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one four zero ahead. Hello, and welcome to the Texas Tribune trip Cast.
My name is Matthew Watkins, Managing editor for News and Politics for the
Tribune. It is July fourteenth, and we finally have a property tax deal.
After months and months and months of fighting and two special legislative sessions,
Lawmakers on Thursday send an eighteen billion dollar property tax cut to Governor Greg Abbott's
desk, where we assume it will be signed in short order. That brought
an end, as we said, to a second special session of the legislature.
We're going to talk about that today and what's coming next. And joining
us to discuss that our Texas Tribune reporter Karen Brooks Harper, who has covered
this issue for us. Hey, Karen Hi, and from the Texan News
outlet politics reporter Brad Johnson. Hey, Brad, Hey, thanks for having
me. Yeah, thanks for joining us. So, Karen, I want
to start with you. There have been lots of negotiations, lots of proposals
kicked around. What is in this final package that is being sent to the
governor? What are we what kind of savings are we going to be seeing
here? Well, if you're um, if you're a homeowner who lives in
your home, that that property will see an average and I'm gonna that's doing
a lot of work here. That word apen um savings of in the neighborhood
of forty one forty two percent. If you're senior citizen, a text on
with a disability, you get a little bit more than that, maybe forty
four forty five percent. That is not across the board. That's not a
percent that's in the law. That's the that's what it shakes out to based
on average. It's gonna vary, but that's the that's the marquee member for
you know, the average of the five point seven million homeowners. So then
there's also an across the board school property tax decreased by by a ten point
seven cents um, which is kind of the tax rate. You know,
we don't need to get into the esoteric details, but so that's gonna that's
gonna drop. Um those taxes an average of about brad is like twenty four
to twenty eight percent on average for all the property owners will see that kind
of reduction. I think that's one of the numbers I saw that's nah around
there um and then and then there is the uh so that's going to be
that's a that's the biggest price tag. And this thing, it's going to
be seven and a half billion in new money, five point three billion in
previous two thousand and nineteen money. So that's like a twelve point six billion
dollars price tag on that particular on the homeowners exemption which goes from forty to
forty thousand and one hundred thousand home set exemption savings I was talking about a
minute ago. That's a five point three billion dollars price tag. So the
rest of the eighteen billion dollars that's an est of it um package is going
to things like franchise tax reductions, like savings people don't have to file the
taxes if they don't pay the taxes anymore kind of a thing. And then
there's also some reductions there. And then there's this novel new program that's going
into the tax code that we haven't seen before in Texas, which is a
temporary They're very careful to say that at twenty percent appraisal cap or in a
cap on, you know, value values increases basically form non home seted properties,
so that is business properties, rental homes, beach houses, you know,
multifamily units, grocery stores, you know, oil and gas, which
is actually significant minerals in general, as long as they're valued at five million
or below this year, that can change by a percentage depending on the controller.
And that's a three year program that will be sunseted, if that's the
right word in both statue, and I believe they ended up changing the constitutional
amendment to that too so that they could might do legislive ends are ends latter.
So um, those are the four big pieces, and then there's a
there's a component that I haven't actually looked too far into. Brad's probably a
little more up on this than I am. About UM elected their appointed term
appraisal boards that are supposed to. They're designed in a way that they'll be
more accountable to the public. But again, I'm sorry to say I haven't
done as much researched onto that one as I can. I was looking at
the dollars on this one. But that's a selling point of this one.
Also, what there isn't in there is protections for like renters, that guarantees
for that kind of thing. But I imagine you'll get into that. I
don't think I missed anything. I think yeah, all right, so Brett,
I want to go to you and ask a little bit about the politics
of this. We'll get a little bit more into the substance and the impact
of this law here in a bit. But of course, the reason that
it took so long to get a property tax cut was because despite the fact
that the Big three, the leaders of the House, on the Senate and
Government or Abbot, all really wanted this, they disagreed strongly on how to
do this. You had Dan Patrick really pushing for homestead exemption. You had
feeling the House Speaker for at least a considerable amount of time, wanting to
do essentially just across the board tax cuts, cuts to the rates Abbott was
at one time on board with that. They ended up going with, you
know, something that included a major home said exemption increase. What should we
take away? I mean, is it possible to kind of declare winners and
losers in that political fight? Do we feel like Patrick got most of what
he wanted? How do you kind of react to the kind of interpersonal dynamics
of this. Well, you know, after hundreds of days of this dispute,
going all the way back to the middle of the regular session, you
know, we kind of ended up about back where we started with. Obviously,
compression, which is the main portion of all of this. The homestead
exemption, although it turned out to be higher than what the Senate originally asked
for. They just wanted a seventy thousand dollar homestead exemption plus another bump for
elderly and disabled. They got one hundred thousand dollars across the board. And
then the House wanted an appraisal cap. They got an appraisal cap. Now
it's, as Karen mentioned, it's a trial run and it's much smaller than
what the House originally wanted. But in the end, the compromise came out
with all three of those aspects, and so how do we sift out who's
the winner who's the loser. I think they all got aspects of what they
wanted, and I think by and large they got what they wanted more than
anything else. Maybe Patrick slightly different on this, but Governor especially fits this
is they got something, and you know, it is a lot of money.
Eighteen billion dollars is the number they're sighting. As Karen said, you
know, five point three of that is for you know, the twenty nineteen
compression that was passed, So they're kind of double counting there when they say
the eighteen billion dollars number, But it is eighteen billion dollars in new money,
So that is that is accurate, even though it's an old law that
a portion of that's going towards. But you know, ultimately, after this
long drug out fight, at some points people thought that they might not get
anything. You know, the Speaker and the Lieutenant Governor were were very much
at odds, and then all of a sudden they did kind of a reset
and whatever it was, maybe they'd had enough of this stalemate. All the
legislators are are exhausted. M the Lieutenant Governor and Speaker said that um.
Ultimately, this war of attrition just left everybody ready to compromise more um.
I think, and Lieutenant Governor is probably a pretty big winner in this because
he got one hundred thousand homestead exemption when the House and the Governor were united
in just compression during the first first session and then most of the rest of
the second specion session. But the Speaker drew a hard line on some sort
of form of appraisal cap and he got that. So I think everybody's leaving
with something that they that they like. Yeah, Karen, I mean the
appraisal cap issue here a little bit like I wonder how big of an impact
it will actually have. I mean, as already mentioned, it's temporary,
right, it will expire eventually. A twenty percent cap on appraisal increases,
you know, not unheard of, but it's you know, that's a pretty
big increase. Those of us who live in Austin might be familiar with twenty
percent increases in recent years, but it's not something you're going to see every
year. And the fact that it's on properties valued at five million or lower
that aren't considered homesteads because of course, homesteads already have that ten percent growth
cap. I mean that feels like not the most kind of in terms of
the impact on like what kind of taxes are going to be collected, not
the most significant part of this law. Am I missing something there? Well,
it's just sticking their toes in the water. And there's a couple of
reasons for that. Because there's, first of all, there's very broad criticism
outside the House Chamber of an appraisal cap across the board. I don't know
how much it would cost businesses or do not like that necessarily for some reason,
you know, I mean, I mean there's you know what. I'm
not even gonna go into all the things. It's just we take two logs
to talk about the things. I mean, people were worried that it wouldn't
mess with the market. And then but politically, there's a huge ground swell
for people wanting to wanting appraisal caps on businesses, even in homes, right,
even if they don't know, um really what it would do. So
um politically it seems like they needed something to bring back to those particular grassroots.
But also they can kind of keep a rain on the cost because it
won't be it won't be as broad as as you know. The original proposal
was to just do the appraisal cops all the way for everybody, you know,
for other So you know, there's a large number of businesses and commercial
properties that are under five million dollars um. You know, and you're talking
probably most Texans you know, rental properties or second homes, and you know,
Um, the fact that it brings in minerals is interesting because Brad,
you know, I think to bring you in on it, because you've been
right there for the whole time too. Um, they're they're kind of there.
They're per parcel, not per entire business interest. For so one business
can have five stores and each store can be less than five million, and
they each get that praisal cap. That's actually could have some impacts, especially
if you're talking about minerals companies, right. I think that deserves a lot
more study. And I think I believe I heard them say that it would
be about a three hundred million dollars a year um program. Perhaps, but
that might they might have been speaking about something else, but it wasn't a
very high number. And they they feel like they can see what it does
for the next few years before they can that are maybe broadening it. The
other thing is that there's you know, the controller can shift it to a
certain degree that number based on you know, consumer price index, so like
the inflation, right, so it doesn't have to stick at five million.
It could wind up higher than that before the three years is out. So
you know, it's it's it's as close to the appraisal cap as they were
going to get. But it is an appraisal cap. And and the fact
that they're calling it a circuit breaker just tells you that they really don't want
it being an appraisal cap. And the rhetoric out there, you're calling it
the circuit breaker because it's temporary and because it's kind of aimed at lower values.
At least that's what Bedcourt was telling me. But you know, Huffman
and the other Senate Finance members and the other budget writers have acknowledged publicly and
very plainly that it's not income based, it's not targeted towards you know,
your ability to pay. It's not your true like political circuit breaker. I
know, nobody can see my air quotes when I'm using air. Yeah,
you know, this fight, as we tried to kind of think through the
idea of homestead exemptions pushed by Dan Patrick or you know, broad compression,
which you know, the idea of compression is essentially lowering the property tax rate
equally across everyone who pays property taxes. As we tried to kind of evaluate
this during these debates, one of the things that we really tried to think
about is so who benefits from what plan? Right and Dan Patrick's plan essentially,
what it was aiming to do as he was discussing this was to folk
direct more of the savings towards homeowners than it being, you know, the
same percentage across the board. What there's a statistic in your story Karen from
the Texas Taxpayers and Research Association talking about how the expectation that they have from
this is that it will in some ways shift some of the school tax burden
toward businesses from the homemown owners. The numbers that she cited is that businesses
currently pay around fifty two percent of school taxes. That will go up to
fifty five percent of school taxes. Homeowners Meanwhile, their share, according to
this estimate, will drop from forty eight percent to forty five percent forty four
point eight percent. Essentially, you know, Brad, I think everyone's getting
savings here. Is there any risk of a pushback from businesses, of a
backlash from businesses? Is there frustration from businesses to be seeing that, you
know, somewhat subtle shift. Well, Karen mentioned the business is not wanting
the appraisal cap, and back during the regular session that was the case.
But there was this interesting dynamic where big businesses didn't like the appraisal cap,
but it was the very small ones that would benefit the most from this kind
of thing because they're, you know, their margins are a lot tighter and
they, um, you know, a five percent appraisal cap, which is
at the time what the plan was a proposal was, would would really help
them. Um. Then it got kind of into this as this argument about
effect on the market, and you know, there are the The Senate pointed
to California as an example of issues that can come from that, But the
House pointed to Florida. Florida has an appraisal cap too. We don't see
issues they're like we do in California. So both sides have their arguments.
Um, as far as shifting the burden, um, you know, compression
applies to everybody equally, But that's only uh, you know, in in
the calculation, um, you know, in terms of how much money comes
out of people's pockets. You know, when you raise the home set exemption,
that means fewer there's less money coming out of homeowners into the school finance
system, and so that's going to go somewhere else. There was a lot
of talk about, well, how do we how do we get not only
the state but these school districts to spend less money and that's not really something
that's ever ever fully addressed. You know, it's talked about here and there.
But then you add to the fact that inflation has been really bad the
last last couple of years and the that's affecting school district budgets, the costs
they're incurring not only for just day to day operations but also building Um,
you know, it costs a lot more to build a new school or build
a you know, an athletic stadium, things like that. So it's just
kind of like a shell game shifting around where the biggest pot of money is
coming from. But overall, you know, it's not really going to change
things that much because this is not this reform is not you know, a
move away from the property tax system. It is is at root increasing the
state's share of payments into the school finance system for the next biennium. That
there's a whole other discussion to have. Is this sustainable? You know,
if we don't have another massive surplus next session, can they continue to do
this? Um, that's a question that well, we won't have answered until
next session. But for now, it's it's going to reduce property tax payments
in the short run. I do I am interested in the conflation of the
school funding next time around for this, like the sustainability and this push for
vouchers, which would ultimately could ultimately lower the enrollment numbers in schools, you
know, in public education, right, that's would be that I don't know
how big an effect that would be, honestly, I don't even I don't
know. But presumably if school if students are to exit in public schools and
go to private schools or parochial schools and devoutch their program that they're debating at
the same time as they're debating more school funding later this year, right,
then that could wind up in less money that they can just or try can
try to justify sending less money to schools in two years, whether I mean
there's going to be a there's a just a cacophony of voices they're screaming right
now, you know, listening to this, I'm sure going but it's not
enough right now. And that's not a new that's not a new point of
view, obviously, it's something we've been hearing for a long time, as
at the schools are under funded. But um, but I'm interested to see,
like you are, what happens in twenty twenty five? Is it twenty
five? Are we there twenty five? Yet? I don't feels like what
year is it? Yeah, twenty to twenty five when they come back with
you know, either surplus or not, and you know, there's they're eighteen
billion dollars the hook, um or not? You know, I don't know,
let's stay. I mean it's it's uh, it's and then they have
this this appraisal program that they would need to like figure out what to do
with it. So, uh, it's it's interesting, That's all I had.
Yeah, on the on the school choice aspect, you know, the
Senate tried to at the beginning, tried to solve that concern in reimbursing school
districts, you know, plus some you know, giving them ten thousand dollars
per student of theirs that left under this program. Obviously it didn't go anywhere,
but that was an effort to try and um, you know, hold
these schools harmless, as they like to say on all this school finance stuff.
But um, it's that would have to you know, that that would
who have implications for the state's share of funding in this and yeah how much?
Yeah, yeah, because that's just that makes the programs so much even
that much more expensive, right, and plus they could take that away at
any point, put that in place now, and then it's like, well
it's not working so far, right, you guys are doing by let's just
you know, oh yeah, yeah, Well, Karen, you mentioned the
idea of you know, certain people making the argument that schools are already not
sufficiently funded. This was of course, something that Democrats were interested in talking
about and wanted to push for in this package. They ended up not getting
it, of course, and they ended up almost unanimously voting for the package
despite having some leverage in this right. Because one of the things that needs
to happen is a constitutional amendment to approve this entire package, which requires a
two thirds vote in the House, and you can't have a two thirds vote
in the House without the support of a number of Democrats. Why do you
think they ended up going along with this plan? Fight those calls and those
pushes. This was a matter of a lot of speculation yesterday on the floor
over the course of them, sure, Brad or remember of the course of
eight hours of sitting there wondering what was going to happen, flying long stretches
of points of order we were waiting to pass. But um, but you
know, at some point when we were seeing the fifty one votes for all
the Democratic amendments, we were thinking they were going to derail the HJR.
And then we realized that ultimately, you know, and as we saw,
you know, there were a lot of people in the offices that were thinking
that the Democrats were going to derail the HR at least on first reading.
I mean, yeah, I'm first reading or a second reading. Sorry,
They would have had a chance again it today to get those hundred if they
hadn't reached it yesterday. But um, I mean, ultimately, it's it's
not easy to explain to your constituents that you have that you voted against or
killed property tax relief bill that would have saved them forty percent on their property
taxes. And while the Democrats did have leverage, you know, I think
that ultimately the notion of killing the property tax bill and being even remotely made
responsible for that right now, it was the Republicans that were endangering that.
You know, if the Democrats killed it because the Republicans refused to play ball
on teacher pay raise, they could easily say, you know it just it
didn't sound like a solid enough political strategy to enough for the Democrats. And
ultimately the texts I got right after the HJR vote of like one hundred and
thirty two or something right to the five it was, you know, oh,
a bunch of Democrats flipped, you know, they were going to hold
the line against the HDR and they flipped like sixty percent of their constituents or
renters for example, So they wanted to be able to make the case for
their renters, and their amendments weren't germane. They were easily killed on technicalities,
you know, at least by the justification of the parliamentarian and everybody knew
that, So I think the compromise at the end of the day was,
let us make our case, let us see if we can't force some votes
on this, let me take my votes back to you know, back to
my people, and we won't de rail your constitutional amendment because ultimately a no
vote on that's going to look worse for most people. That's my long winded
you know, that's kind of where we landed at the end of the day.
But I don't know, Brad, what do you think. Yeah,
I think it was kind of laying the groundwork for what we're going to see
in this school choice special. Whenever that happens sounds like October. I mean,
that's when Democrats are really going to push for the you know, the
school funding aspects of this teacher pay what have you. We saw one amendment
from represent John Bryant trying to give or maybe this trademartiness Fisher trying to give
teachers specifically one hundred and fifty thousand dollars homestead exemption. And um, I'm
not sure if that was killed on a Germanist point of order, if it
was just voted down, but um, I think it is very difficult for
anyone. We saw this with Republicans too. Republicans, especially on the right
side of the GOP Caucus, we're trying to amend the bill as well.
They wanted to make it bigger, and so they're not necessarily you know,
like the Freedom Caucus and those even further right of the Freedom Caucus. Some
Tinder Holton and a couple others, they're not they're not in love with this
plan either. They think it doesn't do enough, doesn't put enough money towards
this um. But in the end, almost all of them voted for the
bill because it is very difficult to vote against a property tax cut, especially
one you know, it's not it's not pennies on the dollar like it's it's
significant, there are issues with it, there are questions to be asked,
and there certainly could have been more money thrown at it, but it was
not nothing, and so just politically, it's it would be a very difficult
vote to justify back in their districts. It's an interesting observation too. I've
kind of forgotten about it, and all the talk about the renters and the
teachers and everything about the handful of Republicans who tried to amend it as well.
You know, there definitely was a moment when they stopped killing each other's
amendments some points of order and just let them have the floor for a while
and make their arguments and have their votes. I remember which which Brian amendment
that started on or who's but but you know it, keeping the hundred votes
was at the end of the day, they did a good job of it.
Obviously they way surpassed that. But it wasn't just a Democrats they had
to keep their eye on for that. You know, you're right they were
risking. But you know, I think it was an easy sell honestly once
they had you know, cutting people's homeowner you know taxes and a half or
close to it, and you know property taxes across the board. And I
think you just can't bring a no vote on that back to your district unless
you have a very specific style of district, like you know, maybe something
do. The only other thing I think, sorry, sorry, kay Off.
The other thing I think should be noted is that in its whole discussion
we hear savings. You know, the legislators themselves said it constantly, but
that savings is a reduction from what their tax bill would be without stars reform,
it's not a reduction from what they paid last year. And so you
know, odds are you're still probably gonna pay more than you did the previous
year, but it will be significantly less than without this this reform. Well,
and that may be why they stuck the part in the bill that says
that the taxing districts has to include a notice with the tax bills this year
saying, due to acts by the Texas Lady Texas legislature, what your tax
bill would have been, this is how much you're saving, and this is
how much it will now be. It's like a flyer like it is very
much in advertising it for how the legislators have saved you many and you know,
I mean maybe that's what people want to see. I'm going to be
interested to see, you know, see that too. But because people might
say, see a number that's not forty one percent lower than their last year's
never and say what I thought I was going to And you're right, really
it's just it's a comparative number. So so yeah, that's I guess that's
going to be made clear to everybody when they read their letters. All right,
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dot or work. Okay, so, Brad, as you mentioned, we
are looking at a likely at least one more special session in October related to
school choice. That is, you know, setting aside even the impeachment convening
of the Senate in September. The compared to property taxes, I mean sorry,
compared to school choice property taxes seems like a pretty easy proposition. We
are not going to get a you know, only five votes out of against
whatever bill comes out on school choice. Take the temperature for me of the
relationship between Dan Patrick and Dade feeling right now heading into that conversation. Are
we in a better place than we were at the end of May, A
worst place about the same? What do you think? Well, the way
they've been talking the last five six days. Clearly they're in a better place
than they were at the end of the first special session when the House you
know, gabbled out siny die in the first day and the Senate convened every
day and just railed against them for doing so. M you know, there
aren't there also aren't just debates or discussions or memes being sent it back and
forth, criticizing each other on Twitter, you know. So overall they're at
a better place, no doubt. Is it enough to get something like school
choice across the line? Um? Yeah, gosh, I don't know.
Um. The property tax fight seemed. We just talked about how it was
not very It was hard to object for any member to that. Um as
an issue itself. The problem the problems came in the breakdown happened between the
Speaker and the Lieutenant Governor after weeks and weeks of hitting each other on on
certain things, the appraisal cap in the homestead exemption. But here, you
know, this is not just a lightning rod issue between the Speaker and Lieutenant
Governor. It's a lightning rod issue between the members, especially in the House.
You know. Not only this is not a a few Democrats might hold
the line and try and stop this hj R from going through. This is
Republicans are opposed to, especially the kind of school choice reform that Lieutenant Governor
in much of the Senate wants. So it's going to come down to how
much the Senate is willing to give on their ideal school choice plan. Because
we've seen over and over again those members of the Republican Party, most of
them are you know, towards the towards the middle, closer to the middle
of the of the caucus, but not all of them being opposed to a
school choice plan. There they're very much Again, they voted again, there
were two test votes this session, and many of them voted against both of
them. So the Senate is going to have to figure out ways to provide
those members with a significant enough carrot. I don't think they're going to beat
them into submission over this. It's not going to happen. You know.
One of the ways we saw Abbott exert his leverage in this fight, Karen
was related to vetoing a bunch of bills and putting into the Veto statement,
you know, this is not as important as cutting Texans property taxes. Did
that have any impact do you think on this conversation? Well, first of
all, he was right. I mean they were I'm not going to bash
anybody's legislation because it all affects somebody, right, But in the scheme of
things, they weren't exactly blockbuster bills he did in veto the budget. There
was no like threatening of hundreds of millions for community colleges or anything like that.
These were some local bills, some niche bills. And again I'm going
to probably get in trouble for that, but from somebody like I said,
not, you know, it's all important. But if we're talking about levels,
he was right, they weren't as important as property taxes, but they
were already passed, so what he was trying to do obviously it was just
kind of stick it to them a little bit. But at the end of
the day, if you know, if you if you asked Patrick anyway,
and obviously you know, if you see the result of it, it didn't
seem to sway anybody. Um, I don't know that it moves the needle
at all, And if it did, I don't think there's anybody that would
admit that it did. Um, I you know, it kept us all
on pins and needles and hitting refresh on our vitail list until midnight on Sunday
night that night, right on the deadline, but which was right before my
vacation, thanks because he never did anything to the budget and that's what we
were watching for, you know. So um so, yeah, you know
it was. It was an interesting dramatic wrinkle and the whole thing. But
you know, I don't think that it was the it was the moves the
needle all that much. If anything, it just kept up the pressure,
you know, it just it kept up the pressure. A lot of the
reaction I heard was, yeah, I was kind of weird. Well,
the leverage the governor had was the threat of the vetos. As soon as
he vetoed them, all that leverage is gone. You know, it's it's
done and over with. So what what incentive do members have after it's already
happened to play ball now where they wouldn't before. So it did not do
anything. And now it leaves the question of do we have all these other
bills in a special session with these school issues or do we have a separate
special session later questions that are are being asked and we won't have an answer
to until later. Yeah, all right, it was doing them all.
That was like striking fear into people, you know, it was making people
like me watch the budget to see if he was going to start doing that,
you know, or yeah, people who had real, real skin in
the game on some of these major pieces, if he was going to do
that, because that's what those little those little guys fell for was to was
to foreshadow a big, big death that never happened on those build on those
vitaos. Anyway, I just want to put that point. It go ahead,
Matthew, please, oh we have you know, there will be lots
to watch and lots more to discuss, but Gus, but I think that
that is about the end of it for today. Maybe Karen and Brad can
get a nice little vacation before the next one comes up. Willing. Thank
you to both of y'all for joining us, and thank you to Justin,
our producer, and thank you to our sponsors, the Texas Association of School
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