Texas lawmakers are once again looking for ways to lower property taxes, but testimony before a House committee this week highlighted a fundamental challenge: Cutting one part of the property tax bill can mean shifting the cost somewhere else.

The Texas House Ways & Means Committee met Sept. 15 to examine property tax relief approved in recent legislative sessions and consider what lawmakers could pursue when they return to Austin in January. The committee’s interim charges include reviewing school tax rate compression, homestead exemptions, local government spending and the state revenue being used to sustain property tax relief.

One of the biggest questions is what it would take to eliminate school district maintenance and operations taxes altogether.

Eliminating School M&O Taxes Comes With $29 Billion Price Tag

Independent school districts account for a significant portion of Texans’ property tax bills, with much of those collections going toward maintenance and operations, commonly known as M&O.

Gov. Greg Abbott and other Republican state leaders have pushed for further reductions in school property taxes, including proposals to eventually eliminate school district M&O taxes.

Texas Education Commissioner Mike Morath told committee members that completely replacing those taxes would require the state to come up with roughly $29 billion annually.

Since 2020, school district M&O levies have ranged from about $28.7 billion to $33 billion annually, according to information presented to lawmakers. Collections are around $29 billion for both this year and last year.

That means eliminating the remaining M&O property tax would require the state to replace approximately that amount each year.

Texas has already committed billions of dollars toward lowering school district tax rates through a process known as compression, in which state money replaces some revenue that districts otherwise would collect locally.

Lawmakers have expanded that approach through several rounds of property tax legislation, including House Bill 3 in 2019, Senate Bill 1 in 2021, Senate Bill 2 in 2023 and Senate Bill 4 in 2025.

According to Morath’s presentation, school district M&O taxes this year would be approximately $23.5 billion higher without the tax compression measures already adopted by lawmakers. That figure is approaching the roughly $29.2 billion in M&O taxes that remain.

Lawmakers Raise Questions About School Debt

The committee also examined another piece of the school property tax system: debt.

A separate study from the office of state Sen. Paul Bettencourt, R-Houston, presented at a Senate hearing earlier this month found that expanded exemptions mean many homeowners who are disabled or 65 and older no longer pay school district property taxes.

State Rep. Cody Vasut, R-Angleton, questioned whether that could affect the incentives voters have when deciding school bond elections.

“Do we have any concern about the fact that we’re creating an incentive for those with less home value to vote yes on bonds because they no longer have to pay the tax that they vote for?” Vasut asked Morath.

Morath said he has heard “others surface that concern,” but cautioned that he had not seen research establishing such an effect.

“I have not seen analysis. Theoretically, I think someone could look at voting trends prior to this, voting trends after this, to see if there is discernible effect,” Morath said.

In addition to M&O taxes, school districts levy interest and sinking, or I&S, taxes. Those taxes are primarily used to repay debt issued through bonds, which districts frequently use to finance new schools, renovations and other capital projects.

The state also provides assistance for school district debt payments. Morath reported that state assistance for debt service has grown since 2022 to approximately $1.3 billion annually.

Other Local Property Taxes Continue to Grow

Even as school district tax collections have declined, Texans continue to receive property tax bills from cities, counties and special districts.

Bettencourt’s study found that levies from those other local governments have continued to increase. Jennifer Rabb, president of the Texas Taxpayers and Research Association, told House lawmakers her organization’s research showed a similar pattern.

“Since 2022, school district levies have been declining, and city, county, and special district levies have continued to increase as they have historically,” Rabb said.

That creates another challenge for lawmakers seeking to deliver property tax relief that homeowners can see on their overall bills.

Rabb also pointed to the broader question of who ultimately pays for property tax relief when the state uses general revenue to replace money that otherwise would be collected locally.

“If we’re talking about a homestead exemption, 100 percent of that benefit goes to homeowners. But that benefit, at least within the school property tax where the state is making school districts whole, that benefit is paid for by general revenue,” Rabb said.

That general revenue comes from sources paid by a much broader group of Texans, including people who rent rather than own homes.

“With homestead exemption in particular, you’re financing some of that homestead exemption with general revenue dollars that have been contributed by renters who don’t benefit from homestead exemption and by businesses that don’t benefit by homestead exemption,” Rabb said.

The testimony illustrates the tradeoffs lawmakers will face when the Legislature reconvenes in January. Texas can continue using state revenue to reduce school property taxes, but doing so requires billions of dollars that otherwise could be used elsewhere in the state budget. And reductions in school district taxes do not necessarily prevent cities, counties and other local taxing entities from increasing their own levies.

The Sept. 15 hearing was part of the Legislature’s work between regular sessions. The Ways & Means Committee was specifically directed to study ways to build on property tax relief approved during the 89th Legislature, including the costs and benefits of additional school tax compression and larger homestead exemptions.

Those questions are likely to remain prominent as lawmakers prepare for the next legislative session — particularly as affordability and the cost of owning a home remain concerns for Texas voters.