Texas districts question state funding plan after property tax cuts, lawmaker warns of fallout

EL PASO, TEXAS (KFOX14/CBS4) — Texas voters approved Senate Bills 4 and 23 in the November election, lowering property taxes by increasing homestead exemptions, but some school districts in El Paso County say the state’s plan to replace the lost revenue is falling short and could have long-term consequences.

“There were two. It was SB4 and SB23. And what those did is that it lowered everybody’s property tax,” state Representative Vince Perez, said.

Both measures raised the homestead exemption, meaning homeowners will pay taxes on a smaller portion of their property value.

For example, on a $200,000 home, homeowners under 65 used to be taxed on $100,000.

Under SB4, that exemption increases to $140,000, meaning they’re taxed on $60,000.

For homeowners over 65, SB23 increases their additional exemption from $10,000 to $60,000, which can bring their total exemption up to $200,000.

To make up for the lost revenue, the state promised to cover the difference through what’s known as a “hold harmless” provision.

Perez said the funding formula can also force districts to lower their tax rates when taxable values drop, reducing revenue further.

“When a school district’s taxable value goes down then it triggers this calculation where then the state comes back and tells EPISD, ‘Okay now because your taxable values going down, you can only tax this, your tax rate has to go down,’” Perez said.

In El Paso, Ysleta ISD said it is already seeing the impact. Chief Financial Officer Lynly Cambern told the school board Wednesday that the district is not being fully made whole.

“Now all of those changes took place under the guise of we’re going to hold you harmless,” Cambern said. “So the state said, ‘We are going to impose these changes on you, but at the same time that we reduce your tax rate and increase the homestead exemption, which reduces local revenue, we’re going to hold you harmless.’”

As the district prepares for next year’s budget, Ysleta ISD could cut more than 80 positions, many through voluntary resignations and early retirement.

Chief Human Capital Management Officer Bobbi Russell-Garcia said the district is looking at 99 positions overall, with most of the reductions expected through attrition.

“It’s 83. And so out of those 99, 83 of those positions can be um taken in through attrition. These positions were voluntarily resigned,” Russell-Garcia said.

The changes come as districts face other pressures, including declining enrollment, competition from charter schools and newly passed school vouchers, which use state funds to help pay for private school tuition. The state has increased funding in some areas, including per-student allotments and teacher pay, but Perez said the property tax changes remain a major concern for the region.

“I consider this the number one issue that El Paso is going to face over the next decade,” Perez said. “It’s going to put pressure on campus closures. It’s gonna put a lot of pressure on staff reductions.”

Districts are still finalizing their budgets, and the full effect of the state’s replacement funding will not be clear until those budgets are complete.

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