Long-awaited property tax relief may come hand-in-hand with school finance reform during the upcoming Texas legislative session, according to local lawmakers, lobbyists and education officials. Many of them point to the November midterm elections’ historic voter turnout as well as its upsets and close calls for long-term incumbents as signs that the issue will take on a greater level of urgency in the 2019 session than it has in the past. “I think the results of the last vote really woke up or resonated more interest in making funding public education a priority,” Austin ISD Chief Financial Officer Nicole Conley Johnson said. The Legislature created a bipartisan commission at the end of the 2017 session to study school finance reform in between sessions. Rep. Celia Israel, D-Austin, who represents much of North Austin,  said she has a renewed hope for this session. “The good news is there are a lot of new people [in the legislature],” Israel said. “I’m excited with the opportunity for new leadership and new ideas.”

Northwest Austin’s challenges

Austin’s taxpayers have long felt the pinch of rising property values. Steve Simmons, co-owner of Amy’s Ice Creams, which has two locations in Northwest Austin, said rising values have affected his business. Simmons said owning their business’s locations and renting out space to other businesses has presented a challenge. “This year I’ve lost two tenants because of property tax increases,” Simmons said. Meanwhile, two out of three school districts in Northwest Austin, AISD and Round Rock ISD, struggle under the weight of payments sent to other districts with lower property values as required by Texas’ “Robin Hood” law, Conley Johnson said. The law was intended to help boost revenue for districts with lower property values but has resulted in “property-rich” districts such as AISD and RRISD sending away tens to hundreds of millions of dollars a year. Northwest Austin’s third school district, Pflugerville ISD, does not have high enough property values to be deemed “property-rich” by the standards of the “Robin Hood” law. “If we don’t get any revenue out of the Legislature we are going to be in an untenable position,” Conley Johnson said of the upcoming session. “We are facing a $55 million shortfall based upon the level of support under current funding laws.” In addition to AISD’s $669 million in recapture payments making up 46 percent of its 2018-19 budget, Conley Johnson said the district faces budgetary challenges because Texas’ school funding formula stipulates that as local tax revenue increases due to rising property values, state funding declines. “All the sort of draconian cuts that we don’t want to do are on the table,” Conley Johnson said. “... The [school finance] formulas have not kept pace with our costs.” In the current budgets for Northwest Austin’s three public school districts, each one lists a majority of its revenue collected through local property taxes. Local revenue accounts for 92 percent of AISD’s revenue, 65 percent of PfISD’s revenue and 84 percent of RRSD’s revenue in fiscal year 2018-19, according to budget documents. If Texas increases its share of state funding, both school districts and property taxpayers could benefit; however, lawmakers will need to agree upon where that funding comes from and how much is necessary, Northwest Austin-area Rep. Donna Howard, D-Austin, said. Although compromise has been difficult among lawmakers in the past, Howard said the recent November election added momentum. “[The public] sees what is happening in some of our districts, Austin in particular, where the property taxes keep going higher and the school district is getting less,” Howard said. “That doesn’t sit well with most taxpayers.”

Diverging paths forward

If lawmakers seek to bring more balance to school district funding and lessen the burden on local taxpayers, there are a few avenues to explore. The bipartisan commission formed at the end of the last session has been meeting periodically, but no formal proposals will be made until the end of December, Israel said. “I really want people to focus on the fact that we can’t just allow ourselves to have another [interim panel] at the end of this session,” she said. “We need to hold one another accountable for new revenue to keep up with the growth.” Kara Belew, senior education policy advisor for the Texas Public Policy Foundation, a conservative think tank based in Austin, said any policies proposed in the upcoming Legislature should focus on decreasing local contribution to school districts by taxpayers and also ensuring that districts spend money wisely. The TPPF supports legislation that would create more accountability standards for teachers and reward high-performing ones as a way to improve results within a school district’s means, Belew said. “We pour billions and billions of dollars into public education; results are declining, and more money is not the answer,” she said. “We have to start using our existing money in much better ways that help kids and support teachers.” Conley Johnson, however, said while she supports property tax-relief efforts, the state needs to find larger sources of revenue to support school districts’ growing needs. The increased costs associated with inflation, recapture payments and a growing population as well as with educating economically disadvantaged students, English language learners and intellectually disabled students requires more funding, she said. These types of needs cannot be fulfilled by issuing a bond because bonds are only used for renovations, repairs, construction and equipment, according to Texas law. “We’re not looking at just shifting the buckets around [from local to state revenue],” Conley Johnson said. “Anything that nets new money into public education certainly will help us and put us into a more favorable position.” Israel said legislators will need to look for more revenue sources than Texas currently collects at the state level to fund the types of educational needs Conley Johnson referenced. One option is increasing or adding certain sales taxes, which Simmons said he could support. “The simplicity of a sales tax is, and I’m a retailer, we collect it at the register,” Simmons said. “We already file reports with the comptroller.” The Legislature could also look at eliminating certain exemptions, Israel said. Texas Comptroller Glenn Hegar released his biennial report on tax exemptions Nov. 26 that shows nearly $60 billion in exemptions. One outdated exemption, Israel said, is for businesses that file sales taxes with the comptroller electronically instead of mailing them. “That’s 1970s-type language from when we were trying to drive things towards electronic [methods],” She said. “Now they all file electronically.” Israel said there will be no easy decisions in the upcoming session, but pressure from constituents might be finally catching up with the Legislature. “I’m a small-business owner and a longtime member of the [Greater Austin] Hispanic Chamber [of Commerce],” Israel said. “It was ingrained in me years ago that education reform is a business issue. If we don’t address it we are ignoring it at our own future economic peril.”