State lawmakers introduced bills in both chambers of the Legislature on Jan. 31 that would restrict local governments, including counties, from increasing their property tax revenue by more than 2.5 percent year-over-year.
Such a cap is referred to as a rollback tax rate because if a taxing entity exceeds that rate, a rollback election is triggered, giving voters the chance to approve or reject the proposed increase.
“Arbitrarily lowering the rollback rate produces modest savings for taxpayers with significant loss of county revenue,” said Deece Eckstein, intergovernmental relations officer for Travis County, during a presentation to the Commissioners Court.
If such a cap had been in place this fiscal year, Eckstein said, the average homestead owner in Travis County would have saved approximately $33.34, but the county would have lost nearly $18 million in revenue.
“Of course, we would have to consider across-the-board cuts of services,” Eckstein said of the proposed cap, adding it would also be hard for the county to build its reserves, which are necessary for funding long-term projects, and likely lead to costly elections if the court ever proposed a tax rate that exceeded the rollback rate.
Unlike cities and other municipalities, counties are funded almost entirely by property taxes and lack other sources of revenue, such as sales taxes.
The proposed cap, Eckstein said, would also make it difficult for the county to fund the services for which it is responsible.
For example, the state mandates that counties provide indigent criminal and civil defense services but does not provide funding to do so. In FY 2019, these services will cost Travis County nearly $24 million.
County Judge Sarah Eckhardt acknowledged there is an affordability issue in the city of Austin and Travis County but pointed out Texas has a relatively low tax burden compared to other states.
Indeed, a study by the Tax Foundation found during the years 1997 and 2012, Texas ranked 46th in the nation for combined state and local tax burden.
“I blanch at the idea that we are being crushed by our tax burden in Texas, especially if we are middle-income or above,” Eckhardt said.
Commissioners and county staff agreed property tax relief is intrinsically tied to school finance reform, which the proposed cap does not address.
“That’s really the crunch that people are feeling,” Eckstein said, pointing to data that shows Travis County residents pay more in property taxes that are recaptured by the state and distributed to other school districts than to the city of Austin or Travis County.
Recapture is a state policy that is often referred to as "Robin Hood" because it sends money from property-wealthy districts, such as in Austin ISD, to property-poor districts.
In the 2018-19 school year, the state of Texas will recapture more than half of the tax revenue Austin ISD collects from local property owners, totaling an estimated $672.9 million.
"These are our local property taxes, and they are being taken to the tune of a very substantial amount of money ... from our local property taxes for an obligation that the Texas Constitution very clearly says is the state's responsibility," Precinct 2 Commissioner Brigid Shea said.
“There can be no meaningful tax relief for Travis County voters unless the Legislature fixes the broken school finance system," Eckstein said.