FILE - Texas Capitol

The Texas State Capital building in Austin

A conference committee of Texas lawmakers is now hashing out the details of what’s billed as a historic property tax reform effort to make the system more transparent and put a tighter lid on homeowner tax levies in the future.

Senate Bill 2, authored by Sen. Paul Bettencourt, R-Houston, passed the state’s House of Representatives April 30, but conferees still need to work out differences between that bill and the version that earlier passed the Senate.

The legislation would prevent cities, counties and some other districts from raising property tax revenues more than 3.5 percent over the previous year’s revenues without an election. Currently, local residents can gather signatures to call for a popular vote on a property tax hike if it exceeds 8 percent.

SB 2 would make such elections automatic for designated jurisdictions that seek to collect annual property tax revenues above the 3.5 percent threshold.

To supporters, the reform is needed to give homeowners relief from decades of rising tax bills.

“The days of local governments raising property taxes at a rate that forces too many Texans out of their homes and businesses could soon come to an end after the House’s passage of today’s historic property tax reform,” Dr. Vance Ginn, director of the Center for Economic Prosperity at the Texas Public Policy Foundation, said in a prepared statement last month.

But the executive director of the Texas Municipal League sees the SB 2 funding restrictions as misguided and too limiting if a local government has to cope with major financial strains, such as hurricane-inflicted damage, a new collective bargaining agreement or state-ordered sewer system upgrades.

“Cities haven’t been the problem with property taxes in Texas,” Bennett Sandlin said, adding that the biggest share of property tax revenues goes to school districts. “It’s way too low of a percentage to keep cities whole in cases of disasters.”

The Municipal League supports House Bill 3, which would provide about $2.7 billion in relief to homeowners, launch a number of school funding reforms and divert more state revenues toward public education. But the league opposes SB 2.

“City cost drivers don’t go up in a smooth line,” Sandlin said, noting that a municipality’s pay structure might be flat for several years but then shoot up 7 percent as a result of long-term contract negotiations.

And setting up an automatic election if cities exceed the proposed new property tax limit puts them at a disadvantage because cities, under Texas law, can’t advocate for or against a ballot measure, he said.

“It’s kind of a stacked deck for us,” Sandlin said. And in any event, voters still have the power to vote elected leaders out of office if they’re seen as advocates of excessive taxation, he said.

In its current form, the property tax legislation passed by the House would only go into effect if the legislature’s other big-ticket item, school funding and policy reform, also gets signed into law by Republican Gov. Greg Abbott.

Economist Ginn told Watchdog.org that for too long tax relief has not been a pressing matter for state lawmakers. Transportation, health care and hurricane recovery have all gotten more attention in the state’s two-year budgets, which now hover around $250 billion, he said.

“Taxpayers should be a top priority within the budget process,” Ginn said, noting that a strong economy has provided a surplus of $9 billion, much of which can be used for public education.

He also doesn’t buy the contention that efforts to limit property tax hikes in the future will hurt local governments’ ability to fund public safety.

“I think it’s just a lot of rhetoric to put fear into many Texans,” Ginn said, adding that the funding of police and fire services should be the top priority when local governments put their budgets together.

SB 2 would allow the state to build on key pillars of its traditional governing philosophy – low taxes and low regulation, he said.

“This is an opportunity to really improve the Texas model,” Ginn said.

But Dick Lavine, senior fiscal analyst with the Center for Public Policy Priorities in Austin, said public officials such as mayors and county judges have been unanimous in expressing concerns about how SB 2 could affect public safety. Police, courts and jails could feel the pinch, or else the squeeze might be felt by parks and libraries, according to Lavine.

And reducing dependence on property tax revenues can create problems since the property tax is less volatile and less regressive than the state’s other major levy, the sales tax, he said.

“Texas has always prided itself on being low-tax and low-services,” Lavine said. “... We can no longer live by that creed.”

New state revenues, such as those coming from online sales, need to be invested in improvements to public education, he said.

And the automatic election provision in SB 2 may end up causing confusion, according to Lavine, because an election to ratify a proposed property tax increase would occur in November, but property tax bills must go out in October.

Though the $9 billion surplus can now fund some property tax relief and efforts to improve public education, there’s no assurance a similar cushion will be there in the future, he said.

“The question is: What are they going to do two years from now?” Lavine said.