Monday, the Senate Committee on Finance met to discuss their interim charge related to property tax relief. They had the usual suspects show up as invited testimony: The Comptroller’s office and the Legislative Budget Board among others to discuss the possibility of getting property tax relief to millions of Texans drowning in growing tax burdens across the state. The last time they convened, it seemed based on comments and questions from committee members, that they had no intention of bringing any meaningful relief to Texans, aside from paying down a few pennies on compression rates.  This last meeting made that even more apparent.

The most glaring example of this in the committee meeting was the committee’s interaction with Vance Ginn, Ph.D., Chief Economist for the Texas Public Policy Foundation, who has been promoting a plan to eliminate property taxes in Texas. Similarly, Texas for Fiscal Responsibility (TFR) has been promoting the same idea for over a year, with a slightly more aggressive approach in that we believe that we do not need to create any new taxes to accomplish elimination. Nevertheless, the TPPF Lower Taxes, Better Texas plan is well thought out and is a completely feasible plan to eliminate property taxes in Texas. The plan suggests raising sales taxes in order to bridge the gap, which actually follows the Republican Party of Texas’ platform plank that suggests using a consumption-based tax to offset property taxes.

 

 

Dr. Ginn started out by naming inflation as a big concern for families in Texas and that increasing property tax burdens were yet another obstacle for families to stay afloat. He acknowledged one of the major drivers of this was the school Maintenance and Operations (M&O) tax and began to address the idea of using surplus dollars to ‘buy-down’ or begin eliminating them (something TFR has been advocating for as well). He asked the question that again reinforced TFR’s position, “How can we actually lower property tax bills, not just slow the growth rate?” Slowing growth has been the Texas legislature’s status quo for a decade and despite their proclamations of “historic property tax relief”, no one’s bills have gone down despite these policy changes. He added, “Whenever you ask many Texans… it’s not that the property tax bill is going up too fast, it’s that the property tax bill is too high already.”

 

 

But before Dr. Ginn could even finish his opening statement he was interrupted by State Sen. John Whitmire (D-Houston) (who scored an abysmal 14 on the most recent Fiscal Responsibility Index). Whitmire asked if he [Dr. Ginn] “would ever be happy with a level of taxation considering the services taxes provide?” Dr. Ginn responded by saying that staying within the conservative metric of population plus inflation is a good guide. Whitmire did not seem to acknowledge that response, continuing to opine that the collection of property taxes provides for emergency services and the need for more and more tax dollars. Whitemire ultimately concluded that if they keep chipping away at the property tax revenue they might be forced to make budgetary cuts (God forbid!).

 

 

Immediately afterward, State Sen. Robert Nichols (R-Jacksonville) (who scored a 71 on the most recent Fiscal Responsibility Index) chimed in, expressing worry that counties would do not have sales taxes would not benefit from the TPPF’s plan because they don’t have a way to offset a loss in property taxes, to which Dr. Ginn conceded. This point is why TFR has advocated to not replace the property tax with anything because all that is actually needed is to make big enough budgetary cuts to prioritize property tax relief, leaving no need for the use or replacement in revenue by sales taxes. Nichols seemed to insinuate that the state legislature would be too confused on how to supplement the funding in these counties and asked Dr. Ginn how he would fund them? Dr. Ginn answered with an amazing response, “We do want to make sure that taxpayers are part of the process as well.” Dr. Ginn continued to explain the TPPF plan to “eliminate the school M&O tax by buying down compression rates over time using surplus dollars.” Nichols responded by saying TPPF has some real weak spots in their plan.

 

 

Finally, after that exchange, the Senate Finance Committee Chairman, State Sen. Joan Huffman (R-Houston) (who scored a 69 in the most recent Fiscal Responsibility Index) attempted to pile on as well, explaining to Dr. Ginn (who has a Ph.D. in Economics) what surpluses are and how they work. Dr. Ginn responded to the comment by giving the correct definition of surplus dollars, “Surplus dollars are no more than excessive dollars taken from the taxpayer by the state, those dollars should be returned to the taxpayer”. Ultimately, Dr. Ginn said that the most needful form to return tax dollars is through property tax relief. Huffman responded by saying, “there is not going to be a surplus every time, it’s rare.” Dr. Ginn then went on to explain that fiscally responsible policies that limit government would continue to produce surpluses.

These exchanges serve as yet another great example of what many state lawmakers are already thinking when it comes to how to use the projected massive surplus they will have when they return for the 88th legislative session in January and surpluses going into the future. Seemingly, many have no intention of giving it back to taxpayers in any meaningful way, because if you spend that surplus on other budgetary items, there is in fact no surplus. This could be best analogized to that of you getting a bonus from work and instead of paying off debts, you go and buy a motorcycle. When your spouse asks why you did not pay off debt, you tell her you could not because you had to buy a motorcycle. This is the game lawmakers are playing with billions of your hard-earned tax dollars.

Taxpayers should know, based on the direction of the interim committee hearings that it does not appear that the legislature is willing to choose taxpayers over special interests in Austin. As TFR has said in the past when there is a big pile of money available to spend, rest assured lobbyists and special interests will be working hard to convince lawmakers the swamp needs it more than you. After all, they keep getting reelected, despite ignoring the cries of Texas taxpayers continuously on this issue.

TFR hopes this will change and we aim to continue to educate taxpayers on how best to engage with lawmakers in an effective manner to promote fiscally responsible policy in Texas. As a matter of fact, next week we will be premiering our own plan to accomplish this. Please be on the lookout for new articles and videos explaining how we can convince corrupt lawmakers to make good on their campaign promises to taxpayers!

Please tell your friends that are worried about increasing tax burdens to sign up for our weekly email called the Fiscal Note to stay up today on Texas news and to hear about our new Texas Prosperity Plan!

Recently, Truth in Accounting published their latest Combined City Taxpayer Report of the 10 most populated cities in the United States and the debt burdens put on each of their taxpayers.

The report attempts to measure the annual financial reports of each city combined with underlying entities and debt obligations that many times are not included in those same reports.

Texas has three cities included on the list, and the report sheds light on the growing liabilities for Texas taxpayers which until remedied, will only continue to stifle prosperity for future generations of Texans.

The Top 10

Ranked from worst to best, the top ten largest cities with the largest shares of individual taxpayer burdens in the United States are:

1. Chicago, Illinois: -$135,700 per taxpayer
2. New York City, New York: -$91,500 per taxpayer
3. Los Angeles, California: -$55,300 per taxpayer
4. Philadelphia, Pennsylvania: -$48,100 per taxpayer
5. San Jose, California: -$42,100 per taxpayer
6. San Diego, California: -$37,600 per taxpayer
7. Houston, Texas: -$27,500 per taxpayer
8. Dallas, Texas: -$26,000 per taxpayer
9. San Antonio, Texas: -$19,400 per taxpayer
10. Phoenix, Arizona: -$11,200 per taxpayer

 

Texas Cities

City of Houston 

According to the report, the City of Houston has a taxpayer burden of $13,200, or each taxpayer’s share of the city’s debt. When you include the county and other underlying governmental units, however, that burden increases to $27,500 per taxpayer.

Here is a breakdown:

*Source: City Combined Taxpayer Burden Report from Truth in Accounting

___________________

City of Dallas

According to the report, the City of Dallas has a taxpayer burden of $12,700, or each taxpayer’s share of the city’s debt. When you include the county and other underlying governmental units, however, that burden increases to $26,000 per taxpayer.

Here is a breakdown:

*Source: City Combined Taxpayer Burden Report from Truth in Accounting

___________________

City of San Antonio

According to the report, the City of San Antonio has a taxpayer burden of $3,100, or each taxpayer’s share of the city’s debt. When you include the county and other underlying governmental units, however, that burden increases to $19,400 per taxpayer.

Here is a breakdown:

*Source: City Combined Taxpayer Burden Report from Truth in Accounting

 

What Does It All Mean?

Texas taxpayers can never hope to fully eliminate things like property taxes or cut government spending when our local government jurisdictions continue to operate irresponsibly or voters continue to overwhelmingly support the addition of new debt obligations on top of those that already exist.

Though the report incorporates the share of state debt in its calculation for each taxpayer it does not include the pure insanity that is federal debt, which recently surpassed over $30 trillion.

All of this debt combined with ongoing record inflation and increases in government spending makes the future look bleak. Without a renewed focus on fiscal sanity by Texas taxpayers, it is likely this behavior will continue and will continue to call into question future prosperity.

 

Understanding Texas’ property taxes, or more specifically understanding the means by which property taxes are levied, collected, distributed, and ultimately who bears responsibility for the increasing property tax burden in the state is admittedly a confusing endeavor; potentially intentionally so.

In a recent poll conducted by the UT Tyler and Dallas Morning News, Texans were asked

“Who do you believe is responsible for high property taxes in Texas?”

The responses were enlightening to say the least because they show that a significant portion (40%) of Texans place the blame on Texas Gov. Greg Abbott and the Texas State Legislature. This breaks down to 60% of Democrats and 26% of Republicans polled.

Though they certainly bear some of the blame when it comes to property taxes and the results, or lack thereof, of the promises they make on the campaign trail with regard to providing relief from growing tax burdens, the rates themselves are actually administered on the local level, by local elected officials, who notably, were only blamed by 24% of those polled.

 

So Who is to Blame?

In plain language, local elected officials. They ultimately set the rates.

School districts, municipalities, counties, and special purpose districts all levy property taxes. When a property owner receives their appraisals, they do not inherently raise their property taxes. A decision made by local elected officials when they set the tax rate the following Summer determines whether an increase in taxes will actually take place.

They determine whether to adopt what is called the ‘No New Revenue Tax Rate’ or to raise the rate, confined by statute set by state lawmakers and the approval of voters over a certain threshold.

All of that being said, state lawmakers and the Governor absolutely do bear some of the blame when it comes to the structure of the property tax formula, and frankly allowing local governments to run roughshod over taxpayers in recent decades. The increase in tax burden has far out-paced the growth in Texas population, i.e. whom the taxes are supposed to serve; see below:

 

 

What Can Be Done?

 Texans for Fiscal Responsibility (TFR) has long supported the elimination of the property tax in Texas. TFR believes the collection of such a tax is immoral and no property owner should have to pay perpetual rent to the government.

We do not have to replace the property tax with anything either; we just need our elected officials to actually cut the size and scope of government, instead of just merely subscribing to the current ‘slow-the-growth’ strategy.

Texas does not have a revenue problem, it has a spending problem and the solution to property taxes is not to increase revenue but instead to cut spending. If we hold lawmakers and local elected officials accountable to cut spending and reduce the size and scope of government, our property tax burdens would subside, without creating any new tax burdens.

In a year where most property owners find themselves getting overwhelmed with inflation driving up the costs of basic goods and services as well as major increases in property tax burdens, it has not been surprising to see millions of Texas taxpayers call for the complete elimination of property taxes this year.

This is something that Texans for Fiscal Responsibility (TFR) has advocated in favor of for more than a year and we have stated our plan to use surplus dollars to accomplish this multiple times. Specifically, we have advocated for the elimination of the school Maintenance & Operations (M&O) portion of the property tax, using surplus tax dollars created by the spending cap passed by State Sen.Kelly Hancock (R-North Richland Hills) during the last regular legislative session.

It is expected that the State Comptroller will give an updated BRE (Biennial Revenue Estimate) sometime this Summer that would show roughly a $15 billion budgetary surplus that lawmakers will have the ability to allocate in the coming legislative session, slated to begin in January 2023.

In recent weeks, many people have asked TFR, “What are you advocating we replace the property tax with… a sales tax? a VAT tax? an income tax?” The simple answer is ABSOLUTELY NOTHING. There is no good reason to have to replace the tax with anything, and here are a few thoughts as to why:

An income tax is a near impossibility for Texas because, in 2019, Texas voters passed a constitutional amendment that prevents the creation of such a tax. It would be incredibly difficult to reverse this and see its implementation. Both the sales tax increase and the creation of a Value Added Tax (VAT) are feasible and have been suggested by many separate organizations to free us from the shackles of paying perpetual rent to the government to live in our homes, but we believe that they simply are not necessary.

The chart above from the Texas Public Policy Foundation (TPPF) shows the rate of growth for property taxes in Texas over the last 20 years. You can see that Population + Inflation, which has long been a metric of conservatives to limit the size of the government, has grown 104%, yet the school portion of property taxes has grown 171% in that same time period. Texas also has the 6th highest property taxes in the United States. With such high growth of tax burdens in Texas, how would it be possible to eliminate the school M&O property tax without creating new taxes or increasing other burdens?

The answer is simple, our state lawmakers actually have to start legislating like fiscal conservatives. You know… the thing all Republicans label themselves as to get elected? At the heart of the conservative worldview is that the government should be extremely small in scope. TFR has yet to meet a self-proclaimed conservative that does not think our government is already too big, yet, despite Republicans controlling every statewide elected office and maintaining majorities in both chambers of the state legislature for nearly two decades, our state budget is on track to have tripled since 2000 in the next biennium (Fiscal Years 2024-25)! Does that sound like we are governing as conservatives? The fact that we passed a constitutional spending limit last legislative session is a huge victory for conservatives, but all these limits actually do is slow the growth of government. This is the same tactic that “conservatives” have used to convince you that they fixed the property tax system in 2019. They passed caps on rate growth, which of course does not lower taxes but merely slows their growth.

The only way we can end the property tax without shifting the burden elsewhere is for the Texas government to live within our means. This would mean that we need to actually cut the size of the government, not merely slow its growth. Right now Texas’ surplus is expected to be around $15 billion dollars and our savings account, the Economic Stabilization Fund (ESF), or ‘Rainy Day Fund’ is sitting at around $13 billion. Between the two we should have roughly $28 billion in expendable income (if not more). This total is not even counting the billions in COVID dollars that have yet to be allocated as a part of the ARPA funding passed by U.S. Congress, or the mountains of corporate welfare and abatements Texas pays out to companies like Facebook who actively silence conservatives while receiving our tax dollars.

Bridging the budgetary gap to eliminate school property taxes in Texas is possible. The only thing preventing this from happening are state lawmakers that campaign as conservatives but legislate like progressives. With budgetary surpluses expected to continue indefinitely and lawmakers actively shrinking the size of state government, organizations like TPPF believe that it would be possible within 10 years to completely phase out the tax. This could be accomplished even sooner if lawmakers made it a priority.

Texas does not have a revenue problem, we have a spending problem. The solution to property taxes is not increasing revenue, the key is cutting spending. If we hold lawmakers accountable to cut spending and reduce the size of government, our property tax problems would be over without creating any new taxes.

In what seems like a perpetual election cycle, Texans find themselves yet again about to go to the polls to vote in the Runoff Election for the Republican and Democrat primaries, which took place in early March.

Given the political disposition and history of many districts around the state, the winner of several of these runoff elections likely determines the overall outcome going into the 88th legislative session, set to begin in January of 2023.

The following is not an exhaustive list, but a closer look at many of the more competitive and notable races taking place around the state:

 

Texas Senate

Senate District 24: Pete Flores vs. Raul Reyes

Texas Senate District 24, is currently represented by outgoing Republican State Sen. Dawn Buckingham (Lakeway) who is currently a Runoff Election candidate for Texas Land Commissioner. The district found its boundaries significantly changed due to the recent decennial redistricting process primarily shifting Southward, and very obviously purposefully including the residence of former Republican State Sen. Pete Flores, who previously represented Texas Senate District 19, before losing his reelection bid to current Democrat State Sen. Roland Guttierez in the 2020 Election Cycle.

During his short tenure in the State Senate, Flores was the recipient of a Fiscal Responsibility Index rating of a lousy 65 out of 100.

Previous Fiscal Responsibility Index Ratings:

• 86th Legislative Session (2019): F – 65/100

Flores heads into the Runoff election being challenged by a former U.S. Congressional candidate and U.S. Air Force veteran Raul Reyes. In the March 2 primary election, Flores received 38,342 votes or 46.1% of the total vote compared to Reyes who received 27,243 votes or 32.7% of the total vote among a total of 3 candidates. Flores boasts the endorsements of former President Donald Trump, both U.S. Senators John Cornyn and Ted Cruz, Texas Gov. Greg Abbott, and Texas Lt. Gov. Dan Patrick, while Reyes has the endorsements of various conservative activist organizations.

Key votes taken in 2019 by Flores resulting in his failing rating:

• Voting in favor of spending Economic Stabilization Fund (ESF) or “Rainy Day Fund” money on ongoing expenses, violating Texas Conservative budget limits
• Voting in favor of regulation on the financing of pet purchases
• Voting in favor of raising the smoking age to 21
• Voting in favor of increased regulations on listed family homes
• Voting in favor of expanding the reach of municipal development districts
• Voting in favor of expanding student loan repayment programs

 

Texas House of Representatives

 

House District 12: Kyle Kacal (Incumbent) vs. Ben Bius

Texas House District 12, currently represented by Republican State Rep. Kyle Kacal (College Station) found its boundaries significantly changed due to the recent decennial redistricting process. The new boundaries no longer include the portion of McLennan County (Waco) it had or any of either Falls or Limestone Counties. The boundaries moved Southward and now consist of all of Robertson, Madison,  Grimes, Walker, and Washington Counties while also maintaining a portion of Brazos County, albeit slightly adjusted.

These boundary alterations have certainly aided in Kacal finding himself in a primary runoff election, however. Kacal is coming off of his fifth legislative session and has consistently found himself at the bottom of the Fiscal Responsibility Index among his Republican colleagues. The most recent legislative session was no different, where he came in dead last compared to the rest of the House Republican Caucus, being rated at an abysmal 28 out of 100 for the 87th legislative session.

Previous Fiscal Responsibility Index Ratings:

• 87th Legislative Session (2021): F – 28/100
• 86th Legislative Session (2019): F – 42/100
• 85th Legislative Session (2017): F – 44/100
• 84th Legislative Session (2015): F – 66/100
• 83rd Legislative Session (2013): F – 34/100

Kacal is being challenged by a former U.S. Congressional candidate and businessman Ben Bius. In the March 2 primary election, Kacal received 11,675 votes or 47% of the total vote compared to Bius who received 10,392 votes or 41.8% of the total vote among a total of 3 candidates. Kacal boasts an endorsement from Gov. Abbott. In the 87th legislative session, Kacal was one of seven total Republican House lawmakers to support legislation seeking to expand Medicaid in Texas, signing on as a joint author, even though it explicitly conflicts with his own political party’s platform which states its direct opposition to such a thing.

Other key votes taken by Kacal resulting in his failing  rating:

• Electing Dade Phelan as Speaker of the House
• Voting in favor of allowing Democrat Chairmen in a Republican-majority House of Representatives
• Voting against overriding unconstitutional executive orders
• Voting against an effort to require record votes in House Committees
• Voting in favor of protecting corporate welfare for “Green Energy”

 

House District 19: Ellen Troxclair vs. Justin Berry

Texas House District 19 was one of several House Districts that found itself completely moved as a result of the recent decennial redistricting process, an example of the growth in population in specific pockets of the state. The district was previously located in East Texas but now encompasses a portion of Central Texas, West of the City of Austin.

The two Republican candidates vying for the position include former Austin City Councilwoman Ellen Troxclair and Austin Police Officer Justin Berry. Both were previously ‘coalition candidates‘ having previously endorsed one another when they announced their candidacies for different districts before the finally approved redistricting boundaries in October. Now they find themselves going head-to-head in a primary runoff election. Berry had unsuccessfully challenged Democrat State Rep. Vikki Goodwin (Austin) to represent House District 47 in the 2020 election cycle.

Troxclair received 12,435 votes or 38.2% of the total vote compared to Berry who received 11,523 votes or 35.4% of the total vote among a total of 4 candidates in the March 2 Primary Election. Berry boasts the endorsement of Gov. Abbott while Troxclair has received the endorsements of U.S. Senator Ted Cruz and the other two Republican candidates who lost their bids on primary election day for the seat, Nubia Devine and Perla Hopkins.

 

House District 60: Glenn Rogers (Incumbent) vs. Mike Olcott

Texas House District 60, currently represented by Republican State Rep. Glenn Rogers (Mineral Wells) is yet another House District that saw its boundaries significantly change due to the recent decennial redistricting process. The boundaries no longer include Callahan, Coleman, Brown, Eastland, or Hood Counties and shrunk to only include Stephens, Palo Pinto, and Parker Counties.

Rogers is coming off of his first legislative session where he received a detestable rating on the Fiscal Responsibility Index, being rated in the bottom tier compared to his Republican colleagues with a 45 out of 100 for the 87th legislative session.

Previous Fiscal Responsibility Index Ratings:

• 87th Legislative Session (2021): F – 45/100

Rogers finds himself heading to the Runoff Election challenged by conservative activist and research scientist retiree Mike Olcott. In the March 2 primary election, Rogers received 12,229 votes or 43.7% of the total vote compared to Olcott who received 10,086 votes or 36.1% of the total vote, among a total of 4 candidates. Rogers boasts an endorsement from Gov. Abbott while Olcott has received the endorsements of U.S. Senator Ted Cruz and several conservative activist organizations.

Key votes taken by Rogers resulting in his failing rating:

• Electing Dade Phelan as Speaker of the House
• Voting in favor of allowing Democrat Chairmen in a Republican-majority House of Representatives
• Voting against overriding unconstitutional executive orders
• Voting against an effort to require record votes in House Committees
• Voting in favor of new burdensome occupational licensing schemes
• Voting in favor of protecting corporate welfare for “Green Energy”

 

House District 91: Stephanie Klick (Incumbent) vs. David Lowe

Texas House District 91, currently represented by Republican State Rep. Stephanie Klick (Fort Worth) found its boundaries only slightly altered due to the recent decennial redistricting process. The new boundaries are still wholly in Tarrant County and include Haltom City and North Richland Hills.

Klick is coming off of her fifth legislative session and has consistently found herself trending downward on the Fiscal Responsibility Index, which unfortunately seems to be all too common of a theme for many lawmakers who serve for extended periods of time. In the most recent legislative session, Klick was rated as having a horrid 54 out of 100, or in the ‘middle-of-the-pack’ when compared to the rest of her colleagues in the House Republican Caucus.

Previous Fiscal Responsibility Index Ratings:

• 87th Legislative Session (2021): F – 54/100
• 86th Legislative Session (2019): F – 56/100
• 85th Legislative Session (2017): C+ – 76/100
• 84th Legislative Session (2015): A – 90/100
• 83rd Legislative Session (2013): A+ – 99/100

Klick is being challenged by U.S. Army veteran David Lowe. In the March 2 primary election, Klick received 6,426 votes or 49% of the total vote compared to Lowe who received 5,116 votes or 39% of the total vote among a total of 5 candidates. Klick boasts an endorsement from Gov. Abbott while Lowe has endorsements from two of the three other Republican candidates who lost their bids on primary election day for the seat, Anthony Reed and David Silvey among other conservative activist organizations. In the 87th legislative session, Klick was chairman of the House Public Health Committee which oversaw legislation like that of the Texas Heartbeat Bill as well as what many conservative activists believe was purposeful inaction on legislation related to prohibiting gender modification of children, another legislative priority of the Republican Party of Texas.

Key votes taken by Klick resulting in her failing rating:

• Electing Dade Phelan as Speaker of the House
• Voting in favor of allowing Democrat Chairmen in a Republican-majority House of Representatives
• Voting against overriding unconstitutional executive orders
• Voting against an effort to require record votes in House Committees
• Voting in favor of new burdensome occupational licensing schemes

 

House District 93: Laura Hill vs. Nate Schatzline

Texas House District 93 is currently represented by outgoing Republican State Rep. Matt Krause (Haslet), who is a current candidate for Tarrant County District Attorney after being a short-lived candidate for Texas Attorney General. The district was slightly altered as a result of the recent decennial redistricting process, losing portions of the City of Fort Worth and all of its portion of the City of Arlington.

The two Republican candidates vying for the position include former Southlake City Mayor Laura Hill and local activist Nate Schatzline.

In the March 2 Primary Election, Schatzline received 5,033 votes or 43.5% of the total vote compared to Hill who received 4,238 votes or 36.6% of the total vote among a total of 3 candidates. Schatzline boasts an endorsement from outgoing State Rep. Matt Krause while Hill has received the endorsement of Texas House Speaker Dade Phelan.

 

House District 122: Elisa Chan vs. Mark Dorazio

Texas House District 122 is currently represented by outgoing Republican State Rep. Lyle Larson (San Antonio). The district was slightly altered as a result of the recent decennial redistricting process, extending slightly Westward in Bexar County and losing a portion of Northeast Bexar County.

The two Republican candidates vying for the position include former San Antonio City Councilwoman Elisa Chan and former Bexar County GOP Chairman and State Republican Executive Committeeman Mark Dorazio.

In the March 2 Primary Election, Chan received 7,452 votes or 37.1% of the total vote compared to Dorazio who received 5,519 votes or 27.4% of the total vote among a total of 4 candidates. Chan boasts an endorsement from Texas House Speaker Dade Phelan while Dorazio has received the endorsement of U.S. Senator Ted Cruz and one of the former candidates in the March 2 primary election, Mark Cuthbert, as well as several conservative activist organizations.

Election Day

Texans for Fiscal Responsibility (TFR) wanted to remind Texans that the early voting period for the Primary Runoff Election is set to take place between Monday, May 16, and Friday, May 20. Election day itself is set to take place on Tuesday, May 24.

Texas taxpayers should be aware of a tremendous resource made available to them in the Fiscal Responsibility Index. TFR spent hundreds of hours analyzing votes that your lawmakers take and we have condensed them into an easily understandable metric that is available for anyone to use. We recommend that you take a look at how fiscally responsible your lawmaker is before casting your ballot in the upcoming primary runoff election.

Saturday marked election day across the state for a whole host of ballot propositions, including over 200 bond proposals from various local governmental jurisdictions.

A total of $18.5 billion of proposed spending was considered by Texas voters and after reviewing the results, it appears that many Texas taxpayers might find themselves confused over what many of the bond proposals actually do.

Despite overwhelmingly supporting two statewide ballot propositions that would provide purported property tax relief to Texas taxpayers in the same election, many of those same taxpayers voted in favor of bond proposals that are funded primarily by their own property taxes, including some that will undoubtedly work to increase that same tax burden.

It’s absurd but perhaps lends credence to arguments in favor of things like the need for uniform election dates, a review of how the bond elections themselves are administered, and a review of the language used on the ballot which can oftentimes be found confusing to voters themselves.

Property Tax-Backed Bonds

 Bonds are ultimately certificates of debt issued by a governmental entity to finance projects with the promise to repay the borrowed money at a fixed rate of interest in the future. Put another way, it is debt, financed on the backs of future taxpayers and their own future prosperity.

In this election, a dozen Texas cities proposed a combined $2.3 billion in bonds and over 100 Texas school districts proposed a combined $16 billion in bonds.

The largest municipal bond proposal package was from the City of San Antonio, totaling $1.2 billion ($1.8 billion when interest is factored in). It included 6 proposals, all of which were approved by San Antonio voters. The city maintained that it had no ‘planned’ increase in the property tax rate. San Antonio boasted about $1,237 of debt per capita as of 2020.

Similarly, the City of Fort Worth included 5 bond propositions in its package totaling $560 million ($845 million when interest is factored in). Propositions A through E all passed with nearly 60% support. Fort Worth Mayor Mattie Parker maintained that the bonds would not impact the tax rate. Fort Worth had about $824 of debt per capita as of 2020.

The largest school district bond package, promoted by Forney ISD, amounted to nearly $1.3 billion and passed with nearly 65% support. In 2020, Forney ISD had an enrollment of slightly less than 12,000 students and a debt per capita of about $7,748.

Some bond packages were in fact defeated, but en masse, most passed with solid majorities.

 Bond Transparency and Rules

 In 2019, the Texas Legislature passed House Bill 3, a school finance overhaul, and Senate Bill 2, property tax reform. Among the provisions included in the legislation was one that required school bond propositions to clearly state on the ballot the words “THIS IS A PROPERTY TAX INCREASE” for bond propositions that qualify. Similarly, if local jurisdictions must now seek the approval of voters if they intend to raise the tax rate above 2.5% for school districts and 3.5% for cities and counties.

The problem? Some local officials claimed that the proposed bonds would not raise taxes because there was no ‘current’ plan for the school district to actually increase its property tax rate, a rate that is reset annually. It is misleading, likely intentionally. School districts for instance can always raise future tax rates.

There is a litany of other issues with this as well. Local jurisdictions are almost assuredly relying on continued trends of growing populations in their jurisdictions. For instance, relying on growing property appraisals in larger urban areas, amounting to higher collections.

A few weeks ago, the Texas Senate Committee on Local Government convened an interim hearing to discuss bond elections and ballot language, items listed as interim charges by Texas Lt. Gov. Dan Patrick for the committee to study in preparation for the next legislative session, slated for January 2023. The Texas House of Representatives, by comparison, has no such interim charge.

This election was full of several examples of confusing messaging used by proponents of such bond proposals.

Take this one from the Tyler ISD for instance, which used a large sign including in large letters the words “NO TAX RATE IMPACT” while also including a large ‘$0’ next to the wording, both being easily readable by passersby. Perhaps intentional, however, the sign also included the words, “PROPOSED AMOUNT $89 MILLION” in much smaller text in a shade of grey, much less obvious to the eye.

 

 

The Background of Inflation, Increased Costs of Living, and Existing Debt Burdens

 As debt continues to get approved, it is important to understand that it piles onto the already existing and troublesome debt burdens seen in jurisdictions all across the state.

All of this is also happening against the backdrop of 40-year high record inflation, increasing the costs of almost all goods and services. This of course does not even take into consideration the over $30 trillion of debt accumulated by the federal government with recent record spending under both Republican and Democratic administrations.

Eventually, someone has to pay those bills. Shamefully, it looks more and more like it will be future generations of Texans.

Election Results

 The final election results as well as their final disposition of all bonds that were considered on the May 7 ballot have not yet been compiled by the Texas Bond Review Board.

Saturday, Texas voters took to the polls to consider two statewide constitutional propositions, local elected offices, and various bond proposals.

As the results came in, there appeared to be some very promising news for conservatives, especially in school board elections where more conservative candidates swept candidates advocating for things like CRT and child grooming in the classrooms.

As expected the statewide propositions related to property taxes also passed with overwhelming support.

 

 

As seen in the results above, both propositions passed with about 85% support. Proposition 1 was a carveout for the elderly and disabled and Proposition 2 was an increase in the homestead exemption from that of $25,000 to that of $40,000. The likely reason that these two proposed constitutional amendments passed so easily is that Texas taxpayers are being crushed under increased property tax burdens. Sadly, these propositions represent yet another example of the Texas Legislature’s typical approach to property tax relief in the last decade, giving us gimmicks and no real relief at all.

The first proposition, the carveout for the elderly and disabled, is one of many types of “relief” legislation the legislature has passed in the last few legislative cycles. Why do they continue to pass the same type of “do nothing” legislation repeatedly? Because lawmakers want to keep the bulk of their voter base happy and it is no secret that the elderly currently make up the majority of voters in Texas. This is simply an effort by swindling politicians to keep the majority of their voters placated at the expense of the rest of us. The problem is that these types of carveouts do not actually provide relief, they simply slow the growth or freeze taxes at a certain level, ultimately raising taxes on those that do not qualify for the exemption. In no way can this be considered true property tax relief.

The second proposition increases the homestead exemption. To some, this might seem like a reasonable reform. If you watched the Senate Finance Committee hearing last week, however, you might feel differently. In this hearing, it was suggested that we stop tying homestead exemptions to static dollar amounts and instead use a percentage. This is because in high inflation environments, like the one we find ourselves in today, it necessitates constant adjustments to the amount of exemption. If it was based on a percentage we would have no need for lawmakers to come to rescue us every 5 years.   This is why the homestead exemption is increased periodically, to keep up with inflation, making this time no different, with nearly double-digit inflation the $25k exemption has simply lost its original value as home prices skyrocket due to a myriad of bad policy decisions at the federal level.

Sadly no one will experience any significant property tax relief because of these two passed amendments. The best anyone could hope for is for your property taxes to stay the same, and that will not be the case for most people. Texans for Fiscal Responsibility (TFR) has been warning of this outcome for nearly a year, ever since the legislature decided to gut 2 property tax relief bills that would have actually provided significant relief for Texans and instead replaced them with shiny trinkets designed to appease low-information voters.

TFR has advocated for the use of surplus dollars to pay down M&O compression rates since the last Summer. However, since that time our surplus has only continued to grow! The estimated $8 billion surplus is now estimated to be nearly $15 billion when the State Comptroller releases his update BRE (Biennial Revenue Statement) sometime this summer. That amount, in combination with our bloated ESF fund ($13 billion) would equate to roughly $28 billion that is available for something like property tax relief. To give you an idea of how significant this amount is, it takes roughly $32 billion to run school M&O (Maintenance & Operations) state-wide in a year. With this amount, we could almost pay down an entire year of M&O property taxes in Texas (even if we decided not to make any budget cuts at all). In a biennium, this would result in a nearly 50% reduction in M&O property taxes if we dedicated the entire amount of surplus dollars and the ESF.

In the past year, TFR has advocated giving the surplus back to whom it belongs, you the taxpayer, in the form of actual property tax relief. The tax relief could be even more significant if we decided to cut our bloated budget, which has nearly tripled in the last 20 years, or if we banned the practice of taxpayer-funded lobbying which steals tens of millions from taxpayers every year to pay lobbyists who work against your interests.

Rest assured that we not only have the money to provide significant property tax relief, but we also have the ability to eliminate the M&O portion of the property tax completely. All that is needed is courageous lawmakers that are willing to be consistent with their “conservative” label. Real conservatives actively shrink the size of government and cut taxes significantly, neither have which have occurred in Texas in decades. We have never had a revenue problem in Texas, we have always had a spending problem.

As always, TFR will continue the fight against big government and support fiscal sanity here in the Lone Star State. We are here as a resource for anyone that needs us, please reach out if you have questions we can help with. Remember there are Primary Runoff Elections coming at the end of May which will be reporting on shortly. This is one of the best ways to have your voice heard on things like property taxes. Work to vote out fiscally irresponsible incumbents and vote for candidates that will commit to eliminating things like property taxes completely.

Wednesday, the Texas Senate Committee on Finance convened for the first time since the last special legislative session to consider interim charges related to the state budget.  Among the issues discussed were things like inflation, Russia, and state pension reforms. This hearing was the first of which the new committee chairman, State Sen. Joan Huffman (R-Houston) presided, and after congratulatory pleasantries from other committee members, the hearing got underway.

Hearing Summary

The hearing was open to invited testimony only. In the opening remarks from representatives of the Texas Legislative Budget Board (LBB), it was mentioned that they expect a shortfall in the Medicaid program which will need to be dealt with in the supplemental budget to be considered by lawmakers during the next legislative session beginning in January of 2023. The Comptroller’s office mentioned that it expects to have an updated Biennial Revenue Estimate (BRE) this Summer which likely will show a larger than expected revenue surplus. In response, State Sen. Charles Perry (R-Lubbock) made the point that despite the large surplus only $9 billion of it is purely from Texas state revenue (not due to federal funds).

There was then an extensive discussion about inflation on the national level and how it will affect budgetary concerns for the Senate Finance Committee and the appropriation of funds to state agencies. In the course of the discussion, many Senators mentioned the growing problem of increasing rents on taxpayers, confirming that rents in the Houston area have risen from 10%-40% in the last few years.

Sen. Perry, once again speaking of the expected budgetary surplus said, “$311 billion in revenue is significantly up, $46 billion from where we left last session, but I can safely say we are going to see $46 billion in increased cost in that.” He went on to say that, “market pressures and salaries alone” for state employees will require more revenue is spent.

This commentary was revealing and serves as a good example of the importance of interim committee hearings. These hearings are the first place that lawmakers begin to really show their hands with regard to what they deem as priorities in ways to spend your tax dollars in the next biennium. What Perry is saying, is that they seemingly have no intention to cut the size of our bloated government, but rather intend to spend every dime of revenue, which will be blamed on inflation.

In another point from the Comptroller’s office, they mentioned basing homestead exemptions on static dollar amounts (As one of the two current ballot propositions increases the current exemption from $25k to $40k) is a self-defeating policy when inflation is factored in. He suggested possibly looking at a percentage-based exemption instead to prevent repeatedly having to correct for inflation. Other than a short conversation on homestead exemptions there was no significant conversation about a plan for property tax relief during the rest of the hearing.

There was discussion about the recent insanely high property valuations and appraisals taxpayers are receiving around the state, but both State Sens. Paul Bettencourt (R-Houston) and Kelly Hancock (R-North Richland Hills) both used the opportunity to boast about the “historic property tax reform” passed in 2019. They both asked for homeowners to be patient and wait until cities have a chance to lower their tax rates with all the extra revenues they have experienced, indicating that they think homeowners will be significantly surprised at their total tax bill in the fall after rate reductions.

Forgive Texans for Fiscal Responsibility (TFR) if we don’t hold our breath on that one.

Despite the lack of interest in using surplus dollars to actually lower property tax burdens on taxpayers, there was much interest and discussion among committee members in giving Texas Capitol employees yet another raise. Texas bureaucrats (especially on the Senate side) seem to receive salary raises every time they go into legislative session. Chairman Huffman asked what it would cost to give across-the-board raises to state employees in the legislature and Sen. Perry asked for more information on state legislative salaries so that he could study how best to give employees a bump.

Bottom line…far more time was used discussing giving our “public servant” bureaucrats more money than giving money back to taxpayers.

If this hearing was any sign of what is to come, the chances of Texas taxpayers receiving any significant reform seem to be slim to none. This potential outcome can change if taxpayers dedicate themselves to engaging effectively with our financial system and state lawmakers.

TFR encourages readers to tell their friends to subscribe to our weekly email and read our articles so they can be kept up to date on all important Texas fiscal news. TFR is always here to shine a light on the actions of lawmakers who seemingly would rather they be left in the dark. You can always count on us to continue to provide transparency and education with the goal of fiscal responsibility.

Last week, the Midland Reporter-Telegram reported on the 15 highest-paid Texas state employees. They used data collected by The Texas Tribune as a part of their ‘Salaries Explorer’ obtained through information requests from the Texas State Comptroller.

Curiously, 11 of the top 15 highest-paid state employees, are employed through the Teacher Retirement System of Texas (TRS). According to the explorer, the agency employs 869 individuals and the median salary of an employee at the agency is $84,460. For comparison, according to ZipRecruiter, the average salary in Texas is $62,266 per year.

Of all 869 employees in the agency, 27 of them make more in salary each year than the Governor of Texas, who makes $153,750.

Digging a little further, in total 1,618 state employees across various state agencies make more per year in salary than the Governor of Texas.

Perpetual Rescue by State Legislature

 The Teacher Retirement System of Texas supports 1.8 million public education employees and retirees. It was established in 1975, and the solvency of its funds and benefits for those it serves has come under much scrutiny in the last few legislative cycles.

In 2019, during the 86th legislative session, the state legislature passed Senate Bill 12 in an attempt to put the pension system on a better financial footing, adjusting for the cost of living. Ultimately, they fell short of making systemic reforms that were needed to make such benefit increases consistently for their beneficiaries. The Reason Foundation analyzed the legislation which had the ultimate goal of ensuring actuarial soundness of the fund 30 years into the future.

In 2021, during a special legislative session of the 87th legislature, they passed legislation that provided what came to be known as a “thirteenth check” for TRS beneficiaries. Ultimately, it amounted to a one-time payment of up to $2,400 to offset the cost of living increases, costing taxpayers nearly $701.1 million.

Though the cost of living adjustments was made, recent legislation did not address the much-needed structural reforms for the TRS itself, therefore not reducing the unfunded liabilities for taxpayers.

Concerned taxpayers may be alarmed at the salaries of some of the Teacher Retirement System employees for instance, especially since they manage a fund that has continued to be problematic for taxpayers every legislative cycle.

Top 15 Highest Paid State Agency Employees

 Of the top 15 highest-paid Texas state employees, 11 of them are employed by the Teacher Retirement System of Texas.

Name: Michelle Le Beau

Job: Chief Scientific Officer

Agency: Cancer Prevention and Research Institute of Texas (CPRIT)

Salary: $608,850

 

Name: Jase Auby

Job: Chief Investment Officer

Agency: Teacher Retirement System

Salary: $550,000

*According to glassdoor, the median salary for a Chief Investment Officer is $201,576 per year, for comparison.

 

Name: Eric Lang

Job: Senior Managing Director

Agency: Teacher Retirement System

Salary: $414,999

*According to glassdoor, the median salary for a Senior Managing Director is $205,879 per year, for comparison.

 

Name: Kimberly Carey

Job: Investment Director

Agency: Teacher Retirement System

Salary: $408,000

*According to glassdoor, the median salary for an Investment Director is $179,685 per year, for comparison.

 

Name: Brian Guthrie

Job: Executive Director

Agency: Teacher Retirement System

Salary: $399,999

*According to glassdoor, the median salary for an Executive Director is $178,288 per year, for comparison.

 

Name: David Veal

Job: Director of Investments

Agency: Employee Retirement System

Salary: $395,000

 

Name: Mikhael Rawls

Job: Investment Manager

Agency: Employee Retirement System

Salary: $387,991

 

Name: Barney Timmins

Job: Chief Investment Officer

Agency: Texas Education Agency

Salary: $384,375

 

Name: Dale West

Job: Senior Managing Director

Agency: Teacher Retirement System

Salary: $380,000

*According to glassdoor, the median salary for a Senior Managing Director is $205,879 per year, for comparison.

 

Name: James Nield

Job: Senior Managing Director

Agency: Teacher Retirement System

Salary: $369,999

*According to glassdoor, the median salary for a Senior Managing Director is $205,879 per year, for comparison.

 

Name: Kathleen Hoffman

Job: Senior Managing Director

Agency: Teacher Retirement System

Salary: $369,999

*According to glassdoor, the median salary for a Senior Managing Director is $205,879 per year, for comparison.

 

Name: Emerson Halstead

Job: Investment Manager

Agency: Teacher Retirement System

Salary: $356,825

*According to glassdoor, the median salary for an Investment Manager is $139,845 per year, for comparison.

 

Name: Grant Walker

Job: Senior Director

Agency: Teacher Retirement System

Salary: $354,999

*According to glassdoor, the median salary for a Senior Director is $171,418 per year, for comparison.

 

Name: John Gilbert

Job: Senior Director

Agency: Teacher Retirement System

Salary: $354,999

*According to glassdoor, the median salary for a Senior Director is $171,418 per year, for comparison.

 

Name: Neil Randall

Job: Managing Director

Agency: Teacher Retirement System

Salary: $354,999

*According to glassdoor, the median salary for a Managing Director is $222,573 per year, for comparison.