Rarely does a session of the Texas Legislature end without aggressive advocacy from local government leaders with one unified message – “No more unfunded mandates, please.”
State and federal officials all too often push government obligations down to city and county levels and then allocate no funding to pay for the new mandates. As painful as that is for local elected leaders, it may get worse. A bill has just been filed to cap property taxes at the local level of government. This would end an option that local officials have been forced to use in the past to recoup the costs of unfunded mandates.
Senate Bill 2, a bill pre-filed before the 85th legislative session convenes in January 2017, would change the rollback elections process for local property taxes. Currently, local governments are subject to rollback elections if they try to increase property taxes 8 percent or more. Senate Bill 2 would make cities and counties subject to rollback elections anytime a proposed tax increase is 4 percent or more. That is a significant change and one that would be disruptive, to say the least.
The bill’s supporters say it is designed to protect taxpayers. Local government officials say it would negatively affect their ability to provide essential citizen services. The mayors of Austin, San Antonio, San Marcos and New Braunfels responded quickly to news of the filing of this bill. They noted that the savings on citizen tax bills would be absolutely minimal (almost unnoticeable) and it would likely result in significant cuts in citizen services. These local elected officials report that their cities collectively would have been penalized at least $770 million over the past decade if the 4 percent cap had been in place. And, they point out that an average homeowner would save only a few dollars a month if the bill becomes law.
Texas law currently prevents all 254 counties from raising general revenues outside revenue authority granted by the state. And, according to a recent report from the National Association of Counties, many states – almost 75 percent – report that unfunded mandates are increasing, or funding is being decreased, or – as in Texas and numerous other states – both are occurring. This creates a huge problem.
The majority of citizen services in local communities are provided by counties and cities and the funds that pay for most of the services come from property tax revenue. In Texas, the state legislature holds the purse strings taut by limiting city and county taxing authority.
The state of Texas currently imposes limitations on counties on the following:
- property tax rates;
- property assessment increases;
- property tax revenue/levy increases;
- personal property tax authority, local option sales tax authority; and
-
the authority to create special tax districts.
That doesn’t leave much room for ways to increase revenue for citizen services such as those related to criminal justice, public safety, health, transportation and infrastructure.
Interestingly enough, counties nationwide are maintaining 45 percent of the nation’s roadways and supporting nearly 1,000 hospitals. The costs for building infrastructure and maintaining public utilities totals more than $106 billion annually, construction of public facilities costs counties $53 billion per year and $70 billion is spent annually on community health and hospitals. A funding source must originate from someplace.
Municipalities also have state limitations on property tax rates, but even in cities that are allowed to generate revenue by imposing sales taxes and/or charging user fees for certain services, unfunded mandates take a big bite out of revenue.
But, local governments are resilient. And, in spite of revenue constraints, city and county officials are constantly finding innovative new solutions to ensure they can continue to provide citizen services. Some of the key innovations are partnerships with other government entities, nonprofits and the private sector.
Officials in counties and cities, now facing another possible state-imposed limitation on revenue generation, are not happy. They see economic challenges looming and they don’t know how to deal with increasing demands related to an aging population and increased growth. They need funding for deteriorating infrastructure, new school buildings, affordable housing, public health care clinics, transportation repair, cleaner air and all types of issues related to sustainability. What are the expectations? How are they supposed to cope? That question rings loud and clear but there are no answering bells.