Thirteen municipal pension systems in Texas are enshrined in state statute. This means that, locally, Texans across the state are paying taxes into pension systems that they have no control over. Even worse, even the most menial changes to these systems must be approved by the legislature before going into effect. This gives municipalities 140 days every two years to coordinate all stakeholders to push for change.
This creates a major problem during times when local governments can’t afford to pay the full actuarial required amount into their pensions systems. Instead of working with their local pension board for temporary resolutions, they either have to go to the legislature for changes or redirect tax dollars from other local projects.
Local government entities should have direct governance, and responsibility, for the pensions of their municipal employees. Mayors and city councils shouldn’t have to go to the legislature for minor changes that should be handled locally; adding an extra layer of bureaucratic red tape only limits the potential for constructive change. The state should return control to local entities, as long as the local process proves to be accountable and transparent to taxpayers and municipal employees.
Traditionally, appropriators in the Texas Legislature utilize what’s commonly referred to as “incremental” budgeting. Under that process, agencies begin at their previous appropriation amount and are provided increases to account for rising costs, population, etc.
Such a practice is inherently flawed because it rests on the assumption that the particular agency is running efficiently and revenue is spent appropriately. In addition to enabling waste, fraud, and abuse, the process is also rigid and slow to adapt.
The answer to this should be a zero-based budgeting system. Under that process, the state budget is wiped clean every time and is re-calculated as if starting from scratch. That way, departments, agencies, and other government entities find it much tougher to spend your tax dollars inefficiently because they cannot count on current levels of spending to be maintained.
By implementing zero-based budgeting, lawmakers could make government smaller and more efficient for taxpayers.
Public sector unions in Texas are given the benefit of using taxpayer resources to collect and pay out their members’ dues. Once a government employee joins a public union, the state allows dues to be automatically deducted from employee paychecks and transferred directly to their respective union. In the hands of unions, the funds are primarily utilized to advocate against business-friendly, free market, and pro-taxpayer legislation.
By continuing this practice Texas further emboldens unions. In states where union members manually contribute their dues on a regular basis, unions have seen a sharp decline in membership.
Government collection of union dues also presents a conflict of interest. State and local officials are charged with negotiating contracts with unions who lobby, donate, and campaign within the same political realm.
By abolishing the practice of government-collected union dues, union members would still be able to contribute to associations of their choosing – the cost burden would simply fall on the unions themselves. Taxpayers should not be forced to pay for the collection of funds that are essentially used to lobby against polarized, anti-free market ideals.
In a free-market system, customers are often loathe to spend money at businesses that reinvest their profits towards political aspirations they find abhorrent. Unfortunately, no such freedom exists when local governments decide to use your tax dollars to lobby the state legislature. Citizens have little recourse when it comes to paying the taxes decided on by their local officials — and none whatsoever when it comes to how that money is spent.
What is most egregious about the practice of tax-funded lobbying is the policy goals these lobbyists seek. As a creation of the state, the legislature is often tasked with reigning in the taxing and regulatory authority abused by runaway local government entities — which is where these hired guns come into play. They lobby your state legislators to oppose things such as protections from tax increases, ballot transparency initiatives, and annexation authority just to name a few.
Anything that might prevent these entities from taking more of your hard earned tax dollars — they will spend your money to defeat.
Texas taxpayers currently shoulder one of the highest property tax burdens in the nation — coming it at 6th highest in the U.S. There can be little doubt that tax-funded lobbyists have had a hand in that role — and considering more than half of registered lobbyists are funded by local governments, it’s time to end this fundamentally anti-taxpayer practice.
Since 2004, state spending is up 12 percent beyond population and inflation growth – a testament to the weak spending limit applied to Texas’ budget.
Though the state legislature must pass a balanced budget (meaning spending can be no greater than the revenue anticipated), the state constitution and enacting statutes only limit the spending growth in certain areas. The net effect is that less than half of all appropriated funds are actually subject to a cap.
In addition to its application, the existing spending cap is also flawed in its definition. Rather than being defined by a metric factoring population and inflation growth, it’s defined as the “rate of growth in the state’s economy” – however legislators are allowed to define exactly what that means. Should legislators seek to spend above and beyond the limit they set for themselves, they only need a majority vote in both chambers to “bust the cap.”
Taxpayers concerned about the exploding growth of government should tell their lawmakers to pass a constitutional amendment strengthening the existing state expenditure limit.
Rather than capping only a portion of the budget, all state spending (including those related to drawing down federal funds) should be subject to the cap, and a super-majority vote of both legislative chambers should be required to exceed it. Additionally, rather than basing the limit on the ill-defined and legislatively malleable phrase in place now, it should instead be based off the rate of population and consumer price inflation growth.
This measure goes to what citizens can actually afford, not what lawmakers want to spend.
Had such a limit been implemented in 2004, Texas taxpayers would have saved an estimated $22 billion.
Texas lawmakers have limited the amount local officials can increase property taxes each year on existing taxpayers, otherwise known as the “rollback rate.” Under current law, if the proposed tax increase exceeds this “rollback” threshold, local citizens can conduct a signature petition drive to force a public vote on the tax rate.
Unfortunately, this public vote is not automatic, meaning local officials (with the exception of school boards) can raise taxes as much as they please without obtaining any voter approval. Lawmakers should lower the rollback rate, but local voters should be empowered by requiring that they approve tax increases over and above this rollback threshold.
The legislature limits annual property tax increases for local operating budgets because local governments experiencing growth should rely upon new taxpayers to pay for their own services. Existing residents should not be tax-gouged each year for the same services, without an option to vote on the tax increase.
Texans don’t own their home, they rent it from the government. That’s certainly what it feels like to most taxpayers when they receive the annual property tax bill. The burden of property taxes is growing more rapidly, while incomes remain stagnant. Texas is consistently ranked near the top of the list of states throughout the country with the highest property taxes.
Texans aren’t subject to one property tax. Rather, they are subject to thousands upon thousands of local property taxes. Many taxpayers have more than a dozen local taxing entities overlapping them! Holding each and every entity accountable is difficult even for the most active citizen. Making matters worse, increases in property tax bills from year to year are nearly impossible to forecast, making it difficult for homeowners to budget for, and even more difficult for first-time buyers to enter the market.
A more fair and equitable system of taxation is based upon consumption, rather than property or income. The Legislature should continue working towards ways to buy down the maintenance and operations (M&O) portion of school district property taxes with state funds and eventually fund it entirely through sales taxes. The legislature should also continue to pass pro-taxpayer reforms, including greater protections from local tax increases, appraisal reform, and more transparency.
Each Texan currently owes local governments a total of roughly $12,500 in debt payments, the second-highest amount of any state in America. Only New York has more local debt, per person, than Texas. This has contributed to Texans paying the 6th highest property taxes in the nation, according to the Tax Foundation.
While voters have approved much of this debt through local propositions in May and November elections, greater ballot transparency is needed. Also, cities are abusing Certificates of Obligation – which do not require voter approval – and should only be used in emergencies such as natural disasters.
The legislature has allowed too many entities to issue local debt. The largest borrowers are school districts, followed by cities, counties, and thousands of “special purpose” districts. Water, hospital, and community college districts also owe billions in debt.
Uniform election dates, greater ballot transparency, local debt limits, and fewer overlapping local entities will help Texans seeking to address our local debt crisis.
The Texas Franchise Tax is an overly complex tax levied on Texas businesses’ gross revenue. Contrary to an income tax or sales tax, businesses are subject to a gross margin tax even when they take a loss and the taxes continue to stack up through every step of production of a product.
The franchise tax is also structured in such a complex way that compliance costs are often almost as much as the tax itself, with businesses having to pay higher accounting fees and often being forced to keep two separate sets of books.
The Texas Legislature recently made a move to lower the burden on Texas businesses; however, to truly lift the burden off of businesses and taxpayers, further action must be taken to phase out or repeal the franchise tax immediately.
In the world of public policy, “ethics” is often a misnomer. Webster’s dictionary defines “ethics” as “rules of behavior based on ideas about what is morally good and bad.” Yet everything from open records and open meetings laws to laws regulating lobbying, elections, and campaign finance are often lumped together under the label of “ethics.”
Alarmingly, advocates against free speech and public participation in elections often attempt to place the “ethics” label on legislation limiting the free speech rights of citizens. These efforts to stifle speech must be fought at every turn.
The true need for so-called “ethics” laws stems from a growing public understanding that many elected officials use their offices to enrich themselves rather than serve the citizens. Good “ethics reform” should be aimed directly at eliminating and exposing this self-dealing. The only way to do that is to impose additional disclosure requirements on elected officials and government employees, not on citizens who choose to be engaged in their communities.
Good reforms in this area include ending the revolving door in which elected officials leave office and immediately go to work as hired gun lobbyists. Even more shocking, we must end the currently common practice of elected officials serving as pay-for-play lobbyists while they are in office. Similarly, Texans need to know when and how their elected officials are making money off of government contracts and government bonds.
The state, as well as local governments across Texas, disperse millions of taxpayer dollars annually to businesses handpicked by government officials. The funds are given via incentive programs such as the Major Event Trust Fund (METF) and Texas Enterprise Fund (TEF) at the state level and tax increment reinvestment zones (TIRZ) at the local level.
By offering subsidies, governments hope to encourage businesses to relocate and/or expand in Texas. Economic development is the overlying idea behind the programs, however, they have received heavy criticism due to the state’s inability to effectively measure their economic impact, a lack of accountability, and the picking of “winners and losers” by the government officials.
The idea of state and local governments using tax revenue in an effort to “create wealth” contradicts free market values and the principles of open competition. Texas’ relatively friendly business environment and low tax rates serve as a pre-existing draw for businesses and a natural catalyst for economic growth. In addition, little research has been provided to show that the benefits of the programs actually outweigh the financial costs.
By abolishing corporate welfare programs, government officials will be encouraged to keep taxes and red tape at a minimum in order to stay competitive and use those funds to create a more balanced budget that addresses the more pressing needs of Texas residents.
Local governments primarily issue debt in May or November, with ballot propositions that require a simple majority of local voters. But state law does not require voters to have detailed information on the ballot to make an informed decision.
In addition to the amount of debt voters are asked to approve, the ballot language should also disclose the proposal’s total cost – including interest expense – the current debt liability of that entity, and the impact on property taxes if the proposition passes or fails.
Unrelated projects, such as administration buildings, fire stations, vehicles, schools, and football stadiums, should be listed as separate propositions for voters to approve or deny. Current law allows local officials to hold the “needs” of a community hostage to unnecessary “wants,” by lumping hundreds of unrelated projects into a single, one-sentence, all-or-nothing proposition.
Voters should be given more than a one-sentence description on the ballot when considering hundreds of projects that cost hundreds of millions of dollars or more in new debt.
There are two variables that determine the total amount of property taxes homeowners pay each year: the tax rate and the appraised value of the home. Local government officials often brag about how they keep tax rates the same (even lower them!) from year to year, yet tax bills continue to grow. Why? Because the appraised value of homes in the district increase to the point that they offset any reduction in the tax rate.
Appraisal districts are comprised of appointees from those very same taxing entities, rather than taxpayers, giving the appraisal districts a perverse incentive to artificially increase revenue via appraisal increases any time those taxing entities don’t want to be held accountable for raising taxes.
Additionally, the appraised value of a home may increase by up to 10% each year, even when population and inflation growth rates are much lower.
Taxpayers should tell their legislators to pass meaningful appraisal reform to hold appraisal districts accountable to the public, not local taxing entities, and lower the cap on appraisal increases to protect taxpayers from dramatic increases in their property tax bills.