The ability to make decisions at the local level is dictated by the Texas Constitution. Texas counties must fulfill the responsibilities mandated by the State of Texas and must use approved revenue sources. Mandatory services include but are not limited to conducting elections, providing for public safety, processing and maintaining voter registration, maintaining and operating the court and jail system including provision for indigent legal defense, providing medical care for indigent county citizens, facilitating the issuance and recording of public documents, processing motor vehicle registration and title transfers, and providing support for some state agencies. The State of Texas provides funding for some of these services, but not all of them. Those services that are required but not funded or fully funded are called unfunded mandates or under-funded mandates.
The county property tax is the primary revenue source for Texas counties. When the legislature requires or expands mandatory services without state funding, the Commissioners Court must either 1) raise property taxes, or 2) reduce other services, explained CJCAT Senior General Counsel Jim Allison.
Along with mandated services, Texas counties provide authorized discretionary services that improve quality of life including emergency medical services, libraries, senior centers, parks, community centers, and youth programs.
“If the legislature limits the county ability to increase revenue, the Commissioners Court is forced to reduce other services provided to the citizens,” Allison said.
Prior to setting the tax rate every year, counties are required by law to calculate and publish a no-new-revenue rate (NNR) and a voter-approval rate (VAR).
The NNR is a calculated rate that would provide the taxing unit with about the same amount of revenue it received in the year before on properties taxed in both years.
The VAR is a calculated maximum rate allowed by law without a referendum. This rate provides the taxing unit with about the same amount of tax revenue it spent the previous year for day-to-day operations, plus an extra 3.5 percent increase for those operations, in addition to sufficient funds to pay debts in the coming year. Prior to the 86th Legislature’s Senate Bill 2, counties were allowed an increase of 8 percent. Mandatory elections are now required to exceed the 3.5 percent rate. As of press time, lawmakers were engaged in the second special called session of the 89th Texas Legislature and considering a bill to once again lower the revenue cap.
Ector County Story
County governments are the frontline of delivering state and local services to the citizens of Texas, summarized Ector County Judge Dustin Fawcett.
“By hamstringing counties’ revenue rates, you are removing the ability of local leaders to govern properly, especially in the budget process, to address the concerns of their citizens,” emphasized Fawcett, who explained his county’s plight as follows:
Ector County is uniquely affected by revenue caps, as we are at the heart of the Central Permian Basin. Our mineral properties can range from 10 percent to 15 percent of the taxable value. This means in a strong oil and gas year, our revenues could steeply increase, even though the rest of the values remain stagnant or even drop. It also means that in a weak oil and gas year, our values can drastically decrease. This leads to unnecessary movement of the tax rate year over year as it attempts to stay above the NNR (to fund inflationary items and minimal staff raises) but below the VAR. In doing so, we are manipulating the citizens’ property tax rates due to these slim margins. What I have preferred is leaving our tax rate alone so that in good oil and gas years, we bank money into a fund balance or can address capital projects, and in bad years, we don’t have to raise the rate but can instead tap reserves or solely address baseline raises for employees.
How are we expected to serve the citizens when we are limited on how we budget for desperately needed projects? The cost of roads, staff, and infrastructure is ever-increasing, yet our revenues are constantly being throttled back by arbitrary numbers. Every year that we put off roadway improvements because of revenue caps, we increase the cost of the exact same pavement. With failing infrastructure statewide, this is a failing recipe for the State of Texas, and I can’t discourage these efforts nearly enough.
Our oil and gas industry funds the State Highway Fund, Permanent University Fund, Permanent School Fund, and Economic Stabilization Fund, among others, all while receiving very little in return. Not only do they not provide us with funding that we generate locally, but they also want to remove our lone source of local revenue as well.
We haven’t even touched on how this impacts public safety. With all of our transportation-related industry, we have 15 of 45 DPS trooper positions filled, and we have fewer than 10 sheriff’s deputies on the street on any shift. Is it a wonder why the Permian Basin is 2 percent of the state’s population, yet is home to 10 percent of the fatal crashes?
Revenue caps cap my ability to increase wages for sheriff’s deputies to compete with the oilfield because I cannot simultaneously fund law enforcement and address infrastructure with the small 3.5 percent window as is.
We don’t want to rely on property taxes and certainly don’t ever want to raise them, but until the Texas Legislature looks hard in the mirror and addresses funding formulas both statewide and with local governments, we have no choice.
The citizens of Texas both demand and deserve high-quality government services. Local governments are answering that call every day they wake up and serve their neighbors. It is time that Austin does the same.
Members of Commissioners Courts worked with the CJCAT to develop the following resolution:
Support for Local Decision-Making and Opposition to Revenue Caps
WHEREAS, 52 percent of the average taxpayer’s property tax burden is due to school taxes while only 16 percent is due to county taxes; and
WHEREAS, revenue caps diminish local decision-making and tie the hands of county officials and limit their ability to provide essential services to address the needs and emergencies of their citizens; and
WHEREAS, county government is already struggling to meet the demands of under-funded and unfunded state mandates such as backlogs of state prison inmates, mental health patients, and felony juvenile offenders; emergency management programs; appointed attorneys in CPS cases; indigent health care and indigent defense; and federal mandates such as the Help America Vote Act and the Clean Air Act; and
WHEREAS, the demands on county budgets continue to increase including health care, motor fuel, road materials, and all other products and services purchased by counties; and
WHEREAS, artificial revenue caps result in a shift of taxes from fluctuating properties, such as volatile mineral values, to those remaining relatively stable in value, such as residential properties; and
WHEREAS, additional revenue caps will result in a severe impact on essential county services including public safety and transportation infrastructure; and
WHEREAS, it is inequitable for the Texas Legislature to impose additional revenue caps on local governments without alternative funding sources and unfunded mandate relief;
NOW, THEREFORE, BE IT RESOLVED that the County Judges and Commissioners Association of Texas does hereby express its opposition to limits to local decision-making and does hereby oppose any further unreasonable revenue caps upon Texas counties, and the County Judges and Commissioners Association of Texas expresses its deep appreciation to all legislators who oppose these unsound measures.