H.B. No. 1

Texas Property Tax Code 2023 Edition: The Texas Property Tax Code available on this website are current through the 89th Regular Legislative Session, 2025. The constitutional provisions found on this website are current through the amendments approved by voters in November 2023.

ARTICLE 1. PUBLIC SCHOOL FINANCE AND PROPERTY TAX RELIEF

SECTION 1.01.

Section 41.002, Education Code, is amended by amending Subsection (a) and adding Subsections (a-1) and (a-2) to read as follows:
(a) A school district may not have a wealth per student that exceeds:
(1) the wealth per student that generates the amount of maintenance and operations tax revenue per weighted student available to a district at the 88th percentile in wealth per student, for the district’s maintenance and operations tax effort equal to or less than the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year;
(2) the wealth per student that generates the amount of maintenance and operations tax revenue per weighted student available to the Austin Independent School District, as determined by the commissioner in cooperation with the Legislative Budget Board, for the first six cents by which the district’s maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, subject to Section 41.093(b-1); or
(3) $319,500, for the district’s maintenance and operations tax effort that exceeds the first six cents by which the district’s maintenance and operations tax effort exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year [$305,000].
(a-1) Subsection (a) applies beginning with the 2008-2009 school year. For the 2006-2007 and 2007-2008 school years, a school district may not have a wealth per student that exceeds the wealth per student specified by Subsection (a), except that:
(1) Subsection (a)(2) applies only to the first four cents by which the district’s maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, subject to Section 41.093(b-1); and
(2) Subsection (a)(3) applies to the district’s maintenance and operations tax effort that exceeds the first four cents by which the district’s maintenance and operations tax effort exceeds the rate described by Subdivision (1).
(a-2) Subsection (a-1) and this subsection expire September 1, 2008.

SECTION 1.02.

Section 41.093, Education Code, is amended by amending Subsection (a) and adding Subsections (b-1) and (b-2) to read as follows:
(a) Subject to Subsection (b-1), the cost of each credit is an amount equal to the greater of:
(1) the amount of the district’s maintenance and operations tax revenue per student in weighted average daily attendance for the school year for which the contract is executed; or
(2) the amount of the statewide district average of maintenance and operations tax revenue per student in weighted average daily attendance for the school year preceding the school year for which the contract is executed.
(b-1) If the guaranteed level of state and local funds per weighted student per cent of tax effort under Section 42.302(a-1)(2) for which state funds are appropriated for a school year is an amount at least equal to the amount of revenue per weighted student per cent of tax effort available to the Austin Independent School District, as determined by the commissioner in cooperation with the Legislative Budget Board, the commissioner, in computing the amounts described by Subsections (a)(1) and (2) and determining the cost of an attendance credit, shall exclude maintenance and operations tax revenue resulting from the first six cents by which a district’s maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year.
(b-2) Subsection (b-1) applies beginning with the 2008-2009 school year. For the 2006-2007 and 2007-2008 school years, the commissioner shall compute the amounts described by Subsections (a)(1) and (2) and determine the cost of an attendance credit as specified by Subsection (b-1), except the commissioner shall exclude maintenance and operations tax revenue resulting from the first four cents by which a district’s maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year. This subsection expires September 1, 2008.

SECTION 1.03.

Section 42.101, Education Code, is amended to read as follows:
Sec. 42.101. BASIC ALLOTMENT. For each student in average daily attendance, not including the time students spend each day in special education programs in an instructional arrangement other than mainstream or career and technology education programs, for which an additional allotment is made under Subchapter C, a district is entitled to an allotment in an amount equal to the product of the amount per student per cent of tax effort available to a district at the percentile in wealth per student specified by Section 42.302(a-1)(1), multiplied by 86 [of $2,537]. A greater amount for any school year may be provided by appropriation.

SECTION 1.04.

Subchapter E, Chapter 42, Education Code, is amended by adding Section 42.2516 to read as follows:
Sec. 42.2516. ADDITIONAL STATE AID FOR TAX REDUCTION.
(a) In this section, “state compression percentage” means the percentage, as determined by the commissioner, of a school district’s adopted maintenance and operations tax rate for the 2005 tax year that serves as the basis for state funding for tax rate reduction under this section. The commissioner shall determine the state compression percentage for each school year based on the percentage by which a district is able to reduce the district’s maintenance and operations tax rate for that year, as compared to the district’s adopted maintenance and operations tax rate for the 2005 tax year, as a result of state funds appropriated for distribution under this section for that year from the property tax relief fund established under Section 403.109, Government Code, or from another funding source available for school district property tax relief.
(a-1) Subsection (a) applies beginning with the state fiscal year ending August 31, 2009. For the state fiscal year ending August 31, 2007, the state compression percentage is 88.67 percent. For the state fiscal year ending August 31, 2008, the state compression percentage is 66.67 percent. This subsection expires September 1, 2009.
(b) Subject to Subsections (g) and (h), but notwithstanding any other provision of this title, a school district is entitled to state revenue necessary to provide the district with the sum of:
(1) the amount of state revenue necessary to maintain state and local revenue per student in weighted average daily attendance in the amount equal to the greater of:
(A) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district available to the district for the 2005-2006 school year;
(B) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district to which the district would have been entitled for the 2006-2007 school year under this chapter, as it existed on January 1, 2006, or, if the district would have been subject to Chapter 41, as that chapter existed on January 1, 2006, the amount to which the district would have been entitled under that chapter, based on the funding elements in effect for the 2005-2006 school year, if the district imposed a maintenance and operations tax at the rate adopted by the district for the 2005 tax year; or
(C) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district to which the district would have been entitled for the 2006-2007 school year under this chapter, as it existed on January 1, 2006, or, if the district would have been subject to Chapter 41, as that chapter existed on January 1, 2006, the amount to which the district would have been entitled under that chapter, based on the funding elements in effect for the 2005-2006 school year, if the district imposed a maintenance and operations tax at the rate equal to the rate described by Section 26.08(i) or (k)(1), Tax Code, as applicable, for the 2006 tax year;
(2) an amount equal to the product of $2,500 multiplied by the number of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, Chapter 21, and full-time school nurses employed by the district and entitled to a minimum salary under Section 21.402; and
(3) an amount equal to the product of $275 multiplied by the number of students in average daily attendance in grades nine through 12 in the district.
(c) In determining the amount to which a district is entitled under Subsection (b)(1), the commissioner shall include:
(1) any amounts described by Rider 69, page III-19, Chapter 1369, Acts of the 79th Legislature, Regular Session, 2005 (the General Appropriations Act);
(2) for a school district that received additional revenue for the 2005-2006 school year as a result of an agreement under Subchapter E, Chapter 41:
(A) if the amount of state revenue to which the district is entitled under Subsection (b) is computed based on the amount described by Subsection (b)(1)(A), the amount of that additional revenue retained by the district for the 2005-2006 school year, which is the amount by which the total maintenance and operations revenue available to the district for that school year exceeded the total maintenance and operations revenue that would have been available to the district for that school year if the district had not entered into the agreement, less any amount the district paid to another entity under the agreement; or
(B) if the amount of state revenue to which the district is entitled under Subsection (b) is computed based on the amount described by Subsection (b)(1)(B) or (C), the amount of the additional revenue that would have been retained by the district for the 2006-2007 school year if the district had entered into the agreement on the same terms as under the agreement for the 2005-2006 school year, which is the amount by which the total maintenance and operations revenue that would have been available to the district for the 2006-2007 school year if the district had entered into the agreement exceeds the total maintenance and operations revenue that would have been available to the district for that school year if the district had not entered into the agreement and had imposed a maintenance and operations tax at the rate of $1.50 on the $100 valuation of taxable property, less any amount the district would have paid to another entity under the agreement;
(3) any amount necessary to reflect an adjustment made by the commissioner under Section 42.005;
(4) any amount necessary to reflect an adjustment made by the commissioner under Section 42.2521; and
(5) any amount necessary to reflect an adjustment made by the commissioner under Section 42.2531.
(d) If, for the 2006-2007 or a subsequent school year, a school district enters into an agreement under Subchapter E, Chapter 41, the commissioner shall reduce the amount of state revenue to which the district is entitled under Subsection (b) for that school year by an amount equal to any additional revenue for that school year that the district receives and retains as a result of that agreement, which is the amount by which the total maintenance and operations revenue available to the district exceeds the total maintenance and operations revenue that would have been available to the district if the district had not entered into the agreement and had imposed a maintenance and operations tax at the maximum rate permitted under Section 45.003(d), less any amount the district pays to another entity under the agreement.
(e) The amount of revenue to which a school district is entitled because of the technology allotment under Section 32.005 is not included in making a determination under Subsection (b)(1).
(f) For purposes of determining the amount of revenue to which a school district is entitled under this section, the commissioner shall use the average tax collection rate for the district for the 2003, 2004, and 2005 tax years.
(g) If a school district adopts a maintenance and operations tax rate that is below the rate equal to the product of the state compression percentage multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, the commissioner shall reduce the district’s entitlement under this section in proportion to the amount by which the adopted rate is less than the rate equal to the product of the state compression percentage multiplied by the rate adopted by the district for the 2005 tax year.
(h) Notwithstanding any other provision of this title, if the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district available to the district in a school year as a result of increases to the equalized wealth level under Section 41.002, the basic allotment under Section 42.101, and the guaranteed level under Section 42.302 made by H.B. No. 1, Acts of the 79th Legislature, 3rd Called Session, 2006, exceeds the amount to which a district is entitled under Subsection (b) for that school year, the commissioner must:
(1) reduce the amount of state aid provided to the district for that school year by an amount equal to the excess revenue, as determined by the commissioner; or
(2) for a district with a wealth per student greater than the applicable amount described by Section 41.002(a), require the district to purchase a number of attendance credits for that school year at a cost equal to the amount of excess revenue, as determined by the commissioner.
(i) A school district that is required to take action under Chapter 41 to reduce its wealth per student to the equalized wealth level and that is entitled to state revenue under this section may receive that revenue through an adjustment against the total amount of attendance credits required to be purchased under Subchapter D, Chapter 41, or the total number of nonresident students required to be educated under Subchapter E, Chapter 41, as determined by the commissioner.
(j) If a school district reduces its maintenance and operations tax rate by an amount less than the rate equal to the product of the difference between the state compression percentage for the preceding year and the state compression percentage for the year of the reduction, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, the commissioner may not reduce the amount to which the district is entitled under this section on the basis of the additional revenue collected by the district.
(k) The commissioner may adopt rules necessary to administer this section.
(l) A determination by the commissioner under this section is final and may not be appealed.

SECTION 1.05.

Sections 42.253(g) and (h), Education Code, are amended to read as follows:
(g) If a school district demonstrates to the satisfaction of the commissioner that the estimate of the district’s tax rate, student enrollment, or taxable value of property used in determining the amount of state funds to which the district is entitled are so inaccurate as to result in undue financial hardship to the district, the commissioner may adjust funding to that district in that school year to the extent that funds are available for that year, including funds in the reserve account. Funds in the reserve account may not be used under this subsection until any reserve funds have been used for purposes of Subsection (f).
(h) If the amount appropriated for the Foundation School Program for the second year of a state fiscal biennium is less than the amount to which school districts are entitled for that year, the commissioner shall certify the amount of the difference to the Legislative Budget Board not later than January 1 of the second year of the state fiscal biennium. The Legislative Budget Board shall propose to the legislature that the certified amount be transferred to the foundation school fund from the economic stabilization fund and appropriated for the purpose of increases in allocations under this subsection. If the legislature fails during the regular session to enact the proposed transfer and appropriation and there are not funds available under Subsection (j), the commissioner shall reduce the total amount of state funds allocated to each district by an amount determined by a method under which the application of the same number of cents of increase in tax rate in all districts applied to the taxable value of property of each district, as determined under Subchapter M, Chapter 403, Government Code, results in a total levy equal to the total reduction. The following fiscal year, a district’s entitlement under this section is increased by an amount equal to the reduction made under this subsection.

SECTION 1.06.

Effective August 1, 2009, Sections 42.259(c), (d), and (f), Education Code, are amended to read as follows:
(c) Payments from the foundation school fund to each category 2 school district shall be made as follows:
(1) 22 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of September of a fiscal year;
(2) 18 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of October;
(3) 9.5 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of November;
(4) 7.5 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of April;
(5) five percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of May;
(6) 10 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of June;
(7) 13 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of July; and
(8) 15 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of August.
(d) Payments from the foundation school fund to each category 3 school district shall be made as follows:
(1) 45 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of September of a fiscal year;
(2) 35 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of October; and
(3) 20 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of August.
(f) Any previously unpaid additional funds from prior years owed to a district shall be paid to the district together with the September payment of the current year entitlement.

SECTION 1.07.

Subchapter E, Chapter 42, Education Code, is amended by adding Section 42.261 to read as follows:
Sec. 42.261. CERTAIN FUNDS APPROPRIATED FOR PURPOSE OF TAX REDUCTION.
(a) Funds appropriated by the legislature for a tax year for the purpose of reducing a school district’s maintenance and operations tax rate and providing state aid under Section 42.2516:
(1) are not excess funds for purposes of Section 42.2517;
(2) are not available for purposes of Section 42.2521 or 42.2522;
(3) may not be used for purposes of Chapter 46; and
(4) may not be provided by the commissioner to a school district for a purpose other than reduction of the district’s maintenance and operations tax rate.
(b) The commissioner may adopt rules necessary to administer this section.