HB 3, which passed the Texas House on April 3, is a school finance reform bill that would add $9 billion in funding over the next two years. The bill not only increases teacher pay and student funding but also follows this legislative session’s theme of property tax reform by compressing school districts’ tax rate.
The bill has been passed onto the Senate Education Committee. HB 3 must be approved by the Senate before it is signed into law.
MISD Chief Financial Officer Jason Bird said if HB 3 is approved, the district will lower the maintenance and operations, or M&O, tax rate from $1.17 per $100 valuation to $1.09 per $100 valuation. This would lower the amount of property taxes collected by the district; however, the decline in revenue would be made up by additional funds from the state.
HB 3 would also lower MISD’s recapture payments from the projected $11.45 million to about $896,000 in the 2019-20 school year, according to a presentation during an April 23 meeting.
“HB 3 lowers tax rates via a compressed M&O tax rate, but future revenue to the district is dependent upon voter approval with [a potential tax ratification election],” Bird said.
In 2020-21, the district would have a compressed tax rate of $1.09 per $100 valuation and receive less state aid. Bird said the state provides less funding if property values rise the previous year.
This would likely require MISD to call for a tax ratification election in 2020, Bird said. The TRE would be a tax swap, Bird said, and would not affect the tax rate. The TRE would lower the interest savings, or I&S, portion of the tax rate by 8-cents and add this amount to the M&O rate.