05-C Tax System Reforms - Laserfiche WebLink

Home Browse Search

Legislative ILegislative Services SCHOOL FINANCE REFORM: CITIES IN THE CROSS HAIRS? If there had been any doubt that Texas cities can be harmed by a special session on school finance reform, that doubt was erased by comments made at a public policy conference in Austin last week. The conference, sponsored by the Texas Public Policy Foundation, included a panel discussion about school finance. On the panel were two prominent members of the legislature. After the panelists had finished their prepared remarks, there was a standard question-and-answer period. The executive director of a statewide business lobby organization immediately asked the following question: if local school property taxes are reduced, what can the legislature do to prevent cities and counties from enacting large tax increases to make up the difference? One of the legislators on the panel answered that the legislature would need to devise a way to statutorily "slow down" local rates, including a possible requirement that a vote of the public be required to raise municipal taxes. New Reasons for Concern This exchange was alarming for several reasons. Most obvious, of course, is the very real possibility that the legislature will attempt to erode the ability of cities to raise revenue to pay for services. Further, it is clear that this effort may be undertaken not just by the legislature, but by other groups such as the business lobby. The most likely scenario is that a special session on school finance will be held in April, and it is clear that cities face the very real possibility that school finance "reform" will include efforts to constrict municipal taxing authority. One approach may be to enact the so-called Taxpayer Bill of Rights (TABOR), which has already been enacted in Colorado and other states. Features of TABOR include the following: 1. any tax rate hike, new tax, or tax policy change resulting in additional revenue requires voter approval; 2. property tax revenues cannot, without voter approval, increase from one year to the next beyond the rate of inflation plus additions to the tax rolls from annexations and certain other adjustments; and 3. all multi-year obligations (bonds and other contractual obligations) require voter approval.