raising property taxes. Further, as our state experiences economic growth, property values may experience market-driven increases as well. The state has used these as an excuse to decrease its own education spending.

 

The crux is this: State aid in education declines — is able to decline — as local property values rise. And values are within a range set at state level, though not necessarily market-driven. This is codified statutorily for the Comptroller’s Office and again in the state’s budget (SB 1) crafted by state legislators and passed by the legislative conference committee. It’s an exhaustive 900-plus-page document and, in Article III of the 85th legislative session’s SB 1, relating to the Texas Education Agency, page 5, subsection 3 tells us clearly: Property values, and the estimates of local tax collections on which they are based, shall be increased by 7.04 percent for tax year 2017 and by 6.77 percent for tax year 2018.

 

We know it is inevitable that property values will continue to rise because the state is mandating it and has given that directive in the state budget. State officials have set the values to which our appraisal district must adhere.

 

When we consider all these components, it is curious then for the Texas Legislature to consider lowering the property-tax rollback rate from 8 percent to 4 percent or even 6 percent as the best solution for property-tax reform. The problem, as we can see, is not the rate but the rising values. And that range of values is artificially created and imposed by the state. Again, our appraisal district must adhere.

 

If we want meaningful property-tax relief — which we as the Greater Waco Chamber of Commerce do — we must address the real problem, which is the broken way we fund our public schools, and stop shifting the cost from the state down to the locals. This is a shift we have seen already: cities being expected to maintain state/federal rights-of-way along our interstates and highways but not given funding to do so; counties being required to provide mental-health services for inmates (a worthy investment, though also one that perhaps should fall more squarely under the state mental-health umbrella) but not given money to provide them; and schools being mandated to give teacher raises or implement more rigorous high-quality early-childhood education programs but not given money to do so. The state is shifting more responsibility to local entities but not providing the funding, which means no choice remains but for local property-tax bills to increase.

 

Further, the state proposes to limit the amount local entities can raise to meet such responsibilities, all while setting the valuation ranges — a fact many voters don’t know — so that local appraisal districts bear the brunt of citizen outcry when property taxes rise when, in fact, the state has directed it to be so.

 

We applaud the work of the Texas House of Representatives, Speaker Joe Straus, Chairman Huberty, his Public Education Committee and its outstanding staff, who worked to craft some meaningful solutions to the property tax-school finance dilemma. We are grateful our representatives supported that bill. We applaud Chairman Larry Taylor and the Senate Education Committee for their call to study school finance during the interim and we appreciate our senator supporting that aspect of the bill.

 

Perhaps if we can talk and move toward repair of our method of school finance, then we can make more progress on broader educational reforms to improve the system. Advocates of public education are often wary of educational reforms. If we fix the system of cost-shifting down to the local government, we could then turn to such education reforms, all while also righting the burden of our rising property taxes. Conversations about what education reforms will improve student outcomes seem premature if the essentials of adequately funding Texas public schools isn’t first addressed.

 

It’s imperative to our future economic growth and vitality that we address our broken property-tax system. It is certainly true that, because Texas does not have a state income tax, our overall tax burden places us in the middle of the pack in a state-by-state ranking. Yet our property taxes are among the highest in the nation. The pro-business orientation of our elected leadership and a friendly regulatory environment have allowed us in Texas to be very successful in attracting and expanding business. Imagine how much stronger our hand would be in competing for new business — particularly those that are capital intensive and thus generate higher property taxes — if we were able to lower our property-tax bills. Property tax relief and reform is possible. It begins with fixing our method of funding Texas public schools.

 

Meaningful property-tax reform and relief is important to businesses and residential owners alike. Perhaps if we could set aside our ideas about what we’ve always known, and be willing to think outside the box about meaningful policy solutions, we could create a property-tax system that allows the certainty that businesses need to grow and thrive, while also improving school funding and student outcomes so that our schools are strengthened and can create a future workforce ready to meet the needs of a thriving state economy that supports enhanced quality of life for us all. The prosperity and economic strength of our state — and all her people — depends on it.

 

-Jessica Attas is director of public policy for the Greater Waco Chamber of Commerce. Our mission is to “prepare and market the Greater Waco region for the businesses and jobs of the future and an outstanding quality of life.”

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The Greater Waco Chamber will host Texas Comptroller Glenn Hegar on October 6 as he stops in Waco as part of his Good For Texas tour.
 
Hegar is embarking on a 27-city, two-month Good For Texas tour, meeting with local officials and citizens to talk about the future of the Texas economy.
 
The Good For Texas tour, a series of town hall-style gatherings, began September 9 with stops in New Braunfels and Kerrville. Hegar will visit every economic region of the state before his last stop in El Paso on November 9.
 
“I’m asking Texans to join me for a discussion of the trends and issues affecting the economy of the state and its regions,” said Hegar. “Understanding where we are today can help all of us ensure that we remain prosperous tomorrow—and that’s good for Texas.”
 
Since taking office on January 2, Hegar has emphasized efforts to increase transparency and accountability at the state’s chief financial agency, while improving customer service. The town hall tour is intended to facilitate those efforts and help keep Texans informed of economic issues in their own backyards.
 
“Texas’ economic prosperity has made it the envy of the nation, and despite recent weakness in oil prices, our resilient and diverse state economy continues to grow,” Hegar added. “Regional diversity within the state is a big part of that story, and I’m very excited to discuss not only the successes, but also the challenges each region must address to ensure our prosperity continues.”
 
The Good For Texas Tour Town Hall meeting in Waco will be from 2 p.m. to 3 p.m. on October 6 at the Greater Waco Chamber of Commerce.
 
More information on the tour, as well as interactive features and economic snapshots for each region, are available at TexasAhead.org. Texans can also follow the Comptroller’s progress and find interesting economic facts and figures for each stop by following @TXComptroller on Twitter or liking the Texas Comptroller Facebook page.
 
The Greater Waco Chamber is focused on policies conducive to the economic growth and development of the central Texas region. Engaging elected officials at all levels through its public policy committee, issuance of policy position statements and hosting legislative programming are part of recent efforts to positively impact economic development, education, healthcare, physical infrastructure and natural resources.
 
The event is free and open to the public, but space is limited. Please contact J.D. Windham, Jr at 254-757-5630 for more information or register on WacoChamber.com.
 
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About the Greater Waco Chamber:
The Greater Waco Chamber is a business leadership organization that advances a progressive and visionary agenda for economic growth and quality of life. The Chamber prepares and markets Greater Waco for the businesses and jobs of the future and enhances the quality of life of the community by promoting strategic development. For more information, visit WacoChamber.com.
 

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Guith_Christopher-webThe Greater Waco Chamber will host a discussion on 21st Century Energy, featuring Christopher Guith, senior vice president for the Institute for 21st Century Energy at the U.S. Chamber of Commerce, as part of its U.S. Chamber Federal Issues Briefing Series.
 
The 21st Century Energy luncheon will be at 11:30 a.m. on June 30 at the Baylor Club. The Chamber’s new Issues Briefing Series is designed to bring in experts from across the U.S. with various public policy backgrounds and connect them to the Greater Waco business community.
 
Guith will be providing a brief on behalf of the U.S. Chamber of Commerce on federal policies and national affairs affecting Greater Waco and the business community on issues related to energy policies.
 
“America’s energy landscape has changed more dramatically in the last decade than at any time in its history,” said Guith. “These changes have created tremendous economic and geopolitical opportunities, many of which are being realized throughout the country today, especially in Texas. However, a deluge of federal regulations threatens to stop many of these benefits in their tracks and put the country on a dangerous path.”
 
At the U.S. Chamber of Commerce’s Institute for 21st Century Energy (Energy Institute), Guith is responsible for developing the Institute’s policies and initiatives as they apply to the legislative, executive and regulatory branches of the federal and state governments.
 
Additionally, Guith offers expertise on an array of energy and environmental issues. He educates policymakers, businesses, energy stakeholders, coalitions and the public about the importance of a diversified energy portfolio and how it can ensure an efficient, reliable, prosperous and secure energy future.
 
The 21st Century Energy Policy luncheon will also give attendees the opportunity to hear about the U.S. Chamber’s work to further economic and job growth into the future.
 
The U.S. Chamber of Commerce is the world’s largest business organization, representing more than 3 million businesses, which enables them to focus on developing and implementing policy on major issues affecting businesses.
 
“Energy policy impacts our lives every day,” said J.D. Windham, Jr, director of community development at the Greater Waco Chamber of Commerce. “That’s why we’re excited to have Christopher come down from Washington, D.C. to discuss how national policies on energy have a direct impact on the decisions of businesses to remain profitable and support a growing economy.”
 
The Greater Waco Chamber is focused on policies conducive to the economic growth and development of the Central Texas region. Engaging elected officials at all levels through its public policy committee, issuance of policy position statements and hosting legislative programming, such as the U.S. Chamber Federal Issues Briefing Series, are part of recent efforts to positively impact economic development, education, healthcare, physical infrastructure and natural resources.
 
Individual tickets are available for $40 and tables of eight are $320. Registrations are due June 24 and can be made online at WacoChamber.com.
 
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About Greater Waco:
The Greater Waco Chamber is a business leadership organization that advances a progressive and visionary agenda for economic growth and quality of life. The Chamber prepares and markets Greater Waco for the businesses and jobs of the future and enhances the quality of life of the community by promoting strategic development. For more information, visit WacoChamber.com.
 

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Meadors-Flores-EngstromThe Greater Waco Chamber will host a State of the Nation Luncheon featuring Rob Engstrom, senior vice president of the Political Affairs and Federation Relations Division and national political director at the U.S. Chamber of Commerce, at 11:30 a.m. on March 20 in the Waco Convention Center.

 

Engstrom will be providing a brief on behalf of the U.S. Chamber of Commerce on federal policies and national affairs affecting Greater Waco and the business community on issues such as healthcare, physical infrastructure, education and economic development.

 

The U.S. Chamber of Commerce is the world’s largest business organization, representing more than 3 million businesses, which enables them to focus on developing and implementing policy on major issues affecting businesses.

 

“In 2014, the U.S. Chamber will work to protect and expand the pro-business majority in the House and advance our position in the Senate,” said Engstrom.

 

The State of the Nation luncheon will give attendees the opportunity to hear about the U.S. Chamber’s work to protect and improve the nation’s business climate and economy.

 

Additionally, Congressman Bill Flores will be in attendance and provide a congressional update on legislation affecting businesses in Greater Waco and the 17th Congressional District of Texas.

 

“The Greater Waco Chamber of Commerce has been very active in developing and assisting its members to promote economic growth and good jobs in Waco and McLennan County,” said Congressman Bill Flores. “It is important that Congress listen to ‘Main Street,’ including local chambers on federal policies to help create growth, opportunity, jobs and better paychecks for hardworking American families. I am looking forward to the State of the Nation Luncheon and listening to Rob Engstrom’s keynote address.”

 

The Greater Waco Chamber is focused on policies conducive to the economic growth and development of the Central Texas region. Engaging elected officials at all levels through its public policy committee, issuance of policy position statements and hosting legislative programming, such as the State of the Nation luncheon, are part of recent efforts to positively impact economic development, education, healthcare, physical infrastructure and natural resources.

 

The State of the Nation Luncheon is presented by Texas First State Bank. The gold sponsor is BBVA Compass and silver sponsors are Baylor University and Courtyard by Marriott.

 

Individual tickets are available for $25 and tables of eight are $200. Reservations can be made online at WacoChamber.com.

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Upcoming Events

Latest News

Good For Texas Tour with Texas Comptroller Glenn Hegar

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October 5, 2017 read more

Primer on Property Tax and School Finance

The Connection Between Property Tax

September 19, 2017 read more

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