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SB 4 Legislative Priority

Relating to an increase in the amount of the exemption of residence homesteads from ad valorem taxation by a school district and the protection of school districts against certain losses in local revenue.
Overall Vote Recommendation
Vote Yes; Amend
Principle Criteria
neutral
Free Enterprise
positive
Property Rights
neutral
Personal Responsibility
neutral
Limited Government
positive
Individual Liberty
In Layman's Terms

SB 4 implements the constitutional amendment to increase the school district homestead exemption from $100,000 to $140,000, reducing property taxes for homeowners while reimbursing school districts for lost revenue. The bill also includes temporary procedures to help appraisal districts and schools smoothly implement the change if voters approve the amendment.

Digest
SB 4 implements the constitutional amendment proposed by SJR 2 by increasing the general school district residence homestead exemption from $100,000 to $140,000 beginning with the 2025 tax year, contingent upon voter approval of the constitutional amendment. The bill amends the Tax Code to apply the larger exemption to qualifying residence homesteads and makes corresponding changes throughout the Education Code to ensure that school districts receive additional state aid to offset losses in both maintenance and operations (M&O) and interest and sinking (I&S) revenue resulting from the higher exemption.

To preserve school district funding, the bill establishes mechanisms for calculating and distributing additional state aid based on the revenue districts would have received absent the increased homestead exemption. It also places limits on how certain reimbursement funds may be used, provides transitional funding formulas, and authorizes the commissioner of education to make necessary adjustments to school finance calculations and recapture procedures during implementation. These provisions are intended to maintain funding stability for school districts while the property tax changes take effect.

The bill also establishes numerous temporary administrative provisions to facilitate implementation during the 2025 tax year. These include allowing appraisal districts and school districts to prepare provisional appraisal rolls, calculate tax rates and tax bills as though the constitutional amendment had already been approved, and issue provisional tax bills before the November 2025 election. If voters approve the constitutional amendment, those tax bills become final. If the amendment fails, taxing entities must recalculate taxes and issue supplemental tax bills to collect the difference. The bill also provides temporary authority for adjustments to school district elections, tax administration, and recapture processes to accommodate the transition.
Author (29)
Co-Author (1)
Borris Miles
Sponsor (5)
Morgan Meyer
Trey Martinez Fischer
Greg Bonnen
Todd Hunter
Chris Turner
Co-Sponsor (102)

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

According to the Legislative Budget Board (LBB), SB 4 would have a significant negative fiscal impact on the state, with an estimated net cost of approximately $2.74 billion to General Revenue-related funds during the 2026–27 biennium. The bill itself does not appropriate funds but provides the statutory authority necessary for future appropriations to implement its provisions. Over the five-year projection period, the LBB estimates recurring General Revenue costs of approximately $1.32 billion in fiscal year 2026, $1.42 billion in fiscal year 2027, and just over $1.0 billion annually through fiscal year 2030.

The primary cost driver is the increase in the mandatory school district residence homestead exemption from $100,000 to $140,000, contingent upon voter approval of SJR 2. Because the larger exemption reduces school district property tax collections, the state would assume a greater share of public education funding by providing additional Foundation School Program (FSP) aid and hold-harmless payments to offset districts' losses in both maintenance and operations (M&O) and interest and sinking (I&S) revenue. The fiscal note also projects a substantial reduction in recapture ("Robin Hood") payments from property-wealthy school districts, further increasing the state's funding obligation.

According to the LBB, implementation would also result in relatively modest administrative costs for the Texas Education Agency, including the addition of one full-time Financial Analyst III position, along with programming and technology upgrades needed to implement the revised school finance calculations. Administrative costs are estimated at approximately $268,000 in fiscal year 2026, $550,000 in fiscal year 2027, and about $112,000 annually thereafter, with technology costs of roughly $146,000 in fiscal year 2026 and $438,000 in fiscal year 2027. The fiscal impacts apply primarily to the state and to school districts through changes in state aid and local property tax collections.

Vote Recommendation Notes

SB 4 implements the constitutional amendment proposed by SJR 2 by increasing the school district residence homestead exemption from $100,000 to $140,000 while providing additional state aid to hold school districts harmless for the resulting loss of local property tax revenue. The bill is designed to ensure that homeowners receive immediate property tax relief without reducing school district funding and includes a range of transitional provisions to facilitate implementation if voters approve the constitutional amendment.

While the bill advances the goal of reducing the property tax burden on homeowners, it relies on increasing the homestead exemption rather than pursuing broader reductions in school district Maintenance and Operations (M&O) tax rates. Homestead exemptions provide targeted relief to owner-occupied residences but do not benefit all taxpayers equally, excluding many businesses, rental property owners, and other property owners while requiring the state to assume a larger share of school finance obligations. According to the LBB, the measure would result in an estimated $2.74 billion negative impact to General Revenue-related funds during the 2026–27 biennium, with recurring annual state costs exceeding $1 billion to reimburse school districts for reduced local tax collections.

Texas Policy Research recommends that lawmakers vote YES on SB 4 while also considering amendments to strengthen the bill. Such amendments should direct a significant share of available state surplus funds toward permanent rate reductions and establish a legislative preference for broad-based tax relief over recurring increases in exemption amounts. This approach would preserve the immediate benefits of the resolution for homeowners while advancing a more sustainable, equitable, and fiscally responsible property tax policy for all Texans.

Free Enterprise
neutral
The bill does not impose new regulations or barriers on businesses. However, because the increased homestead exemption benefits only owner-occupied residences, it does not provide equivalent tax relief to commercial property owners, rental property owners, or other businesses. While it has limited indirect economic benefits, its overall impact on free enterprise is neutral.
Property Rights
positive
By reducing the tax burden on residence homesteads, the bill strengthens private property rights by allowing homeowners to retain more of the value of their property. Lower recurring property tax obligations reduce the government's financial claim on private property ownership.
Personal Responsibility
neutral
The bill provides tax relief but does not materially affect incentives related to personal responsibility. It neither creates a new public assistance program nor alters individual obligations or decision-making in a way that significantly strengthens or weakens personal accountability.
Limited Government
neutral
The bill does not create a new agency, regulatory program, or grant additional rulemaking authority. However, it requires the state to absorb additional costs to reimburse school districts for reduced property tax collections, expanding the state's fiscal commitment without reducing the underlying size or cost of government. As a result, the overall impact on limited government is mixed but ultimately neutral.
Individual Liberty
positive
The bill reduces the property tax burden on homeowners by increasing the school district residence homestead exemption, allowing individuals to retain more of their income and property. It does not create new mandates, criminal penalties, or regulatory restrictions on individual conduct.
Amendment Recommendations
  • Prioritize rate compression over exemption increases
Committee Vote Information
  • Senate Committee on Local Government: 7Y/0N
  • House Committee on Ways & Means: 11Y/1N (1 Absent)
References
Related Legislation
View Bill Text and Status
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