Local governments and school districts in Texas could face steeper requirements at the ballot box to increase tax rates or issue bonds at the same time some face tight budgets or big infrastructure needs.
In his Feb. 2 State of the State address, Republican Gov. Greg Abbott demanded restraints on local tax increases that could backfill a
"Loopholes that increase your property taxes must be banned," he said. "No taxing entity should be able to raise your property taxes without a two-thirds approval by voters."
In addition to changing the current simple-majority passage to a supermajority vote for local tax and bond propositions, his plan would require those elections to take place only in November, eliminating a May ballot option.
Republican Lt. Gov. Dan Patrick, who heads the Senate, signaled on Thursday the chamber could quickly pass a two-thirds requirement for tax increases if Abbott makes it an emergency item.
Concerns that local tax hikes and big bond issues are eroding property tax relief were raised during Thursday's Senate debate and passage of a bill that would
Republican State Sen. Paul Bettencourt, the bill's sponsor, cautioned that two-thirds voter approval might not be the way to go.
"I think it should be applied to the elected officials, not the voters, because I'm not sure that you can have bond issues with a higher majority vote," he said.
A bill
Republican State Sen. Mayes Middleton said a number of ideas are on the table this session, including limiting the amount of debt pledged against the Permanent School Fund's bond guarantee program, which bestows triple-A ratings on school debt. Lawmakers also called for closing "loopholes" in existing law.
Harris County was singled out by the governor and lawmakers for using a disaster declaration "loophole" from severe storms last year to hike its property tax rate without voter approval.
Texas already requires local bond measures to be separated by general and special purposes on ballots, which can result in multiple propositions from a single issuer.
"Separating them out like this has made it very challenging," said Ajay Thomas, public finance head at FHN Financial. "If we went to a two-thirds super majority, it would make it just that much harder."
Mandating a higher voter approval rate will "particularly impact fast-growth communities, whether they're cities, towns, counties, or school districts," he added.
Texas, which gained more than 9 million residents between 2000 and 2022, is only the
Kevin Brown, executive director of the Texas Association of School Administrators, said it is unclear what if anything lawmakers may pass and that the K-12 community will be working to ensure they understand potential impacts of adopting supermajority voting thresholds.
"There's a lot of districts already that have a real big challenge of passing bonds and this would make it next to impossible in many communities," he said, adding it's important for a growing state like Texas to be able to accommodate higher student enrollment and for districts to maintain their infrastructure.
For example, voters in the Round Rock Independent School District
"Things that make it more difficult to operate can obviously be challenging," S&P Global Ratings analyst Jane Ridley said, adding the rating agency does not have a specific opinion on exactly what a supermajority requirement would do to credit quality.
In a report last week, the rating agency said credit deterioration for Texas public schools could spread in fiscal 2025 and 2026 if action is not taken to address revenue shortfalls.
"We expect budgetary pressure will continue if basic aid funding is not adjusted to accommodate inflationary growth in operating costs, or if the requirement to adopt essentially revenue-neutral local tax rates is not balanced by electorate-approved increases to local property tax rates above this neutral level," the report said.
It pointed to weakened financial performance over the last year due to inflationary pressures on operating expenses, constrained local revenue growth, and limited increases in basic state aid in recent years.
Negative rating actions on Texas public schools outpaced positive ones, with 36 of the 638 districts rated by S&P downgraded or given negative outlooks over the last year, while only 13 received upgrades or positive outlooks. Median reserves as a percentage of general fund revenue or expenditures fell to 36.8% in 2024 from 40.7% in 2023.
The Lone Star State's biggest city is also feeling fiscal pressure, with Houston's mayor aiming to
Republican lawmakers in Arizona are looking to set a higher bar for tax and bond approval. A proposed constitutional amendment
Senate Bill 1013 would
