HB 3 FAQ: Reduces and Reforms Property Taxes

Tax Rate Changes:

1. How does House Bill 3 affect my district’s 2019 tax rate?
   • House Bill 3 reorders a district’s 2018 tax rate, then compresses both Tier 1 and Tier II copper pennies.  For most districts, this constitutes the district’s 2019 tax rate, however, some exceptions exist. A To the Administrator Addressed letter on 6/11/2019 walks through these calculations and may be found here. 
2. What will TEA use in order to calculate current year values?
   • The agency is currently exploring different options and will provide additional information later this summer.   
3. How will the 2018 Property Value Study (PVS) results impact Foundation School Program funding?       
   • The 2018 PVS results will be used in the Formula Transition Grant when calculating the district's total M&O revenue per student that the district would have received if the Foundation School Program formula had not changed. Additional uses of the 2018 PVS, if pursued, will be addressed in future communications from the agency.
4. How many decimals can my tax rate contain?
   • The agency, in calculating funding under the FSP, will round down to 4 decimal places (e.g. 1.0684). This has been long-standing agency practice.
     
     Tax rates with more than 4 decimals will not have the additional fractions of a penny recognized for state funding purposes.
5. What happens if I don’t compress my taxes in compliance with HB 3?
   • The agency, in calculating funding under the FSP, will reduce state aid or adjust recapture in an amount equal to the amount of revenue generated by a school district’s tax effort that is not in compliance with HB 3.
     
     The district will not benefit from the additional tax revenue. The district may be liable for other civil remedies for failure to appropriately reduce tax rates
6. What if I have already adopted my 2019 Tax rate?
   • The district must re-adopt its tax rate to be in compliance with HB 3. Having adopted a tax rate prior to the passage or effective date of HB 3 does not exempt the district from the tax rate compression requirements of HB 3

Recapture:

1. Are recapture payments from school districts used to fund other functions of the state budget?
   • No. Recaptured funds are appropriated in the General Appropriations Act as a method of finance to help pay for the Foundation School Program (FSP). Texas Education Code, 49.154(b) states, “Receipts shall be deposited in the state treasury and may be used only for foundation school program purposes.”
2. How do I…?
   • Visit the Excess Local Revenue webpage on the TEA’s website at: https://tea.texas.gov/Finance_and_Grants/State_Funding/Excess_Local_Rev… or contact Kim Wall at kim.wall@tea.texas.gov or (512)-463-4809.