Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms October 29, 2018 Goals For Education and Property Tax Reform • Focus state resources on dataproven strategies to improve student outcomes • Slow the growth of skyrocketing tax bills • Pay the best teachers more, especially when teaching in more difficult classrooms • Focus on early childhood education • Reward the districts that achieve targeted student outcomes October 29, 2018 • Compress tax rates as property values rise • Promote housing affordability and economic development by capping annual property tax revenue increases • Reduce recapture’s projected growth, keeping tax dollars local Improving through Comprehensive School Finance Reforms The future of Texas is in our classrooms today. That future depends on paying our best teachers more, rewarding districts for student achievement and growth, prioritizing spending in the classroom and reducing the burden of ever-increasing property taxes. We must seize this moment to build a better future for Texas. -Governor Abbott October 29, 2018 The Texas Constitution requires the Legislature to maintain an efficient system of free public schools in order to preserve liberty and fundamental rights. What is the goal of our education system? October 29, 2018 College Career Military Are we meeting our goals? 222222222222 18 Too few Texas students are prepared for college % Above "Passing" on SAT/ACT 30.0% Non Economically Disadvantaged 25.0% 6.1 point rise 31% increase 20.0% All Students In Texas 15.0% 10.0% Economically Disadvantaged 5.0% 1.8 point rise 45% increase 0.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 Economically disadvantaged 2005 2006 2007 2008 2009 2010 Not economically disadvantaged October 29, 2018 2011 All 2012 2013 2014 2015 2016 Too few Texas students are prepared for the military Inadequate Education Prevents Young Americans From Serving Proportion Who Score Too Low Out of those who do graduate and try.( to the Arm}: over one In flue cannot join herause they store too low on the soilitarfs entranre examProportion of graduates who do not do I. enough on the Armed Forces tn Qualification Tee: to join the Army 14% or Under mile-15% - ante - sum - ase? 29st. - Due-r Proportion Who Do Not Graduate Nationwide, rroro than one in five young ?rnor'ieans doos not graduate on timeJn some states It Is even worse: Proportion of students who do not graduate on time from high school No Data Elm - Loss Tran Has - 15's, 24%. - 25% 34's. - 35% or Greater ldLLatio'I ll llilJo rJ' out 'Ji ROI 3 [Pl] atluul 'pwi. ?Hl: lo [51:4 lil'gI 'l'tt?ft?il'} fiscl'otd War was malts October 29, 2018 Will we reach our 6OX30 goal? - Six Yr. Completion Rate for Lowr Income Students of Texas' K-12 Population Today) r-i r-5 5% 1:5096' 55% 50% 55% no; :55'10:1239% 42% 60% 63% 66% 20% 11% 12% 20% 23% 26% 29% 32% 35% 38% 41% 44% 62% 65% 68% 25% 13% :1593 19% 229s. 259s. 239s. 319mere. 30% 15% '18'4080% 83% 86% 82% 85% 88% 80% 83% 86% 89% 92% 85% 32% 40% 43% 46% 49% 52% 55% 58% 61% 64% 62% 20% 23% 82% 85% 88% 91% 94% 90% 39% 42% 45% 48% 51% 54% 52% 60% 63% 66% 69% 22% 25% 84% 82% 90% 93% 96% Six Yr. Completion Rate for NON Low Income of Texas? K-12 Population Today) 55% 41% 44% 42% 50% 53% 56% 59% 62% 65% 68% 21% 24% 22% 80% 83% 86% 89% 92% 95% 98% 100% 43% 46% 49% 52% 55% 58% 61% 64% 62% 20% 23% 26% 29% 82% 85% 88% 91% 94% 92% 100% October 29, 2018 Lack of post-secondary credentials is costing Texas Estimated Lifetime Earnings by Education Level, H.S. class of 2010 $3 M $2.5 M Gap: ~$1 Million $2 M $1.5 M $1 M $0 M Completes P.S. Credential # students, 2010 HS cohort Does Not Complete P.S. Credential 79,142 201,378 October 29, 2018 There are state budgetary consequences when students graduate unprepared. Skills Mismatch: Uninsured Medical: 300,000 ~ unfilled jobs per Texas Workforce Commission vs. ~544,000 unemployed Texans 11 Incarceration: 147,000 $6.0B ~ inmates costing annual cost to Texas for people without the health benefits typically associated with living wage jobs ~$3.3B ~ annually ($22k per inmate), or 2x what we spend on K-12 student Within each Texas H.S. graduating class, students subsequently not earning a postsecondary credential lose a combined $201 billion in future lifetime earnings (equal to 1/8th of Texas $1.6 trillion GDP). October 29, 2018 Texas does well in demographically-adjusted assessments. Meaning, all Texas student groups do relatively well compared to national figures. October 29, 2018 Reading Grade 4 Adjusted Scores 235 230 225 220 215 210 205 200 195 190 185 1998 2002 2003 2005 2007 2009 2011 2013 Texas-White US-White Texas-Hispanic US-Hispanic Texas-Black US-Black 2015 BUT, site selectors and employers do not adjust for demographics in their business or hiring decisions. Reading Grade 4 Non-adjusted Score 240 230 220 210 200 190 1998 2002 US 2003 2005 2007 California Massachusetts New York 2009 2011 2013 Florida 2015 Texas October 29, 2018 Our future economic success as a state will require that all children have a chance to learn and achieve. The college, career, and military readiness challenges will only increase in the coming years. 1996 Econ Dis. % October 29, 2018 Our School Finance Problems Don’t Stop With a Need To Improve Student Outcomes – We Must Also Address The Recurring Growth in School Property Taxes October 29, 2018 School Property Taxes are the Largest Part of a Texan’s Tax Bill – And Rates Don’t Decline • Tier 1 M&O Property Taxes – the largest portion of the largest portion of a Texan’s property tax bill – do not decrease when property values increase. • The current school finance system functionally requires most districts to tax at a $1.00 tax rate, with significant negative financial consequences for dropping the local tax rate. October 29, 2018 Fixed Tax Rates – Coupled with Property Value Growth – Cause Property Tax Bills to Grow Faster than Ability to Pay 200% 185.40% 180% 160% 140% 120% 100% 80% 62.50% 60% 40% 20% 0% Increase in Est. Average Taxable Value Single Family Homes October 29, 2018 Increase in Median Household Income since 1996 Despite past efforts, taxes continue to increase 2008 Average Taxable Value Single Family Home (Statewide) Tier 1 Tax Rate Tier 1 portion of Tax Bill 2017 2027 $ 118,181.53 $ 159,828.10 $ 281,658.13 $ 1.0000 $ 1.0000 $ 1.0000 $ 1,181.82 $ 1,598.28 $ 2,816.58 October 29, 2018 Without tax reform, the state share of education will continue to decline Current Law Projections: State vs. Local Share of M&O Funding 70.0% 60.0% 50.0% 40.0% 30.0% The state’s share will plummet to below 30% by 2023. 20.0% 10.0% 0.0% State Tax Revenues Recapture Revenues 2018 October 29, 2018 2019 2020 2021 2022 Local M&O Revenues 2023 THE TEXAS TRIBUNE Texas projects state funding for schools to drop as local revenue grows In a preliminary budget request, the Texas Education Agency revealed it expects the state to put less money into public education next year because of fast-increasing local property values. BY ALIYYA SWABY SEPT. 12, 2018 1 PM Without Tax Reform, Recapture Will Also Skyrocket $7,000,000,000.00 $6,000,000,000.00 $5,000,000,000.00 $4,000,000,000.00 $3,000,000,000.00 $2,000,000,000.00 $1,000,000,000.00 $- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 • As property values have increased, more districts have entered recapture and those districts in recapture have seen their payments continue to increase. • Without reform, the total amount of recapture and the size of district recapture payments will continue to grow rapidly. Recapture Actuals (1994-2018) and Projections (2019-2023) October 29, 2018 If Current Trends Hold, What Will Texas Look Like in 2028? 0.8 • If current trends hold for the next decade, and the state does not compress local property taxes, “Robin Hood” payments may form a larger percentage of school funding than state tax dollars by 2028. 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2018 2019 2020 2021 State Share % October 29, 2018 2022 2023 2024 Local Share % 2025 2026 Recapture % 2027 2028 A comprehensive redesign of the entire school finance system is needed 222222222222 18 Incentives in our system must be aligned • Prioritizing money to teachers • Incentivizing improvement in student outcomes, especially for low-income students • Removing outdated elements • Easing the over-reliance on school property taxes October 29, 2018 Improve Student Outcomes by Paying Our Best Teachers More, Especially If They Teach in the Most Difficult Classrooms October 29, 2018 Teacher Quality Allotment Distinguished Accomplished Masters October 29, 2018 Statewide Teacher Salary Distribution (2017-18 School Year) 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% $25,000 to $29,999 $30,000 to $34,999 Source: Texas Education Agency PEIMS Data $35,000 to $39,999 $40,000 to $44,999 $45,000 to $49,999 $50,000 to $54,999 October 29, 2018 $60,000 to $64,999 $65,000 to $69,999 $70,000 to $74,999 $75,000 to $79,999 $80,000+ Statewide vs. Dallas Teacher Pay (2017-18 School Year) 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% $25,000 to $29,999 $30,000 to $34,999 Source: Texas Education Agency PEIMS Data $35,000 to $39,999 $40,000 to $44,999 $45,000 to $49,999 $50,000 to $54,999 October 29, 2018 $60,000 to $64,999 $65,000 to $69,999 $70,000 to $74,999 $75,000 to $79,999 $80,000+ Dallas ISD has focused on placing its best teachers in the toughest classrooms in the lowest grades. This has resulted in dramatic academic improvements in just one year. 5th Grade Math at Meets 5th Grade Reading at Meets +23 40 +3 +8 +7 37 -3 32 30 +50 33 58 60 28 24 25 50 25 24 42 41 40 20 35 17 15 +12 +24 70 36 35 +14 +21 30 30 14 26 20 10 17 14 5 10 0 0 CF Carr ES (92% JN Ervin ES JW Ray ES (94% Titche ES (84% Hernandez ES EcoDis) (97% EcoDis) EcoDis) EcoDis) (84% EcoDis) 2017 2018 12 8 CF Carr ES (92% JN Ervin ES JW Ray ES (94% Titche ES (84% Hernandez ES EcoDis) (97% EcoDis) EcoDis) EcoDis) (84% EcoDis) October 29, 2018 2017 2018 After Three Years, ACE Schools Continue to Show Good Results. % Proficient for 5th Grade Math at Meets % Proficient for 5th Grade Reading at Meets 70 +38 +19 +40 +11 +67 +48 +42 +18 +11 +12 +18 -3 +5 +31 +13 -1 90 58 60 50 70 38 54 50 41 40 27 30 57 60 39 40 20 80 56 47 20 82 77 22 20 16 19 26 30 20 8 10 23 15 12 9 10 22 4 0 0 Blanton ES (92% Umphrey Lee ES EcoDis) (92% EcoDis) Mills ES (91% EcoDis) Pease ES (92% EcoDis) Blanton ES (92% EcoDis) Umphrey Lee ES (92% EcoDis) 2015 2015 2017 2018 October 29, 2018 2017 Mills ES (91% EcoDis) 2018 Pease ES (92% EcoDis) Financially Incentivize Districts to Improve Student Outcomes – Especially When Achieved Among Low-Income Students October 29, 2018 College Career Military The concept is that bonus levels are driven by student adjustments Basic Allotment Student Adjustments Bonus Funding District Adjustments October 29, 2018 The goal of a school finance system should be to ensure that similar children receive similar funding, regardless of where they live. October 29, 2018 Diz? Uag? 02062 NP Fold the CEI into the basic allotment Alamo Heights: 1.08 Northside: 1.11 East Central: 1.10 Randolph: 1.06 Edgewood: 1.15 San Antonio: 1.14 Floresville: 1.08 Schertz-Cibolo Univ. City: 1.09 Ft. Sam Houston: 1.06 South San Antonio: 1.14 Harlandale: 1.12 Southside: 1.10 Judson: 1.11 Southwest: 1.11 Lackland: 1.05 North East: 1.11 October 29, 2018 District with CEI of 1.08 ABC ISD (CEI = 1.08) ABA = BA × (((CEI – 1) × 0.71) + 1) ABA = $5,140 × (((1.08 – 1) × 0.71) + 1) $5,432 per student in average daily attendance District with CEI of 1.17 XYZ ISD (CEI = 1.17) ABA = BA × (((CEI – 1) × 0.71) + 1) ABA = $5,140 × (((1.17 – 1) × 0.71) + 1) $5,760 per student in average daily attendance October 29, 2018 Put student weights on a spectrum Lowest Highest Need Need October 29, 2018 Compensatory Education Poor Poorer Poorest School districts are pioneering new ways to calculate compensatory educa?on THE CHALLENGES 82% of red is SAISD, Harlandale, Edgewood and South San Bexar County Boundaries ISD Boundaries - Block 1 Block 2 - Block 3 - Block 4 October 29, 2018 Q?l . ft). A ,o isn?Jt-t' . a. English Language Learners Year 1 Year 2 Year 3 Year 4 Year 5 October 29, 2018 ELs Long-Term K-12 Achievement Normal Curve Equivalents on standardized tests in English Reading Two Way Dual Language Ed One Way Dual Language Ed Transitional Bilingual Ed (Academic content) Transitional Bilingual Ed (Taught Traditionally) ESL taught with academic content ESL pullout from mainstream Proposition 227 in California Thomas, W.P., & Collier, V.P. (2012). Dual language education for a transformed world. Fuente Press: Albuquerque, NM. October 29, 2018 Merely increasing spending will not solve our education problem, but more money spent in a better way can improve student outcomes. October 29, 2018 Total funding per enrolled student has increased 29% (from $8,800 in FY2006 to $11,349 in FY2017) -Total Statewide Federal Funding -Total Statewide Local Funding Total Statewide Revenue from Reoa pture -Total Statewide State Funding ?Total Statewide Funding Adjusted for Inflation $12,000 $11 038 $11,245 $11,349 $10,493 $10,499 $10,528 $10,118 $10,103 $10,049 $0,?75 $10,000 $9,423 $8,800 $8,000 $6,000 $4,000 $2,000 FY2006 FY2008 FY2009 FY20 10 FY2011 FY20 12 FY2013 FY2014 FY2015 FY20 16 FY2017 October 29, 2018 Total annual funding has increased 53% (from $39.6 billion in FY2006 to $60.6 billion in FY2017) -Tota Statewide State Funding Total Statewide Revenue from Recapture -Tota Statewide Local Funding -Total Statewide Federal Funding ?Tota Statewide Funding Adjusted for Inflation $70,000 $59 389 $?50'616 $60,000 $57,510 $54,059 $50,624 $51576 $50,293 $50,826 $50,000 $45 465 $47,835 ?g $43,124 .9 $39,342 $40,000 $30,000 $20,000 $10,000 I I I I I FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY20 16 FY2017 October 29, 2018 New State Spending, Without Local Tax Reform, Will Not Stop The State Share Decline Without Compression, The State Share Always Falls Even With Massive Infusions of State Revenue 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% State (No Compression) Local (No Compression) 2018 2019 2020 2021 2022 2023 2024 October 29, 2018 Recapture (No Compression) 2025 2026 2027 2028 You can?t fix school finance without fixing how you pay for schools 222222222222 18 Our Proposal: The 2.5% Tier 1 M&O Revenue Cap • This caps the increase in additional local property tax revenue a school district can collect for Tier 1 M&O at 2.5% per year, plus new property value. • As property values rise on a district level, this cap would cause the tax rate to decline. So long as districts tax at this new individual district compression ratio, they would still be entitled to their full Tier 1 M&O allocation. • State revenues will be utilized to ensure districts do not lose money as a result of this compression of tax collections. October 29, 2018 Our Proposal: The 2.5% Tier 1 M&O Revenue Cap Simplified Impact of 2.5% Revenue Cap on Tax Rates for District Growing at 10% Annually $2,500,000,000 120% 100% $2,000,000,000 80% $1,500,000,000 60% $1,000,000,000 40% $500,000,000 20% $0 0% Year 1 Year 2 Year 3 Year 4 Year 5 Property Value Year 6 Tax Rate October 29, 2018 Year 7 Year 8 Year 9 Year 10 Projected Tax Effects - Austin ISD Note: All projections are in draft form and are subject to change. Total M&O tax rate projection M&O Property Tax revenue projection $2,000,000,000 $1.20 $1.10 1.079 1.079 1.079 $1,933,235,477 $1,900,000,000 $1,800,000,000 $1,700,000,000 $1.00 $0.9865 $1,600,000,000 $1,506,173,936 $0.90 $0.9246 $1,500,000,000 $0.8815 $0.80 $0.8406 $1,400,000,000 $1,300,000,000 $0.70 $1,200,000,000 $0.60 $1,100,000,000 $1,139,631,510 $1,000,000,000 $0.50 2018 2019 2020 Austin Tax Rate under Current Law 2021 2022 2023 Austin Tax Rate under Revenue Cap October 29, 2018 2018 2019 Austin M&O Revenue under Current Law 2020 2021 2022 2023 Austin M&O Revenue under Revnue Cap Projected Tax Effects - Houston ISD Note: All projections are in draft form and are subject to change. Total M&O tax rate projection $1.10 M&O Property Tax revenue projection $2,400,000,000 $1.04 $1.04 $1.04 $2,249,810,203 $1.0022 $2,200,000,000 $1.00 $0.9645 $0.9283 $0.8936 $1,933,055,465 $2,000,000,000 $0.90 $1,800,000,000 $0.80 $1,600,000,000 $1,672,011,369 $0.70 $1,400,000,000 $0.60 $1,200,000,000 $0.50 $1,000,000,000 2018 2019 2020 Houston Tax Rate under Current Law 2021 2022 2023 Houston Tax Rate under Revenue Cap October 29, 2018 2018 2019 M&O Revenue under Current Law 2020 2021 2022 2023 M&O Revenue under Revnue Cap Projected Tax Effects - Dallas ISD Note: All projections are in draft form and are subject to change. Total M&O tax rate projection $1.10 $1.0401 M&O Property Tax revenue projection $1.0401 $1.0401 $1,700,000,000 $1,663,693,653 $1,600,000,000 $1.00 $0.9763 $0.90 $1,500,000,000 $0.9165 $0.8719 $1,400,000,000 $0.80 $1,326,833,256 $0.8295 $1,300,000,000 $0.70 $1,200,000,000 $0.60 $1,100,000,000 $1,067,514,829 $0.50 $1,000,000,000 2018 2019 2020 Dallas Tax Rate under Current Law 2021 2022 2023 Dallas Tax Rate under Revenue Cap October 29, 2018 2018 2019 Dallas M&O Revenue under Current Law 2020 2021 2022 2023 Dallas M&O Revenue under Revnue Cap Projected State vs. Local Share Effects Impact of 2.5% Revenue Cap on State vs. Local Share of M&O Funding (Left: Current Law FY 18-23; Right: Current Law FY 18-19 and Proposed FY 20-23) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% State Tax Revenues Recapture Revenues Local M&O Revenues 2018 State Tax Revenues 2019 2020 2021 October 29, 2018 2022 2023 Recapture Revenues Local M&O Revenues Projected Effects - Recapture • As property values continue to grow, the amount of recapture paid and the rate at which it increases will continue to grow. • Adopting the 2.5% proposal will reduce future recapture payments districts would limit the state’s reliance on recapture as a method of finance for public schools. Annual Recapture under Current Law and 2.5% Proposal $6,000,000,000 Recapture as a % share of total state and local funding $5,864,489,288 $5,000,000,000 12.00% Recapture Current Law $4,000,000,000 9.05% 10.00% 6.39% 8.00% $3,000,000,000 6.00% $2,851,599,912 $2,000,000,000 Recapture 2.5% Proposal $1,000,000,000 $- 4.21% 4.00% 3.88% 10.52% Recapture Current Law 7.71% 5.11% 5.12% 4.65% 4.35% 4.68% Recapture 2.5% Proposal 4.66% 2.00% 0.00% 2018 2019 2020 2021 2022 2023 2018 October 29, 2018 2019 2020 2021 2022 2023 Projected Recapture Effects - Statewide $7,000,000,000 $5,864,489,288 $6,000,000,000 $4,916,305,699 $5,000,000,000 $4,122,550,986 $4,000,000,000 Recapture under Current Law $3,334,885,070 Recapture under 2.5% Proposal $3,000,000,000 $2,851,599,912 $2,618,550,103 $2,386,206,672 $2,000,000,000 $2,101,300,966 $1,933,330,728 $2,509,863,992 $2,541,215,585 $2,283,407,402 $1,000,000,000 $0 2018 2019 2020 2021 October 29, 2018 2022 2023 Projected Recapture Effects (Austin ISD) $1,400,000,000 $1,244,099,974 $1,200,000,000 $1,107,355,350 $980,442,061 $1,000,000,000 $836,655,808 $800,000,000 $743,087,610 $673,848,354 $664,011,482 $600,000,000 $695,177,216 $627,155,787 $600,296,543 $528,955,169 $494,335,576 Recapture under Current Law Recapture under 2.5% Proposal $400,000,000 $200,000,000 $0 2018 2019 2020 2021 October 29, 2018 2022 2023 Projected Recapture Effects (Houston ISD) $800,000,000 $700,000,000 $667,930,790 $600,000,000 $549,125,271 $500,000,000 Recapture under Current Law $438,640,647 $400,000,000 Recapture under 2.5% Proposal $335,957,237 $315,300,236 $300,000,000 $271,574,629 $242,746,945 $200,000,000 $254,023,280 $230,715,221 $248,974,089 $189,008,650 $180,943,810 $100,000,000 $0 2018 2019 2020 2021 October 29, 2018 2022 2023 Projected Recapture Effects (Dallas ISD) $500,000,000 $450,000,000 $431,624,122 $400,000,000 $350,000,000 $319,135,859 $300,000,000 Recapture under Current Law $250,000,000 Recapture under 2.5% Proposal $215,229,802 $200,000,000 $150,000,000 $102,245,120 $95,788,596 $100,000,000 $44,976,898 $50,000,000 $20,187,583 $0 2018 2019 2020 2021 October 29, 2018 2022 2023 The system is more unfair than people realize October 29, 2018 How people believe “Robin Hood” works Local Revenue (Popcorn) Recaptured Funds District’s Entitlement (Bucket) October 29, 2018 How it actually works It doesn’t matter how much money the formulas say you should receive. Recapture always happens at a designated equalized wealth level. October 29, 2018 You can start paying recapture before your bucket has been filled. 91 4 Number of districts who made recapture payments in 2017 so large they didn’t have enough Tier 1 money to meet formula needs. Number of ISDs that paid more than 100% of Tier 1 collection in recapture in 2017. October 29, 2018 $49m Amount of Houston ISD’s Tier 1 deficit because of recapture in 2018. With the changes in the Governor?s plan, these problems are finally fixed. October 29, 2018 Instead of Non-recapture Some Recapture District Districts The system will treat all districts the same. All Districts Utiwlih?l 2Ull?i But it gets even October 29, 2018 As a district collects more outcomes bonuses and hires better teachers, their entitlement grows and their recapture shrinks. Better teachers Better outcomes October 29, 2018 What does this mean for the future of Texas education 222222222222 18 Maintaining Affordability Through Comprehensive Local Tax Reform IfOctober 29, 2018 Overview of Proposal • Cap annual property tax revenue growth at 2.5% for cities, counties, and school districts, with a requirement that the impacted taxpayers have a right to vote if a governing body seeks to exceed this allowable rate • Three Parts • School M&O Taxes • City/County M&O Taxes • Transparency and Harmonization October 29, 2018 Why do we need revenue caps? 222222222222 18 Property taxes are increasing at an unsustainable rate • From 2005 to 2015 (11 years) • • • • • The County total property tax levy increased by 82.2% The City total property tax levy increased by 70.9% The School total property tax levy increased by 39.5% The Special District property tax levy increased by 92.6% Median Household Income increased by 36.34% • Taxable home values have increased faster than incomes as well, as shown on the next slide • Property taxes rising faster than the economy is growing is not a sustainable policy and threatens the Texas economic growth model • People are being taxed out of their homes. Gentrification and an overall housing affordability crisis are significant problems across the state. October 29, 2018 Background- Home values vs Median Income Statewide Single Family Home Values 1998-2016 200% 185.40% 180% 160% 140% 120% 100% 80% 62.50% 60% 40% 20% 0% Increase in Est. Average Taxable Value Single Family Homes October 29, 2018 Increase in Median Household Income since 1996 Background- Values by Property Category Harris County values by category 2005-2015 194.04% 200.00% 180.00% 160.00% 132.82% 140.00% 120.00% 100.00% 81.30% 80.00% 63.97% 60.00% 40.00% 20.00% 0.00% 2005 2006 Ave Taxable Value- Single Family Home 2007 2008 2009 2010 Avg Taxable Value- Multifamily 2011 2012 2013 Avg Taxable Value- Commercial Real October 29, 2018 2014 2015 2016 2017 Avg Taxable Value- Industrial Real Why is there a need for a cap? Local Tax Trends - Austin • Since 2014, the total tax bill on a median Austin home has increased 79.5% • Austin ISD: 72.3% • $1,662 median increase • City of Austin: 57.2% • $533 median increase • Travis County: 28.6% • $262 median increase 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% FY 15 FY 16 Austin ISD FY 17 City of Austin FY 18 Travis County Recapture Actuals (1994-2018) and Projections (2019-2023) October 29, 2018 FY 19 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth *** October 29, 2018 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth October 29, 2018 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth October 29, 2018 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth October 29, 2018 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth October 29, 2018 Why is there a need for a cap? Tax Rates do not Sufficiently Adjust Downward with Value Growth October 29, 2018 Why is there a need for a cap? Property Tax Increases are Driving Gentrification October 29, 2018 Quick Overview of Proposal • By limiting allowable property tax revenue growth, cities and counties will reduce tax rates as property values decline. • Voters will have an automatic say when a local government tries to raise property tax revenues by more than 2.5%. • Local Governments can exceed 2.5% only for limited causes • Law enforcement • Critical infrastructure • Fiscal restraint will be rewarded, as local governments can “bank” capacity for future years October 29, 2018 What does this mean for the future of Texas? 222222222222 18