TCSA Capitol Update
Week of March 4 - March 8, 2024
It’s the time of year when the committee calendars are jam-packed with bills, major initiatives are being debated and last minute amendments are springing up. The property tax cap bill, which was on calendar in Senate State and Local, was not heard this week. No amendment was filed and the bill was deferred to the final calendar of that committee. Meanwhile, the House sponsor has filed an amendment and has the bill on calendar in a subcommittee next week. The voucher legislation is moving in both chambers, but in opposite directions. Other bills of interest to counties are moving through an assortment of committees.
Property Tax Cap
We finally have some clarity on the property tax cap proposal we have been hearing about all session. The bill that is expected to carry the amendment to impose a cap on property tax increases is HB1969/SB2248. The bill currently only changes a deadline in code but we have now seen a proposed amendment to re-write the legislation. It would cap the amount a local government could raise property taxes at 5% over the previous year’s collections. This would exclude growth in revenue that results from newly constructed properties or improvements that are added to the tax rolls. There is also an exception that taxes levied for principal and interest on general obligation bonds are outside of the cap. Otherwise, in order for the county to increase property tax by more than 5% in a given year, a referendum must be held with 2/3rds of the voters approving the increase. Even if a county was successful in getting the voters to approve the rate increase, any increase in excess of 5% is automatically repealed after four years. This bill would be devastating to counties’ finances, bond ratings and overall operations. It would be unlikely that voters would ever approve a property tax increase by a two-thirds margin. If a county finds during its budget process that it will need to hold a referendum, it would be a minimum of 75 days before the election commission could hold the election under current law, creating a major delay in the budget. If this bill passed, it would put pressure on county commissions to raise taxes up to the cap every year, just in case they experience a drop in sales tax revenue or have extraordinary expenses and need extra revenue in the future.
Property Reappraisals
The Comptroller’s bill on more frequent reappraisals SB1946/HB2057 was on the House floor Thursday of this week where it generated a fair number of questions. The sponsor rolled the bill to next week to get clarity for some of his colleagues’ concerns. In the Senate, the bill is scheduled to be heard in the Finance Committee next week.
School Vouchers
The major school choice initiative continues to travel in opposite directions in the House and Senate. At this point, the proposal even has different names in the two chambers. The bill sailed out of the Senate Education committee this week after a relatively brief discussion. It is headed to the Finance Committee in that chamber, but was not referred in time to be on next week’s calendar. The House Committee meeting was far more contentious, with the meeting stretching over four hours before the bill was approved. The bill goes to the Governmental Operations Committee in that chamber, but is not scheduled for next week.
The Senate’s version is still named the Education Freedom Scholarship Act, it is similar to the Governor’s original proposal but with an open enrollment option between public schools included. The House has renamed its proposal the Education Freedom Act because it now includes many changes related to public schools that are unrelated to the voucher scholarships. The Senate version is projected, for at least the first year, to be cheaper than the $140 million Governor Lee put in his budget proposal. It is estimated to cost around $75 million in year one, in part because a significant percentage of the scholarships would go to students the state is already funding through TISA who choose to enroll in an out of district public school. But in future years, the proposal could balloon to more than half a billion dollars because it does not cap the number of participants. The bill is projected to result in a decrease in local revenue of over $21 million in year one and grow from there as students leave public schools to attend private schools using the voucher.
The House version of the bill would cost nearly $400 million in the first year. The scholarship program itself would closely follow the Governor’s budgeted cost in year one, then grow to around $175 million in year two and $217 million in year three. This is because once 90% of the scholarships are used, the program grows 20% each year. It is projected to reduce local public education funding by nearly $60 million in FY 25-26 and grow from there. This is offset in the House version by new investments in public schools, changing some of the weights in the TISA formula, providing a new direct allocation of $75 per student for maintenance and infrastructure, and funding a larger percentage of teacher health insurance.
At some point, the two chambers will have to find agreement for the bill to pass. Whether that happens in negotiations prior to the passage of the budget or after the bill ends up on the House and Senate floors remains to be seen.
Challenging County Commission Votes
SB2548/HB2685 which creates a process whereby members of the public can raise potential conflicts of interest of county commissioners has already passed the House. The Senate State and Local Government committee debated it briefly before deferring the bill for a week.
County Mayors and the Sunshine Law
The bill that clarifies that county mayors are not subject to the Open Meetings Act (SB1667/HB1921) has passed both chambers and is headed to the Governor for his signature.
Fuel Purchasing
HB2547/SB2432 that gives local governments flexibility to buy bulk gas and diesel fuel using documented quotes instead of competitive bids moved out of the State and Local Government Committee in the Senate. It is scheduled for a floor vote next week. In the House, the bill is on calendar in the Finance Subcommittee on Wednesday.
Mayor’s Budget Maintenance of Effort
The bill SB2023/HB2019 to set a maintenance of effort standard for the county mayor’s budget was placed behind the budget in the House Finance Subcommittee. This procedural move is required for any bill that is believed to have a local fiscal cost. The bill was approved by the Senate State and Local Government Committee with an amendment and heads to the Senate floor for debate Monday night.
Lower Local Option Sales Tax on Food
HB 2641/SB2520, which would give local governments the option to reduce or eliminate the local option sales tax on groceries, passed on the House floor this week. Some local governments that border other states where groceries are exempt from sales tax have expressed an interest in such a measure as a way to stop leakage of spending across state lines. The bill is awaiting a hearing in the Senate Finance Revenue Subcommittee.
Hotel-Motel Taxes
A bill creating more oversight on how hotel/motel taxes are used is moving forward. Under a bill passed a few years ago, local governments that didn’t already have a hotel-motel tax by private act were authorized by general law to levy a tax up to 4% which could stack on top of another jurisdiction’s levy (county and city). Under the law, the revenues had to be spent to promote tourism or tourism development. HB 2240/SB1676 requires local governments using that authority to report to the comptroller on the uses of the funds within 30 days after the close of the fiscal year. The bill moved out of subcommittee and is headed to the House Local Government Committee. A section was eliminated that set a total cap of 8%. There are many places in the state where either a city or county already had a rate in excess of 4% and this would have limited how much the other jurisdiction could add on top. The bill is scheduled to be heard in State and Local in the Senate.
Coming Weeks are Critical
Most legislative committees will start to close over the next few weeks. If bills are not approved, they will not progress this year. The legislation we list in this update is just a small fraction of the number of bills affecting county governments. There is discussion of an adjournment in mid to late April, however, there is a lot that has to happen between now and then. We will continue to keep you informed of the major developments as the session progresses.