| TO: | Honorable Steve Ogden, Chair, Senate Committee on Finance |
| FROM: | John S. O'Brien, Director, Legislative Budget Board |
| IN RE: | SB575 by Nichols (Relating to limitations on increases in the appraised value of a residence homestead for ad valorem taxation.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2008 | $0 |
| 2009 | ($52,368,000) |
| 2010 | ($108,109,000) |
| 2011 | ($164,189,000) |
| 2012 | ($170,499,000) |
| Fiscal Year | Probable Savings/(Cost) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) from School Districts - Initial Impact |
Probable Revenue Gain/(Loss) from Counties |
Probable Revenue Gain/(Loss) from Cities |
|---|---|---|---|---|
| 2008 | $0 | $0 | $0 | $0 |
| 2009 | ($52,368,000) | ($62,765,000) | ($21,493,000) | ($18,817,000) |
| 2010 | ($108,109,000) | ($126,052,000) | ($43,488,000) | ($37,827,000) |
| 2011 | ($164,189,000) | ($189,876,000) | ($65,985,000) | ($57,032,000) |
| 2012 | ($170,499,000) | ($193,864,000) | ($67,850,000) | ($58,279,000) |
The bill would amend Section 23.23 the Tax Code to authorize the commissioners court of a county to call an election to permit voters to determine whether to apply a percentage limitation on increases in appraised value of residence homesteads of not less than five percent.
If a majority of the votes cast at the election favored the establishment of the proposed limitation, the limitation would apply beginning with the tax year following the year in which the election was held and would remain in effect until amended or repealed through a subsequent election held after the 10th year after the year the limitation was approved by the voters.
The bill would take effect January 1, 2008.
Because the state is constitutionally prohibited from imposing a state property tax, there would be no direct fiscal impact on the state; however, Section 403.302 of the Government Code requires the Comptroller to conduct a property value study to determine the total taxable value for each school district. Total taxable value is an element in the state's school funding formula. Passage of the bill could cause a change in school district taxable values reported to the Commissioner of Education by the Comptroller.
The bill would allow counties to reduce the limit on the growth in the appraised value of a homestead from 10 percent to any percentage below 10 percent but not below five percent per year since the last reappraisal. For illustrative purposes, this analysis assumes that half the counties would adopt the reduced appraisal limit at five percent, and the limitation would apply to half the taxing units in the state, contingent upon passage of the requisite constitutional amendment.
The analysis was based on appraisal roll information reported electronically by appraisal districts. The percent change in value from properties that were listed on the appraisal roll in two successive years was calculated, and the results were sorted by percent change. The value loss resulting from the proposed limitation was calculated for homesteads that increased in value more than five percent. Value lost to the existing 10 percent value limitation on homestead property was excluded. The value loss was adjusted in the second and succeeding years of the analysis to reflect multi-year appraisal cycles and the holdover of capped property from one year to the next based on historical data from the existing 10 percent cap. The projected city, county and school district tax rates were applied to the value losses in each year to estimate their respective levy losses.
The bill is estimated to have an impact on the state aid districts receive based on the enrichment tier as tied to the yield of the Austin Independent School District (ISD). To the extent that the bill has the effect of lessening Austin ISD's revenue per weighted student per penny of tax effort, as determined by the Commissioner of Education, the equalized yield on those enrichment pennies would decrease, resulting in a decrease in state aid.
The initial impact on school districts shown in the table above is provided for illustrative purposes only. The mechanics of the school finance system would likely transfer the fiscal impact to districts' M&O revenue to the state, resulting in a zero or negligible fiscal impact to the school districts. However, districts would experience a one-year lag between the loss of I&S revenue due to the provisions of the bill and the corresponding increase in state aid for debt service, which would occur the following year.
Passage of the bill would authorize the commissioners court of a county to call an election to permit voters to determine whether to apply a percentage limitation on increases in appraised value of residence homesteads of not less than five percent. For illustrative purposes, this analysis assumes that half of all counties would adopt the reduced appraisal limit, with voter approval, and the limitation would apply to half the taxing units in the state. The actual costs will depend on actions taken by commissioners courts and voters.
| Source Agencies: | 304 Comptroller of Public Accounts, 701 Central Education Agency
|
| LBB Staff: | JOB, CT, SD, SJS
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