“In a time when you may want to pull back, step it up!”
On the opening day of the 97th Annual County Judges and Commissioners Association of Texas Conference, Rep. Drew Darby offered the challenge above to some 300 members of Commissioners Court gathered at Galveston County’s Moody Gardens.
“County government is really the most important aspect of how we deliver services in this state,” Darby emphasized. “The State of Texas could not do anything without county government.”
Throughout the remainder of the Oct. 7-10 meeting, officials were taught how to continue in the midst of new regulations with a slate of educational courses developed around the conference theme, Strategies for Success.
Seasoned experts and officials with firsthand experience covered key areas including budgeting, the census and redistricting, subdivision regulations, public information, and cybersecurity. County Judges and Commissioners left the annual meeting armed with recommendations and takeaways to help them comply with new mandates and position their counties for the best possible outcome.
Senate Bill 2
“You’re going to have to start earlier and inform other departments. This is not a
Commissioners Court problem. This is a county problem.”
While there are still many unanswered questions regarding S.B. 2, Jim Allison, CJCAT general counsel, offered preliminary suggestions for preparing the 2020 county budget under new revenue caps.
Texas counties develop their budget using the guidelines spelled out under Chapter 111 of the Local Government Code. The process for proposing the tax rate is explained in Chapter 140 of the Local Government Code and Chapter 26 of the Tax Code. Commissioners Court votes on the county budget before adopting a tax rate. The new requirements will compress the deadlines and require careful coordination and systematic communication between the Commissioners Court, all county departments, and the public, Allison emphasized.
What Will Be My County’s Voter-Approval Rate?
The first step will be to determine your county’s voter-approval rate, Allison stated.
S.B. 2 renames the rollback tax rate as the voter-approval tax rate and renames the effective tax rate as the no-new-revenue tax rate. Under current law, voters in any taxing unit have the option to petition for a rollback election when the taxing unit adopts a total tax rate that includes an increase of more than 8 percent in the effective maintenance and operations rate. Under the new law, the standard voter-approval rate has been reduced from 8 percent to 3.5 percent, and mandatory elections will be required to exceed the 3.5 percent rate. However, there are several exceptions that can increase the rate.
- A disaster declaration will reinstate the 8 percent cap for at least two years after the disaster declaration.
- A county may increase its tax by $500,000 without an automatic election for this “de minimis” increase but can force a petition election if it exceeds an 8 percent increase.
- Adjustments are allowed to the standard 3.5 percent cap for increased state inmate costs, indigent health care costs, county hospital costs (8 percent maximum), indigent defense costs (5 percent maximum), and unused increment rate (after 2020).
The Office of the Texas Comptroller is developing a truth-in-taxation form that will be used to calculate the voter-approval rate for the coming year. Most of the provisions of S.B. 2 are effective Jan. 1, 2020.
Is My County Maximizing All Revenue Sources?
Property taxes are the primary funding source for Texas counties, and S.B. 2 reduces this funding potential.
“Maximizing additional revenue sources will be essential,” Allison told officials. Counties should immediately begin an examination of all of their income categories. Specific suggestions include:
- Review fine and fee collections, and determine if improvements can be made.
- Study optional fees to determine potential increases.
- Negotiate payments in lieu of taxes (PILOT) in your tax abatement agreements.
- Urge the full prosecution of bond forfeitures.
- Fully implement the Optional Motor Vehicle Registration Fee.
Begin Budgeting Early: What Are My County’s Unavoidable Costs?
Commissioners Courts must still fund essential services and absorb any increased costs of state-mandated services, Allison noted. It is not too early to begin tabulating these costs such as employee salaries, health care, fuel and materials, supplies, equipment (such as voting machines), equipment maintenance, etc.
Once the voter-approval rate has been determined and costs have been estimated, budget planners will be able to determine whether or not any potential revenue remains and communicate with county departments accordingly.
Explain Budget Limitations to Other County Departments and Evaluate Options
Most county departments have wish lists. However, revenue caps likely mean reality checks for most counties and the creation of dual lists: 1) items that can be afforded under the voter-approval rate, and 2) items that can be afforded under a voter-approved tax rate that exceeds the voter-approval rate. These items can be labeled in the budget at adoption or a subsequent budget amendment. This informs the departments and the public that these items will be eliminated or reduced if the tax rate is not approved.
If the county determines that essential services cannot be maintained by a budget under the voter-approval rate, it may be necessary to call for a November election; at this point, a statutory timeline comes into effect, Allison emphasized. The county must make a decision on an election, adopt the budget, adopt the tax rate, and adopt an election order at least 71 days before the November general election, or by Aug. 21, 2020, Allison reported.
“This will require earlier budget and tax rate hearings,” he reiterated.
Educate the Public
County funds cannot be used to campaign for the approval of a higher tax rate, Allison reminded officials. However, county officials can educate the public on the county budget.
In the past, Commissioners Courts and sometimes other officials have shared the need for increased revenue using general terms: law enforcement, equipment maintenance, etc. However, Allison urged Judges and Commissioners to call upon officials countywide to explain the specific budget items that would only be fundable via a higher rate.
“We need everybody on deck,” Allison declared. “We need every elected official out there.” For example, the sheriff can offer details on what the higher rate would fund in the sheriff’s department, i.e. additional patrol cars or salary for additional deputies.
“We’re going to have to go to the voters with a specific list,” Allison continued. This is especially important because the language on the actual ballot will not list the items that will be funded by the higher rate; voters need to know before heading to the polls.
Should Our County Look at Financing Debt?
The Tax Code continues to exclude the debt service rate from the calculation of the voter-approval rate, Allison reminded officials. Although funding capital items such as equipment and vehicles through debt issuance will mean additional cost and higher taxes, it is an option when revenue caps and referendums are not feasible.
“The ramifications of S.B. 2 may seem overwhelming,” said Allison, especially since worksheets and guidelines are still under development. However, strategizing early will make the process a little more manageable.
As additional information becomes available, Allison will share sample orders and budget amendments on the county listservs and in County Progress Magazine.
