What Is 2019 Texas property tax reform

Overview

The 2019 Texas property tax reform marked a significant shift in how local governments collect and increase property taxes across the state. Driven by rising homeowner frustration over escalating tax bills, the Texas Legislature passed comprehensive legislation aimed at increasing transparency and limiting tax growth without voter approval.

Senate Bill 2 and House Bill 2, signed into law in June 2019, introduced new rollback thresholds and compression factors to control tax increases. These reforms were designed to give residents more influence over local tax decisions and reduce reliance on property tax revenue for city and county budgets.

• Effective January 2020, the new law limits city and county property tax revenue growth to 3.5% annually without voter approval.
• School districts face a stricter 2.5% rollback threshold, meaning they must hold an election if they propose higher increases.
• The law introduced a compression factor to prevent sharp tax spikes when property values surge unexpectedly in a given area.
• Local governments must now publish a tax rate certification by early September, allowing public scrutiny before finalization.
• If a jurisdiction exceeds its rollback rate, it triggers an automatic rollback election, where voters can cap the increase.

How It Works

The 2019 reform established clear mechanisms for calculating allowable tax increases and ensuring public accountability in the budgeting process. Each local taxing entity must follow specific steps to set its tax rate, with strict deadlines and disclosure requirements.

• Rollback Threshold: The maximum tax rate increase allowed before triggering a voter referendum; set at 3.5% for cities and counties and 2.5% for schools.
• Effective Tax Rate: The rate that would generate 2% more revenue than the prior year, adjusted for voter-approved debt.
• Compression Factor: A formula that adjusts tax bills when property values rise faster than inflation, protecting homeowners from disproportionate hikes.
• Tax Rate Hearing: Requires at least two public meetings, including a public hearing before final adoption of the tax rate.
• Notice Requirement: Entities must publish proposed tax rates in local newspapers and online at least 25 days before the hearing.
• Voter Approval: If a tax rate exceeds the rollback threshold, voters can override the increase through a petition or election.

Comparison at a Glance

The following table compares key aspects of Texas property tax policy before and after the 2019 reform:

These changes reflect a statewide effort to increase fiscal responsibility and public trust. By lowering thresholds and enhancing transparency, the reform has reshaped how local governments plan budgets and engage with constituents. While some rural districts argue it limits essential funding, urban areas have seen more stable tax growth and greater voter participation in tax decisions.

Why It Matters

The 2019 Texas property tax reform has had wide-ranging implications for homeowners, local governments, and the state's fiscal landscape. By empowering voters and curbing automatic tax growth, the law has shifted the balance of power in local taxation.

• Homeowners in fast-appreciating areas like Fort Worth and Austin benefit from the compression factor during valuation spikes.
• Local governments must now justify tax increases more rigorously, leading to leaner budget proposals.
• The 2.5% school threshold has pressured districts to seek alternative funding or efficiency improvements.
• Voter awareness has increased, with over 70% of counties publishing tax notices online by 2021.
• The law has inspired similar reforms in other states grappling with property tax inequities.
• Long-term, the reform may reduce reliance on property taxes in favor of broader economic development strategies.

As Texas continues to grow, the 2019 reforms provide a framework for sustainable taxation that balances local needs with taxpayer protections. Future adjustments may refine the compression factor or adjust thresholds, but the core principle of voter accountability remains central.