The Texas Senate approved a property tax plan Monday that could result in lower revenues for cities and especially schools across the state.
Cities would be required to get voter approval for revenue growth over 3.5 percent. But for school districts, that threshold is lower -- just 2.5 percent.
School districts are watching all the maneuvering closely, because it’s not clear how the state will continue to provide additional funding for schools while also capping revenue from property taxes.
“We don’t know how it will impact us,” said Frisco ISD Superintendent Mike Waldrip.
Like many school districts that are property wealthy, Frisco ISD is subject to recapture. That means in addition to tax restrictions, it has to send some of its revenue back to the state.
“It’s a system that is broken, if they don’t fix it, there will be significant issues,” Waldrip said.
The question for school districts is how the state will bring the formula back into balance — with state funding that accounts for rapid growth in many communities that also reduces the reliance on local taxes.
“These things have been designed to lessen the burden on taxpayer, lessen recapture and have the state contribute more to school funding. We’ll have to wait and see what they do when they’re done,” Waldrip said.
If all Gov. Greg Abbott has prioritized to get done sounds too good to be true, SMU Political Science Professor Cal Jillson says there is reason for caution.
“The state is saying trust us, we will increase our funding, cap your local funding, I think school districts need to be very wary of that,” Jillson said.
One possible revenue stream being debated is an increase in sales tax -- but that would still have to be approved by voters in November.
“When it's taxation and local government it is a shell game. You might improve your situation, but you may pay more sales tax,” Jillson said.
Six weeks remain in the current legislative session in Austin.