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School District Tax Rates: What’s In Store For 2021

Posted by Rick Fine | Nov 02, 2020 | 0 Comments

In response to the coronavirus disaster, some cities and counties have controversially proposed to increase their 2020 tax rates by as much as 8% without voter approval. Perhaps you've noticed a deafening silence from school districts, though, despite the unprecedented challenges they face in the coming school year. That's because truth-in-taxation treats school districts very differently than cities and counties.

 For 2020, school districts cannot raise their tax rates to cover this year's increased, disaster-related expenditures. But school districts do have two other, unique remedies.

 First, they can ask the Commissioner of Education for assistance for the current year in which the disaster has occurred. The Commissioner has been very responsive thus far with additional support, including providing assistance for increased connectivity to those who lack access, thus extending virtual classes and online instruction. Along with federal appropriations, school districts may well manage to cover their additional costs of dealing with the coronavirus — as long as the money doesn't run out.

Secondly, should a district nonetheless suffer a shortfall for 2020, the district can increase its M&O rate for 2021 — the year following the coronavirus disaster — by the amount necessary “to respond to” the disaster. That's why school boards have been silent about tax increases this year. Simply stated, they can't do it until next year! And if a school board does adopt a higher rate for 2021, that increase would be a one-time opportunity available only in 2021. For 2022, the district's M&O rate would revert to its maximum compressed rate as calculated by TEA, with voter approval once again being required for any increase.

In the broader context of potential tax increases, it is worth examining the plight of the next Texas Legislature. Entering into the upcoming regular session that will begin on January 12, 2021, the Lege will inherit a current budget that is presently $4.6 billion in the red. If the state's fiscal health condition does not improve, then crafting the next appropriations bill might get tricky. If the Lege has to trim spending, school finance constitutes the largest slice of the pie: some 42% of the state's general revenue budget, dwarfing all other expenditures over which the Lege has discretion.

 Should the Lege be unable to fully fund its share of public school finance for the next biennium, then Education Code Section 48.2553 would allow school districts to raise their M&O rates as high as $1.17 to make up the difference in per student funding (meaning the amount by which a district's maximum basic allotment for the then-current school year falls below its maximum basic allotment for the 2020-2021, which provides the benchmark). Perhaps needless to say, legislators would be loathe to reduce school funding and in turn get blamed for local property tax increases. So expect the Lege to get creative next session in making ends meet, and hope for the best that the state's revenue outlook will improve as the economy recovers. Then keep your eye on those school board meetings a year from now.

About the Author

Rick Fine

Rick Fine has been active in public affairs for more than 40 years at the local, state and federal levels. He has been a licensed attorney since 1979, working in both the public and private sectors. Over the past two decades, Rick's practice has focused primarily on property tax valuations,...

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