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Chapter 1
Focus on Statewide Taxes

The Texas Constitution and Legislature empower local governments to impose, levy and collect a number of taxes and fees so they may carry out their responsibilities to provide schools, roads, hospitals, fire departments, police protection and other services. Local governments, which include 3,794 separate taxing jurisdictions, include counties, school districts, cities and special-purpose districts such as junior colleges, hospitals, utilities, flood control and emergency service districts, among others.

These governments fund their operations from a number of revenue sources, including property and sales taxes; franchise and user fees; and court costs and fines. The local property tax, however, generates the most revenue statewide. Local property taxes for all jurisdictions totaled $35.1 billion, or almost half of all taxes collected in Texas, in 2007 (Exhibit 1).

Exhibit 1

Texas Tax Revenue, 2007
Type of Tax Tax Amount Percent of Total Tax
Property Tax $35,114,596,621 45.3%
State Sales Tax $20,270,476,222 26.1%
Local Sales Taxes $5,540,048,687 7.1%
Other State Taxes $16,685,153,662 21.5%
Total Taxes $77,610,275,192 100%

Source: Texas Comptroller of Public Accounts.

While local property taxes account for almost half of all tax revenue in the state, Texas has no state property tax. The Texas Constitution only authorizes local governments to collect property taxes. The state does not set property tax rates or collect property taxes.

The next-largest tax revenue source in Texas is the sales tax, which is allocated between the state and local governments (except for school districts, which do not have authority to assess a sales tax). In 2007, the combined sales tax totaled $25.8 billion, or 33.2 percent of all taxes collected in Texas. The bulk of that amount, $20.3 billion, went to the state, with local governments receiving $5.5 billion. Other state taxes, such as those imposed on motor fuels, cigarettes, utilities, etc., totaled $16.7 billion (21.5 percent). Local governments collect 52.4 percent of all taxes in the state, while state government takes in 47.6 percent.

Local Property Tax

The Texas Constitution authorizes local governments to adopt a property tax in order to provide public services. The constitution sets out five basic rules for property taxes in our state.

The first and overarching requirement is that property taxes must be equal and uniform. No single property or type of property should pay more than its fair share.

Local officials must base property taxes on value. If, for instance, an individual’s property is worth half as much as the property owned by his or her neighbor, then — everything else being equal — that individual’s tax bill should be one-half of his or her neighbor’s.

Generally, a local government must tax all property on its current market value — the price it would sell for when both buyer and seller seek the best price and neither is under pressure to buy or sell. The Texas Constitution provides certain exceptions to this rule, such as the use of “productivity values” for agricultural and timber land. This means that governments assess taxes based on the value of what the land produces, such as crops and livestock, rather than its sale value. This typically lowers the tax bill for such land.

Each property in a county must have a single appraised value. This means that the various local governments that collect property taxes cannot assign different values to the same property; all must use the same value. The Legislature created CADs to guarantee that this occurs.

All property is taxable unless federal or state law exempts it from the tax. These exemptions may exclude all or part of a property’s value from taxation.

Finally, property owners have a right to reasonable notice of increases in their appraised property value.

In tax year 2007, Texas’ local taxing units levied $35.1 billion in property taxes, 1.2 percent less than in 2006 (Exhibit 2).

Exhibit 2

Property Taxes Reported by Unit Type, 2006 vs. 2007
Unit Type 2006 Number of Units 2006 Tax Levy 2006 Percent of Levy 2007 Number of Units 2007 Tax Levy 2007 Percent of Levy Percent Levy Change from 2006 to 2007
School Districts 1,027 $20,918,122,059 58.8% 1,026 $18,874,239,532 53.8% (9.8%)
Cities 1,044 $5,322,985,519 15.0% 1,047 $5,890,306,731 16.8% 10.7%
Counties 254 $5,339,613,542 15.0% 254 $5,836,989,949 16.6% 9.3%
Special Districts 1,433 $3,972,185,910 11.2% 1,467 $4,513,060,409 12.8% 13.6%
Total 3,758 $35,552,907,030 100% 3,794 $35,114,596,621 100% (1.2%)

Source: Texas Comptroller of Public Accounts.

Unlike other local governments, which can also collect sales taxes and fees, school districts' only source of tax revenue is the property tax. In 2007, the 1,026 school districts levied $18.9 billion in property taxes, or 53.8 percent of all property taxes levied in the state (Exhibit 3).

 Local Governmentss Share of Property Taxes

The levy imposed by school districts in 2007 was 9.8 percent lower than in 2006, due to House Bill 1, adopted by the third called session of the 79th Legislature.

Cities collected the second-largest share of the property tax in 2007 — $5.9 billion, an increase of 10.7 percent over the 2006 levy. Counties followed closely behind with a property tax levy of $5.8 billion, 9.3 percent more than in 2006. The levy of special-purpose districts rose by 13.6 percent from 2006 to 2007, to more than $4.5 billion.

In the last 20 years, property taxes have grown at an annual compounded rate of 6.2 percent, or by 254.2 percent from 1987 to 2007 (Exhibit 4).

Exhibit 4

Growth of the Property Tax by Unit Type, 1988-2007
Tax Year Special Purpose District Levy County Levy City Levy School Levy Total Levy
1988 $1,232,415,000 $1,595,183,000 $2,145,726,000 $5,575,843,000 $10,549,167,000
1989 $1,284,165,144 $1,715,691,860 $2,200,415,156 $6,072,227,279 $11,272,499,439
1990 $1,354,607,273 $1,743,176,612 $2,218,971,749 $6,605,433,619 $11,922,189,253
1991 $1,459,643,501 $1,894,013,461 $2,303,609,801 $7,566,042,099 $13,223,308,862
1992 $1,492,043,534 $1,996,116,460 $2,311,630,199 $8,181,309,478 $13,981,099,671
1993 $1,535,769,813 $2,176,974,573 $2,362,404,482 $8,681,859,148 $14,757,008,016
1994 $1,620,504,796 $2,311,389,149 $2,493,554,910 $9,024,885,601 $15,450,334,456
1995 $1,628,217,607 $2,391,961,283 $2,596,742,540 $9,340,994,056 $15,957,915,486
1996 $1,698,557,436 $2,537,183,937 $2,701,214,386 $9,910,195,171 $16,847,150,930
1997 $1,759,622,591 $2,658,308,076 $2,847,081,480 $10,394,500,372 $17,659,512,519
1998 $1,889,138,306 $2,828,286,927 $3,005,996,060 $11,334,614,289 $19,058,035,582
1999 $2,041,041,011 $2,979,279,400 $3,247,964,177 $12,009,923,498 $20,278,208,086
2000 $2,389,110,312 $3,200,919,731 $3,530,863,516 $13,392,336,012 $22,513,229,571
2001 $2,703,512,059 $3,566,857,130 $3,884,829,249 $15,155,217,587 $25,310,416,025
2002 $2,864,454,984 $3,849,728,346 $4,186,795,363 $16,418,788,831 $27,319,767,524
2003 $3,092,285,295 $4,121,758,950 $4,415,212,819 $17,264,153,972 $28,893,411,036
2004 $3,369,068,834 $4,462,844,074 $4,607,757,531 $18,533,964,802 $30,973,635,241
2005 $3,609,629,697 $4,772,652,208 $4,901,791,597 $20,194,915,813 $33,478,989,315
2006 $3,972,185,910 $5,339,613,542 $5,322,985,519 $20,918,122,059 $35,552,907,030
2007 $4,513,060,409 $5,836,989,949 $5,890,306,731 $18,874,239,532 $35,114,596,621
Average Annual Increase 6.7% 6.7% 5.2% 6.3% 6.2%

Source: Texas Comptroller of Public Accounts.

During the same 20-year period, special purpose districts and counties saw the highest rate of increase in property tax collections, with an average annual increase of 6.7 percent. School districts experienced annual compounded rates of 6.3 percent. Cities had the lowest annual growth rate, at 5.2 percent.

Keeping Check on Local Property Tax Increases

The Legislature has provided Texas taxpayers with a mechanism to limit the rate of taxation a local government may adopt. If local taxing units adopt rates above a calculated “rollback” rate, taxpayers can petition for a rollback election.

A school district exceeding the rollback rate must hold an election automatically, without any need for a petition process. This allows its voters to decide whether to approve the proposed tax rate or to roll back the tax.

In 2007, 121 school districts exceeded the rollback rate, compared to 15 in 2006. Voters in 26 school districts rejected the tax rate proposed by the school board; in 93 elections, they ratified the board’s proposed rate; and two school districts cancelled the election and adopted the rollback rate. The highest tax rate increase voters approved was in Crowell ISD in Foard County, which saw its tax rate rise by 23.6 percent, from 95 cents per $100 of assessed value to $1.17 (Exhibit 5).

Exhibit 5

2007 School District Rollback Election Results
School District Election Results Board Approved Tax Rate Voter Approved Tax Rate Rollback Rate Percent Increase
Abbott ISD Ratified $1.1500 $1.1500 $1.0785 6.6%
Abernathy ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Aquilla ISD Ratified $1.2345 $1.2345 $1.1040 11.8%
Axtell ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Baird ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Ballinger ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Bay City ISD Ratified $1.3200 $1.3200 $1.2126 8.9%
Benjamin ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Blue Ridge ISD Ratified $1.5560 $1.5560 $1.4260 9.1%
Blum ISD Ratified $1.3715 $1.3715 $1.2415 10.5%
Boles ISD Ratified $1.2529 $1.2529 $1.1229 11.6%
Bonham ISD Rejected $1.2500 $1.1200 $1.1200 0.0%
Bosqueville ISD Ratified $1.2700 $1.2700 $1.2700 0.0%
Bruceville-Eddy ISD Ratified $1.3250 $1.3250 $1.1950 10.9%
Burkburnett ISD Ratified $1.2800 $1.2800 $1.1500 11.3%
Byers ISD Ratified $1.2400 $1.2400 $1.1100 11.7%
Canutillo ISD Rejected $1.3900 $1.3349 $1.3349 0.0%
Carlisle ISD Ratified $1.2820 $1.2820 $1.1520 11.3%
Coldspring-Oakhurst CISD Rejected $1.2400 $1.0900 $1.0900 0.0%
Colorado ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Cooper ISD Ratified $1.3500 $1.3500 $1.2200 10.7%
Copperas Cove ISD Rejected $1.3110 $1.1810 $1.1810 0.0%
Cotton Center ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Covington ISD Rejected $1.3700 $1.2400 $1.2400 0.0%
Crowell ISD Ratified $1.1700 $1.1700 $0.9467 23.6%
Culberson-Allamoore ISD Rejected $1.2170 $1.0870 $1.0870 0.0%
DeKalb ISD Ratified $1.2620 $1.2620 $1.1320 11.5%
Detroit ISD Ratified $1.3100 $1.3100 $1.1800 11.0%
Devine ISD Ratified $1.2350 $1.2350 $1.1050 11.8%
Edgewood ISD Ratified $1.4050 $1.4050 $1.2750 10.2%
Elkhart ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Eula ISD Ratified $1.4000 $1.4000 $1.2700 10.2%
Evadale ISD Cancelled $1.2700 $1.2700 $1.2700 0.0%
Excelsior ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Flatonia ISD Ratified $1.2600 $1.2600 $1.1300 11.5%
Galena Park ISD Ratified $1.4309 $1.4309 $1.3608 5.2%
Goldburg ISD Rejected $1.3700 $1.2400 $1.2400 0.0%
Grape Creek ISD Ratified $1.3590 $1.3590 $1.2290 10.6%
Hamlin ISD Ratified $1.3750 $1.3750 $1.2450 10.4%
Hamshire-Fannett ISD Ratified $1.3380 $1.3380 $1.2080 10.8%
Harlandale ISD Rejected $1.4790 $1.3490 $1.3490 0.0%
Harleton ISD Ratified $1.2550 $1.2550 $1.1250 11.6%
Haskell ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
High Island ISD Ratified $1.3000 $1.3000 $1.1700 11.1%
Hillsboro ISD Ratified $1.4100 $1.4100 $1.3000 8.5%
Hubbard ISD Rejected $1.3580 $1.2280 $1.2280 0.0%
Hughes Springs ISD Ratified $1.2300 $1.2300 $1.1000 11.8%
Idalou ISD Ratified $1.2700 $1.2700 $1.1400 11.4%
Jasper ISD Ratified $1.3400 $1.3400 $1.2100 10.7%
Jourdanton ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Karnes City ISD Rejected $1.1700 $1.0700 $1.0700 0.0%
Knox City-O'Brien CISD Ratified $1.2400 $1.2400 $1.1000 12.7%
Kress ISD Ratified $1.1700 $1.1700 $1.1700 0.0%
Lake Worth ISD Rejected $1.6700 $1.5800 $1.5800 0.0%
La Pryor ISD Ratified $1.3300 $1.3300 $1.2000 10.8%
Lazbuddie ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Leonard ISD Ratified $1.2700 $1.2700 $1.1400 11.4%
Leveretts Chapel ISD Ratified $1.2500 $1.2500 $1.1200 11.6%
Lindale ISD Rejected $1.3900 $1.2600 $1.2600 0.0%
Linden-Kildare ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Lockney ISD Ratified $1.1400 $1.1400 $1.0400 9.6%
Lone Oak ISD Rejected $1.3800 $1.2400 $1.2400 0.0%
Loraine ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Louise ISD Rejected $1.3100 $1.1800 $1.1800 0.0%
Lueders-Avoca ISD Ratified $1.2500 $1.2500 $1.1200 11.6%
Lytle ISD Rejected $1.4000 $1.2200 $1.2200 0.0%
Marion ISD Rejected $1.3100 $1.2800 $1.2800 0.0%
Mathis ISD Ratified $1.3300 $1.3300 $1.2000 10.8%
Maud ISD Ratified $1.2200 $1.2200 $1.0900 11.9%
Miller Grove ISD Rejected $1.3200 $1.1900 $1.1900 0.0%
Mineola ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Motley County ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Mount Calm ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Munday CISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Nacogdoches ISD Ratified $1.3700 $1.3700 $1.2400 10.5%
Nazareth ISD Ratified $1.3000 $1.3000 $1.1800 10.2%
New Deal ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
New Home ISD Ratified $1.2560 $1.2560 $1.1260 11.5%
Newcastle ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Nordheim ISD Ratified $1.1950 $1.1950 $1.0650 12.2%
Odem-Edroy ISD Ratified $1.2930 $1.2930 $1.1650 11.0%
Olney ISD Ratified $1.3800 $1.3800 $1.2500 10.4%
Paint Creek ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Palestine ISD Ratified $1.2800 $1.2800 $1.1500 11.3%
Patton Springs ISD Rejected $1.1700 $1.0400 $1.0400 0.0%
Penelope ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Petersburg ISD Ratified $1.2400 $1.2400 $1.1000 12.7%
Poteet ISD Rejected $1.2550 $1.1250 $1.1250 0.0%
Presidio ISD Ratified $1.3700 $1.3700 $1.2400 10.5%
Prosper ISD Ratified $1.6700 $1.6700 $1.5400 8.4%
Redwater ISD Ratified $1.2900 $1.2900 $1.1600 11.2%
Ricardo ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Rio Grande City ISD Ratified $1.4200 $1.4200 $1.2900 10.1%
Roscoe ISD Ratified $1.2400 $1.2400 $1.1100 11.7%
Rosebud-Lott ISD Cancelled $0.7406 $0.7406 $0.7406 0.0%
Royse City ISD Rejected $1.4500 $1.3500 $1.3500 0.0%
Rule ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Saint Jo ISD Ratified $1.3100 $1.3100 $1.1800 11.0%
Sam Rayburn ISD Ratified $1.2100 $1.2100 $1.0800 12.0%
San Antonio ISD Rejected $1.3700 $1.2400 $1.2400 0.0%
San Marcos ISD Rejected $1.5000 $1.3700 $1.3700 0.0%
Schleicher County ISD Ratified $1.1700 $1.1700 $1.0400 12.5%
Schulenburg ISD Rejected $1.3600 $1.2300 $1.2300 0.0%
Shallowater ISD Ratified $1.4100 $1.4100 $1.2400 13.7%
Shelbyville ISD Ratified $1.2200 $1.2200 $1.1100 9.9%
Silsbee ISD Ratified $1.3400 $1.3400 $1.2100 10.7%
Sinton ISD Ratified $1.2300 $1.2300 $1.1079 11.0%
Somerset ISD Rejected $1.3240 $1.1940 $1.1940 0.0%
Southside ISD Rejected $1.4900 $1.3600 $1.3600 0.0%
Stamford ISD Ratified $1.2600 $1.2600 $1.1300 11.5%
Texline ISD Ratified $1.1700 $1.1700 $1.0350 13.0%
Thorndale ISD Ratified $1.3150 $1.3150 $1.1850 11.0%
Timpson ISD Rejected $1.2600 $1.1300 $1.1300 0.0%
Tornillo ISD Ratified $1.3300 $1.3300 $1.2800 3.9%
Tulia ISD Ratified $1.1600 $1.1600 $1.0400 11.5%
Union Grove ISD Ratified $1.2700 $1.2700 $1.1400 11.4%
Veribest ISD Ratified $1.2900 $1.2900 $1.1600 11.2%
Vidor ISD Ratified $1.2200 $1.2200 $1.1350 7.5%
Whitesboro ISD Ratified $1.3370 $1.3370 $1.2070 10.8%
Woodson ISD Ratified $1.1700 $1.1700 $1.0100 15.8%
Ysleta ISD Ratified $1.3300 $1.3300 $1.2000 10.8%

Source: Texas Comptroller of Public Accounts.

A school district that adopts a tax rate above the rollback rate must hold a rollback election between 30 and 90 days after its board of trustees adopts the rate. The school district’s election differs from that of other taxing units in that the district must ask voters to ratify the school district’s adopted tax rate. If a simple majority of votes cast in the election favors the adopted tax rate, it stands. If the voters disapprove the adopted rate, the school district’s rollback rate becomes the adopted tax rate.

This year marked the highest number of school rollback elections in the last 20 years. School districts triggered four times as many elections as the next highest year of 2001, which saw 30 elections. The 26 school district tax rates rejected by voters is also the highest number in the last 20 years and equals the number of rejected tax rates from 1990-2006 combined (Exhibit 6).

 History of school District Rollback Elections, 1988-2007

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