The Texas Legislature is grappling with its biennial budget negotiations, with Wednesday expected to be a long night in the state’s House of Representatives. That’s where 307 spending amendments will be debated.
There are three main issues at stake: overall spending, public education finance reform including teacher salaries, and property tax relief.
Starting with discretionary spending, the House proposes spending $116.5 billion in 2020-21, compared to the Senate’s $112.2 billion. All but 15% of the budget is earmarked for education and human services (most of that is Medicaid).
For the full, two-year budget, the House is proposing $246.5 billion, a 13.8% increase, with the Senate at $236 billion, a 9% increase. Both proposals exceed the budget if only increased the measure of population growth and inflation, which is 8%, or $234.1 billion. Such a budget, while still spending more money, would make it a conservative Texas budget, which aims to restrain government spending from growing faster than Texans’ ability to pay for it. Had state spending been limited to population and inflation since 2004, the budget would be $15 billion smaller this biennium, or about $1,000 less in taxes for a family of four.
Regarding public education, the House budget proposes adding $9 billion to education and temporary property tax relief (property taxes fund most of Texas public school spending), while the Senate is considering $6.3 billion along with temporary property tax relief.
Yet as much as Texas lawmakers rightly criticize California for its big-taxing, spendthrift ways, when it comes to local government spending and property taxes, Texas has no leg to stand on. In fact, Texas local government is increasing taxes and spending at a higher pace than its rival California.
Looking at property taxes, local government—mostly schools—saw a 51.6% increase in property tax collections, which was 12.9% above population and inflation—and higher than the 41% increase in California, which was 12.5% above the measure of population and inflation.
So, by two measures, Texas local government revenue and property tax revenue are both going up at a faster pace than in California, after population and inflation are considered.
But that’s property taxes (collected only at the local level in Texas). Texas state government has mostly held the line (at least through 2016); revenues at the state level only (sales taxes, borrowing, fees and fines) were up 42.5%, or 3.8% above population and inflation. That’s lower than California after accounting for population growth, which saw state-only revenues increase 39.4%, or 11.2% above the baseline measure.
Texas’ local governments have even racked up more per capita debt than in California, $8,124 per Texan, compared to $7,146 per person in California. Texas has the second-highest per capita local debt in the nation, behind only New York.
One reason why California local governments are increasing spending and property taxes at a slightly slower clip than in Texas (after accounting for population growth) is that property tax hikes in the Golden State are checked by Proposition 13. Prop. 13 is a state constitutional amendment approved by voters in 1978 that limits annual increases to no more than 2% and bases a property’s value on its actual selling price, rather than government property assessors’ opinions, as is the case in Texas.
Texas lawmakers are actively considering measures that would allow citizens to rollback property tax revenue increases above 2.5%. Any property tax reform weaker than that risks the ongoing “Californization” of Texas at the local level.
It matters little if state lawmakers hold the line on state taxes and spending if local governments continue to have virtually unlimited ability to boost property taxes.