After state leaders’ unified rollout, 2.5 percent rollback rate on property tax bill looks unlikely to stick

Three weeks ago, Gov. Greg Abbott convened state leaders to announce an achievement he hailed as “unprecedented”: The governor, lieutenant governor, House speaker and Republican tax committee chiefs in both chambers had come together on a proposal to curb property tax growth. Identical bills filed in the Texas House and Senate would trigger automatic local elections when a local government’s property tax revenue grew more than 2.5 percent in a given year.

The consensus proposal marked a drastic departure from the current rollback rate of 8 percent and even from the numbers the two chambers backed last session. In the wake of a House pitch for 6 percent and a Senate pitch for 4 percent, the governor proposed a compromise at 2.5 percent — a show of “real leadership,” joked Sen. Paul Bettencourt, the Houston Republican who chairs the Senate’s property tax committee.

Less than a month later, that 2.5 figure seems to face steep odds — if it’s still on the table at all. Several of the leaders who flanked the governor at that press conference weeks ago have backed off from the proposal, casting the 2.5-percent figure as more of a starting point than a consensus. And a key GOP vote in the Senate, Amarillo Republican Kel Seliger, has announced his opposition to the legislation, calling into question whether leadership will have enough support to bring the bill to the floor for a vote.

Some have suggested that 2.5 was never a serious proposal — just a headline-grabber that would make critics more likely to settle at a number like 4 percent or 5 percent down the line. And some leaders on the issue suggested the number was subject to change within hours of its announcement.

“This is a starting point for the bill,” state Rep. Dustin Burrows, a Lubbock Republican who’s spearheading the legislation in the lower chamber, told radio host Chad Hasty the day after he sat beside Abbott to lay the bill out. “Ask me again in 60 days, and we’ll see where the bill is at.”

Local officials have consistently opposed lowering the rollback rate, arguing that doing so would limit their ability to fund critical city services. A fiscal note from the Legislative Budget Board estimates that billions in new revenue for local governments would be at stake if the threshold were lowered to 2.5 percent.

Currently, taxpayers have to petition for an election on their property taxes — and can do so only if their taxing district’s revenue is set to rise more than 8 percent over a given year. State leaders — who can exert some power over the process but do not have the jurisdiction to set local tax rates — have honed in on lowering the rollback rate as the key to easing the property tax burden on homeowners. In addition to lowering the election trigger to 2.5 percent, the current proposal would make that election automatic. But tax revenue collected from new developments would not count towards the trigger, so local governments could still see their revenue grow beyond that threshold without voter approval.

Local officials brought their concerns — at high volume — to a public hearing on Senate Bill 2, held just a week after the legislation was filed. Nonetheless, the measure passed out of the Senate’s majority-Republican property tax committee last week with no "nay" votes. But it has yet to be called to the floor for a vote of the full Senate as lawmakers work behind the scenes to recruit supporters and slog through an upcoming school finance bill that will prove an important piece of companion legislation.

Last week, Lt. Gov. Dan Patrick, the head of the Senate, took a less-than-bullish approach on whether that 2.5 percent election threshold will stick.

“I don’t know what the final number will be,” Patrick told a group of business leaders at an Austin luncheon Thursday. “We want to be as close to the governor’s number as we can be, if not there.”

Bettencourt, the bill’s Senate author, has made much the same point. He expressed confidence that “we’ll have the votes” to pass property tax reform — but left open the possibility that the measure could pass with a number higher than 2.5 percent.

“I’m certainly not open to a number that won’t give property tax relief,” Bettencourt said last week in an interview with The Texas Tribune. “I know that the number 6 won’t.”

Bettencourt suggested there’s no rush on bringing the bill, as filed, to the Senate floor. For one thing, there are still significant pieces to be filled in.

The property tax bill includes “placeholder language” on how to tax school districts — what many consider the thorniest portion of the tax debate. Numerically, it's also far and away the most significant portion of the tax debate: More than half of the overall property tax bill paid by Texas homeowners and business owners comes from school district taxes. And unlike property taxes raised by cities and counties, school districts' ability to raise money directly affects the state budget because the state shares responsibility for funding public schools. That language is expected to be hammered out more concretely in a yet-to-come, sprawling school finance bill that will mark the session’s other major priority.

The tax bill — and the much-trumpeted rollback rate — could change as time goes on and as the lower chamber works through the process.

“I’ve got great respect for Speaker [Dennis] Bonnen and Chairman Burrows, and they may come up with new and better solutions in House Ways & Means,” Bettencourt said. “We’re open to watching it.”

The House, though, appears to be taking its time with the legislation.

The tax-writing Ways & Means Committee met publicly for the first time last week — and instead of listening to the four groups invited to testify that day, punted half of its lineup into a second “introductory hearing” scheduled for Wednesday. Despite an effort by Burrows, the Lubbock Republican chairing the committee, to center the hearing on more general background information, members were eager to pose questions about the headlining property tax proposal.

At one point during the Feb. 13 hearing, after a person testifying fielded legislation-specific questions from members, Burrows encouraged the speaker to continue delivering introductory remarks, adding jokingly amid laughter that “it sounds like the committee may be ready for a certain bill.”

During the 2017 session, the more moderate House was open to a higher rollback rate than the Patrick-led Senate. The upper chamber backed a rollback rate of 4 percent, and the House supported a 6 percent rate. Down-to-the-wire negotiations left the chambers deadlocked as the clock ran out.

In early 2018, months after the session concluded, Abbott laid down an even more ambitious marker, calling on state lawmakers to limit annual local governments’ property tax revenue growth to 2.5 percent. At the time, when asked about the chances such a proposal would have at the Legislature, Abbott told reporters he thought it would “be easy to get it through both the House and Senate because taxpayers in the state of Texas are frustrated.”

But even the governor has made few public remarks about the figure he championed last month at the Capitol. And neither has Bonnen, who in 2017 — under different leadership — led the House’s efforts for a 6 percent rollback rate. Spokespeople for Abbott and Bonnen did not return requests for comment for this story.

The significant shift since 2017 — and the fact that no one seems married to the original 2.5 percent proposal — suggest that starting debate at that low threshold may have been a calculated tactic to make local officials, so far the loudest critics of the bill, willing to settle at a higher number later on.

Patrick hinted at that strategy in a speech last week.

“A lot of those people who opposed our bill last time are coming to the Capitol saying, ‘We should’ve taken that deal,’” the lieutenant governor told a group of business leaders in Austin on Thursday. “Local officials are now willing to sit down at the table.”

While Republicans have framed the property tax proposal as a conversation-starter, a number of Democrats have already written it off as a nonstarter. Members in the minority party argue not only that the 2.5 figure is too low, but also that both chambers should tap the brakes on the debate until school finance legislation is filed, as the issues are so closely intertwined.

“This [proposal] raises more questions than it does answers,” said state Rep. Trey Martinez Fischer, a San Antonio Democrat who sits on the Ways & Means Committee, hours after the GOP property tax proposal was unveiled. “We do our worst work when we work under deadlines — especially artificial deadlines.”

Martinez Fischer, asked about the House’s slower approach with the property tax legislation, said the 150-member chamber plans to have more “thoughtful” discussions than the Senate committee.

“In the House, we recognize that we’re going to be the adults in the room,” Martinez Fischer told the Tribune. “We’re going to come up with pragmatic and thoughtful policy — and we won’t react to the artificial deadlines set by the Senate.”

Meanwhile, top Republicans in both chambers have been upfront about their concerns with the legislation as it’s written. State Rep. John Zerwas, a Richmond Republican who serves as the House’s chief budget writer, told the Tribune’s Evan Smith last week that a 2.5 percent election trigger “puts a real stranglehold on our county officials, our city officials.” And Seliger, who has said he doesn’t support the bill in its current form, said he gets the impression that 2.5 is “a very squishy number.”