SRC-CDH H.J.R. 4 75(R) BILL ANALYSIS
Senate Research Center H.J.R. 4
By: Craddick (Armbrister, Bivins)
Tax Reform & Public School Finance
4-24-97
Engrossed
DIGEST
Recently, the Governor submitted a constitutional proposal to the
legislature which provided for the creation of the Texas School Trust
Fund, increased residential homestead exemptions on maintenance and
operations of school districts, and excluded the business activity tax
from Article VIII, Section 24 and Article VII, Section 3. The Select
Committee on Revenue and Public Education Funding, after extensive
examination, developed a plan to provide additional property tax relief
and create a reliable stream of revenue for public education. H.J.R. 4
ensures a stable source of revenue for public education and provides
property tax relief by establishing first priority spending for public
education; dedicating lottery proceeds; creating a limited tax on
non-residential property; authorizing a franchise tax on business entities
other than sole proprietorships; and allowing portability of the school
property tax freeze for the elderly. The constitutional amendment would
be placed on the uniform election date in August, 1997.
PURPOSE
As proposed, H.J.R. 4 requires the submission to the voters of a
constitutional amendment providing financial support for elementary and
secondary public education; dedicating revenue and authorizing priority
allocations of certain revenue; authorizing a state property tax and
certain taxes on entities; providing property tax relief and reduced
school taxes on residential property, including certain homestead
property; and making implementation and conforming amendments.
RULEMAKING AUTHORITY
This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Adds Section 1, Article VII, Texas Constitution, to require
the financial support of elementary and secondary public school education
to be the first priority among state spending and appropriations, subject
only to constitutional revenue dedications and the payments of lawfully
incurred state debt. Sets forth the policy of the state regarding the
provision of public education. Establishes the conditions under which the
public school finance system of this state is required to adhere to a
standard of neutrality that provides for substantially equal access to
similar revenue per student at similar tax effort. Prohibits the
legislature from appropriating, for any biennium, an amount of state funds
for the maintenance and operation of public schools and their buildings
that is less than the amount appropriated in the prior biennium, adjusted
for student population growth. Makes a conforming change.
SECTION 2. Amends Section 1-e, Article VIII, Texas Constitution, to
authorize the legislature to impose ad valorem taxes for public free
school purposes, at a rate not to exceed $1.05 per $100 of taxable value,
on property not subject to taxation for maintenance and operations
purposes by a school district and not otherwise exempted by this
constitution or by the legislature under the authority of this
constitution. Authorizes the legislature to provide for the appraisal,
equalization of value, and tax collection of property subject to state ad
valorem taxes. Deletes obsolete language relating to the disposition of
receipts from the previously authorized state ad valorem tax. Authorizes
the legislature to exempt from ad valorem taxes property pursuant to a tax
abatement agreement entered into before January 1, 1997, by the school
district, or in certain reinvestment zones created on or before April 1,
1997. Requires state ad valorem taxes to be assessed on the valuation
of property subject to those taxes as determined by appraisal officials in
the county in which the property is located until the end of the 1999 ad
valorem tax year. Provides that the assessment on that valuation is valid
if the appraisal and equalization process conform to accepted standards
and practices. Authorizes the legislature by general law to authorize the
state to use increases in ad valorem tax revenues imposed on property in a
reinvestment zone to finance the development or redevelopment of property
in the zone under certain circumstances. Makes a conforming change.
SECTION 3. Amends Section 3, Article VII, Texas Constitution, to require
an annual ad valorem state tax to be levied and collected as provided by
Subsection 2, Section 1-e, Article VIII, of this constitution to maintain
and support the public schools of this state. Authorizes lottery
proceeds, less prize money and administrative costs, to be spent only for
elementary and secondary public free schools. Deletes obsolete references
to poll taxes, the original state property tax, and school facilities
taxes. Authorizes the deficit to be met by appropriation from the general
fund of the state if taxation and revenue are insufficient. Authorizes
the legislature, by general law, to provide for the management and control
of the public schools of public school districts. Authorizes the
legislature to provide for school districts to impose an ad valorem tax on
all residential property. Authorizes the legislature to set a statutory
cap on school district ad valorem tax rates, except that a school district
may not impose a tax for maintenance and operations at a rate greater than
$1.05 on the $100 valuation of taxable property. Authorizes the
legislature to provide for school districts to impose an additional ad
valorem tax on all otherwise nonexempt property for purposes of the
erection and equipment of school buildings if approved by a majority of
school district voters. Makes conforming changes.
SECTION 4. Amends Section 1, Article VIII, Texas Constitution, by
amending Subsection (c), and adding Subsections (c-1), (i), and (j), to
authorize the legislature to impose privilege or franchise taxes, measured
by the income or taxable capital of a corporation, partnership, or
business entity other than a sole proprietorship. Establishes that a sole
proprietorship, rather than persons, engaged in mechanical or agricultural
pursuits shall never be required to pay an occupation tax. Provides that
this subsection does not prohibit the imposition of taxes on
municipally-incorporated gas, electric, or water utilities. Provides that
the use of income earned or receipts after December 31, 1996, to measure
or apportion to this state a privilege or franchise tax, is not
prohibited. Provides that this section expires January 1, 2000. Sets
forth the terms by which, notwithstanding Subsections (a) and (b), the
legislature by general law is authorized to limit the maximum annual
increase in the appraised value of residence homesteads for ad valorem tax
purposes; and is authorized to limit the frequency with which increases in
the appraised value of real property may be recognized.
SECTION 5. Amends Section 1-b(d), Article VIII, Texas Constitution, to
authorize the legislature, by general law, to provide for the transfer of
a frozen property tax rate for persons 65 or older if the qualified person
establishes a different residence homestead. Prohibits a school district,
if the total amount of a school district's taxes imposed in 1997 for
elementary and secondary public school purposes on a residence homestead
subject to a limitation is less than the total amount of the school
district's taxes on that homestead in the first year that the homestead
qualified for the limitation, from imposing taxes in a subsequent tax year
which exceed the amount of the 1997 school district taxes, with certain
exceptions. Makes conforming changes.
SECTION 6. Amends Article VIII, Texas Constitution, by adding Section
1-b-2, as follows:
Sec. 1-b-2. NOTICE OF PROPERTY TAX DECREASE. Establishes the conditions
under which the person controlling an escrow account maintained on
September 1, 1997, in connection with a real property mortgage, is
required to deliver to the person who pays money into the account a notice
of property tax decrease. Sets forth the language of the notice.
Provides that this section expires December 31, 1998.
SECTION 7. Amends Article VIII, Texas Constitution, by adding Section
1-b-3, as follows:
Sec. 1-b-3. NOTICE OF PROPERTY TAX REDUCTION. Requires the chief
appraiser of each appraisal district, not later than October 1, 1997, to
send to each owner of a residence homestead in the appraisal district a
notice of property tax reduction. Sets forth the language of the notice.
Provides that this section expires December 31, 1998.
SECTION 8. Amends Section 1-j, Article VIII, Texas Constitution, by
amending Subsection (a), and adding Subsection (a-1), to provide that
property described by Subsection (a) of this section, regarding goods,
wares, merchandise, other tangible property, and certain ores, is not
exempt from ad valorem taxes imposed under Section 1-e of this article if
the property is located in a school district that taxes it for the tax
year. Make a conforming change.
SECTION 9. Amends Article VIII, Texas Constitution, by adding Section 1-m,
as follows:
Sec. 1-m. Establishes the conditions under which the legislature is
authorized by general law to provide that the owner of property consisting
of a separate interest in oil or gas, in lieu of ad valorem taxes on the
property, may elect to pay a gross wellhead receipts tax.
SECTION 10. Amends Article VIII, Texas Constitution, by adding Section
1-n, as follows:
Sec. 1-n. Authorizes the legislature, by general law, to make a river
authority that owns or operates one or more steam generating plants
subject to a franchise tax. Authorizes the legislature to impose such
franchise taxes only upon the portion of the authority's business that is
directly related to the generation, transmission, or distribution of
electricity, and at a rate not to exceed that of similar private entities
engaged in the electric business.
SECTION 11. Amends Section 22, Article VIII, Texas Constitution, by
adding Subsection (d), to establish that the appropriation of state tax
revenue for public education, generated from the increase in revenue from
H.B. 4, does not apply to the constitutional spending limit for the
biennium ending August 31, 2001. Provides that this subsection expires
September 1, 2001.
SECTION 12. Amends Section 24, Article VIII, Texas Constitution, by
adding Subsection (k), to provide that the restrictions on imposition of a
personal income tax does not apply to a privilege or franchise tax
measured by the income of a corporation, partnership, or other taxable
business entity, other than a sole proprietorship.
SECTION 13. Amends Article III, Texas Constitution, by adding Section 31a,
as follows:
Sec. 31a. Authorizes the legislature, by general law, to create a Texas
Grace Commission (TGC) to study state agencies, institutions, and programs
in the executive department of state government and recommend that any of
those entities be abolished, reduced in size, or otherwise modified to
make them more cost-effective. Requires the legislature to accept or
reject, but may not amend, notwithstanding Sections 1, 11, and 31 of this
article, each substantive recommendation presented to the legislature by
TGC. Provides that this section is repealed on September 1, 1999.
SECTION 14. Establishes an election date of August 9, 1997, for the
constitutional amendment proposed by the joint resolution. Establishes
the ballot language for the amendment proposition.