With the passage of HB 3, school districts levying property taxes must use current year values of properties within their jurisdiction. Previously, school property taxes were calculated using prior-year tax values of properties certified by the Texas State Comptroller. This affects local share of tier 1 district entitlements and recapture since both use property values in their calculations.
The Legislature provided property tax relief by lowering the minimum and maximum M&O property tax rates. lowering the “state compression percentage” to 93% for the $1 of tax effort in the tier one M&O property tax rate as well as reducing the cap on M&O taxes. Instead of a cap of $1.17, now it’s $1.068 for FY 2020 with future taxing capacity up until $1.10. In FY 2021, there is an additional 2.5% across the board compression, based on the assumption that property value growth will exceed 2.5% statewide or in-district. This reduces the tier 1 tax rate to $0.92 and reduces the cap to $1.09.
School districts that had a property tax rate between $1.00 and $1.08 (otherwise eligible under the new system to gain the benefit of 2 more golden pennies), were reduced by 7 cents across the board. Others tax rates less than $1.00 were reduced by a smaller amount whereas tax rates greater than $1.08 changed at a greater amount.