Overall Vote Recommendation

Vote Yes; Amend

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 4 increases the homestead exemption for school district property taxes from $100,000 to $140,000, contingent on the approval of a constitutional amendment. The bill ensures that school districts receive additional state aid to offset revenue losses caused by the exemption increase. It modifies multiple sections of the Tax Code and Education Code to adjust school finance formulas, recapture payments, and state funding mechanisms. The legislation also provides transitional provisions to prevent financial disruptions for school districts and taxpayers. If approved, the new exemption would apply to ad valorem tax years beginning January 1, 2025. If the corresponding constitutional amendment is not approved by voters, the changes in Article 1 of this bill will not take effect.

Author

Paul Bettencourt

Carol Alvarado

Brian Birdwell

Cesar Blanco

Donna Campbell

Molly Cook

Brandon Creighton

Sarah Eckhardt

Peter Flores

Roland Gutierrez

Brent Hagenbuch

Bob Hall

Kelly Hancock

Adam Hinojosa

Juan Hinojosa

Joan Huffman

Bryan Hughes

Phil King

Lois Kolkhorst

Jose Menendez

Mayes Middleton

Robert Nichols

Tan Parker

Angela Paxton

Charles Perry

Charles Schwertner

Kevin Sparks

Royce West

Judith Zaffirini

Co-Author

Borris Miles

Sponsor

Morgan Meyer

Trey Martinez Fischer

Greg Bonnen

Todd Hunter

Chris Turner

Co-Sponsor

Daniel Alders

Alma Allen

Rafael Anchia

Trent Ashby

Jeffrey Barry

Cecil Bell, Jr.

Keith Bell

Salman Bhojani

Rhetta Bowers

Bradley Buckley

John Bucy III

Ben Bumgarner

Angie Chen Button

Briscoe Cain

Elizabeth Campos

Giovanni Capriglione

David Cook

Philip Cortez

Charles Cunningham

Pat Curry

Drew Darby

Aicha Davis

Jay Dean

Mano DeAyala

Mark Dorazio

Harold Dutton

Paul Dyson

Caroline Fairly

Maria Flores

James Frank

Erin Gamez

Cassandra Garcia Hernandez

Josey Garcia

Linda Garcia

Gary Gates

Stan Gerdes

Charlie Geren

Barbara Gervin-Hawkins

Vikki Goodwin

Ryan Guillen

Sam Harless

Cody Harris

Caroline Harris Davila

Cole Hefner

Hillary Hickland

Donna Howard

Lacey Hull

Carrie Isaac

Ann Johnson

Helen Kerwin

Ken King

Stan Kitzman

Suleman Lalani

Stan Lambert

Brooks Landgraf

Jeff Leach

Terri Leo-Wilson

Janie Lopez

Ray Lopez

A.J. Louderback

J. M. Lozano

John Lujan

Christian Manuel

Armando Martinez

Don McLaughlin

John McQueeney

William Metcalf

Terry Meza

Eddie Morales

Matt Morgan

Sergio Munoz, Jr.

Candy Noble

Tom Oliverson

Claudia Ordaz

Angelia Orr

Jared Patterson

Dennis Paul

Mary Perez

Vincent Perez

Dade Phelan

Katrina Pierson

Mihaela Plesa

Richard Raymond

Ron Reynolds

Alan Schoolcraft

Matthew Shaheen

Joanne Shofner

Shelby Slawson

John Smithee

David Spiller

Valoree Swanson

Tony Tinderholt

Steve Toth

Ellen Troxclair

Gary Vandeaver

Cody Vasut

Denise Villalobos

Hubert Vo

Charlene Ward Johnson

Trey Wharton

Terry Wilson

Erin Zwiener

Contact the Author

Sen. Paul Bettencourt

Capitol Phone:

(512) 463-0107

Capitol Office:

CAP 3E.16

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

The fiscal note for Senate Bill 4 (SB 4) projects a two-year net negative impact of $1.04 billion on General Revenue-related funds through the biennium ending August 31, 2027. The bill increases the homestead exemption for school district property taxes from $100,000 to $140,000, requiring the state to compensate school districts for lost revenue through additional state aid. This results in an estimated cost of $1.24 billion in fiscal year 2026 and $1.38 billion in fiscal year 2027, with costs decreasing in later years but still totaling $957 million by fiscal year 2030.

The fiscal impact extends beyond General Revenue, as school districts will see reduced local tax collections, with estimated levy losses of $1.48 billion in fiscal year 2026 and $1.61 billion in fiscal year 2027. Recapture payments, which transfer funds from wealthier districts to less affluent ones, will also decline, leading to a revenue loss of $337 million in fiscal year 2026 and $410 million in fiscal year 2027.

Administrative costs are expected to rise due to the implementation of the new exemption. The Texas Education Agency (TEA) will require additional funding, with administrative costs projected at $267,918 in fiscal year 2026 and $550,228 in fiscal year 2027. Additionally, technology costs for programming and system updates are estimated at $146,002 in fiscal year 2026 and $438,006 in fiscal year 2027.

The fiscal note highlights that while SB 4 provides property tax relief, it does so at a substantial cost to the state budget, shifting more of the school finance burden to General Revenue. The bill's impact is contingent on the passage of a constitutional amendment (SJR 2) to authorize the exemption increase. Without additional revenue sources, this policy will require ongoing state funding commitments, making long-term budget sustainability a key consideration.

Vote Recommendation Notes

The most effective and equitable way to provide lasting property tax relief for all Texas taxpayers is to use state surplus funds to buy down the Maintenance and Operations (M&O) portion of school district property taxes. This method ensures that every property owner—homeowners, businesses, and renters—benefits from broad, long-term tax reduction rather than temporary or uneven relief. Unlike homestead exemptions, which primarily help certain groups and shift the tax burden onto others, compressing M&O tax rates lowers taxes for all property owners and provides a more predictable and sustainable solution.

SB 4 includes language requiring the state to compensate school districts for any revenue lost due to the increased homestead exemption, including funds allocated for Interest & Sinking (I&S) payments. While raising the homestead exemption does offer short-term relief to homeowners, its impact weakens over time as rising property values and local government spending diminish its effectiveness. Furthermore, increasing exemptions shifts the tax burden onto renters, businesses, and other property owners who do not qualify for the exemption, creating an imbalance in the tax system.

To maximize long-term tax relief, SB 4 should be amended to prioritize rate compression over exemption increases. By directing a significant portion of the state’s surplus funds toward permanently reducing M&O tax rates, Texas can ensure that all property owners experience meaningful and lasting tax relief while promoting fiscal responsibility and economic growth.

Political Landscape:

The Republican Party of Texas supports lowering property taxes as a means to ultimately eliminate them in favor of a consumption-based tax system.
The Libertarian Party of Texas generally favors tax cuts but opposes state redistribution of funds to cover local revenue losses.
The Texas Democratic Party while supportive of property tax relief prefers more targeted exemptions for low-income households and increased state funding for education.

Governor Greg Abbott and Lt. Governor Dan Patrick have designated property tax relief as a top priority, though it is unclear whether they agree on the method by which it is delivered. Texas Policy Research encourages lawmakers to support this legislation as it does provide property tax relief to some Texas taxpayers but also encourages them to find a way to lessen the property tax burden so all Texas taxpayers benefit.

References

The Texas Legislature's Broken Promises: Rising Property Taxes Despite "Relief"

Texas Property Tax Relief: Why Current Efforts Fall Short and How to Fix Them

The Growing Movement to Eliminate Property Taxes: Will Texas Join the Tax Revolt?

Texas Property Taxes Across Largest Counties and Cities

Texas Property Tax Levies 1998-2023

Related Legislation

View Bill Text and Status