Texas House, Senate pass school finance bill mandating teacher raises and cutting taxes

Days after top Republican leaders announced they had a deal on a school finance bill long in the making, the Texas House and Senate approved the final legislation Saturday, bringing mandated teacher pay raises and property tax cuts one step closer to becoming law.

The Texas House voted 139-0 and the Senate voted 30-0 to approve the final negotiated version of House Bill 3, which includes $6.5 billion to improve public education and pay teachers, plus $5.1 billion to lower school district taxes. Authored by state Rep. Dan Huberty, R-Houston, and sponsored by state Sen. Larry Taylor, R-Friendswood, the bill is now poised to head to Gov. Greg Abbott for a signature.

"In my inaugural address I said that this will be the session we enact historical school finance reform by putting more money into the classroom, paying our teachers more, reducing recapture and cutting property taxes," Abbott said in a statement after the bill passed both chambers. "Tonight, without a court order, the legislature did just that by passing one of the most transformative educational bills in recent Texas history."

HB 3 passed the House first. “We are truly transforming public school finance in Texas, and all of you have been a large part of that,” Huberty said before calling for a vote. Afterward, he and House Speaker Dennis Bonnen, along with a few other lawmakers, walked across the hall to watch the upper chamber do the same.

But a few lawmakers from both parties in both chambers raised concerns that the state would not be able to afford the cost of the changes long term.

Before voting for the bill, state Rep. Trey Martinez Fischer, D-San Antonio, called for a “sustainable path that will support increasing the cost of this bill for schools,” especially as more students continue to enroll in public schools.

“I think we’re spending far more on it than what we should,” said state Sen. Bob Hall, R-Edgewood.

Despite facing repeated lawsuits alleging the state hasn’t adequately funded public schools, lawmakers, including Huberty and Taylor, failed to make changes during the last legislative session in 2017. A reform bill became mired in political controversy between the Senate and the House. Instead, they created a school finance panel of lawmakers, educators and businesspeople that ultimately developed dozens of recommendations to overhaul the system.

Many of those recommendations appear in the version of HB 3 that lawmakers approved Saturday, including funding full-day pre-K for eligible 4-year-olds, increasing the money used to educate low-income students, incentivizing school districts to offer dual language programs and improve dyslexia programs, and providing money for school districts that want to develop merit pay programs for teachers.

The panel did not recommend giving classroom teachers across-the-board raises. But after Lt. Gov. Dan Patrick began the session announcing a plan to give $5,000 permanent raises to all full-time teachers, the proposal became one of the most talked about in the Capitol and across the state. With the state’s average teacher salary below the national average, many teachers desperately wanted the $5,000 to deal with soaring health insurance premiums and other costs — though they asked for other school employees to receive more money as well.

School administrators, on the other hand, asked for flexibility on how to use additional funding in their schools so they could address local priorities. Bonnen said he preferred to allow them that discretion.

The final proposal would require school districts to use a portion of their increase in per-student funding on salary increases and benefits for teachers, librarians, nurses and counselors, with a smaller amount designated for raises for all employees, as administrators see fit. They are expected to prioritize raises and benefits for teachers with more than five years of experience but otherwise would have flexibility on how to offer salary increases.

HB 3 also includes several Senate proposals to help lower school district tax rates over the next two years and beyond. It would limit the growth in tax revenue; school districts with property values growing 2.5% or more would see tax rates automatically lowered to keep revenue growth in line.

The bill also mandates a study on potential sources of money for future school district tax cuts and their anticipated impacts on taxpayers, schools and the state.

Lawmakers estimate the bill would lower tax rates by an average of 8 cents per $100 valuation in 2020 and 13 cents in 2021. That would mean a tax cut of $200 for the owner of a $250,000 home in 2020 and $325 in 2021.

The cost of the reforms is anticipated to jump in future years. The official cost analysis shows the changes will cost the state $13.5 billion in 2022 and 2023, a $2 billion increase from the upcoming biennium.

“Many of you have asked how we’re going to pay for it as we go forward with tax compression,” Huberty said. He referenced a new fund the bill creates to pay for those tax cuts. The state comptroller is required to deposit some money from the Available School Fund — which provides money for schools derived from state-owned land and fuel taxes — and some money from an online sales tax into the new fund.

But it is not clear whether the state’s plan to lower tax rates further in future years is sustainable, a point of concern for some lawmakers. Because the state is required to help school districts pay to educate students, limiting local tax revenue could force the state to reimburse them billions of dollars going forward.

“It does not provide the reliable state revenue source that will be necessary to realize a truly transformational, long term school finance solution,” the Democrat-run Texas Legislative Study Group Caucus wrote in a recent analysis of HB 3. “For that reason, future legislatures may still have to address challenges if state revenue is not readily available.”