Austin leaders are moving to cement property tax relief for child care operators following the passage of Proposition 2, a tax exemption measure Texans handily approved in the Nov. 7 state election.

What's happening

Proposition 2's passage clears the way for eligible child care providers to be exempted from most or all local property tax payments. Related legislation Senate Bill 1145 was approved this spring and will go into effect in January 2024, allowing local governments to pursue the tax breaks.

In anticipation of the changes stemming from the state constitutional amendment, City Council Member Alison Alter drafted a resolution that sets Austin up to enact the local property tax cuts early next year.

The measure was approved Nov. 9 and directs city management to come up with a plan to roll out 100% tax exemptions for eligible providers.

Alter said action is needed given the importance of child care in the city, and with an anticipated "child care cliff" coming as one-off federal funds supporting those services expire.

"We know that our economy can’t function at full productivity without affordable and accessible child care centers," Alter said Nov. 9. "Child care workers make all of the other work in Austin possible, especially our community’s essential and frontline work. ... I’m hopeful that this action will help provide more financial stability and support to some of our local child care operators who are currently operating on very, very thin margins.”

A recent survey by the Texas Association for the Education of Young Children found such financial concerns led 26% of Texas child care programs to report they're likely to close in the near future, while 43% are unsure whether they'll be able to keep up their operations.

That uncertainty comes after more than one-fifth of Texas child care providers shut their doors during the first year and a half of the COVID-19 pandemic, according to welfare nonprofit Children at Risk.

The details

Proposition 2 allows property tax exemptions for licensed child care operators who:
  • Participate in the Texas Rising Star state rating program
  • Have services for at least 20% of their enrolled children subsidized through the Texas Workforce Commission
As the new state proposal didn't account for home-based child care operators, Austin officials also asked to identify other options to provide similar tax relief to those providers by next spring.

Mayor Kirk Watson noted legislation related to the taxing changes could still be adjusted in the future and said reviews of child care and taxes will be continuing.

"Access to quality, affordable child care is one of the biggest challenges to overcome for folks to take advantage of Austin’s economic opportunities. And in the wake of the pandemic, I think a lot of employers as well as policymakers are starting to understand the critical importance of child care in a whole new way," Watson said in a Nov. 9 newsletter.

What they're saying

“With reduced property taxes, child care centers can lower costs for families, expand availability to working parents, increase wages and improve the quality of education provided,” said Cathy McHorse, vice president of the United Way for Greater Austin's Success By 6 childhood development coalition, in a statement.

“We’ve seen our home-based and family child care folks get left out of the narrative time and time again,” said Michelle Mejía, Go Austin/Vamos Austin's early childhood and family health organizer, in a statement. “We applaud our child care champions at the city level for moving swiftly and responding to the dire needs of our early child care community.”

Also of note

Council's move on the heels of the state election follows other recent action aimed at child care accessibility and affordability in Austin.

Weeks ago, officials voted to streamline the creation of new care facilities across the city through a land development code update. Council members also made child care a priority topic in their discussions over one of the city's more notable economic development deals in recent years.