The Texas Education Agency (TEA) sent out an important update earlier today regarding the hold harmless funding many school districts receive related to SB 12 (87th, 2nd Called Session) and the adjustment to frozen levies.
You can find this hold harmless funding on line 14 of the “Other Programs” detail report on your current Summary of Finance (look for TEC 48.2542). There is currently nearly $800 million in funding flowing under this provision statewide. Districts have been receiving this funding since the 2023-24 school year.
Here’s a summary of what we know now:
Background:
- The Legislature passed, and voters approved, a constitutional amendment in 2022 that was intended to provide additional property tax relief to elderly and disabled homeowners subject to the tax freeze. Their tax bills were to be reduced to pass along benefits of other relief measures that impacted non-frozen taxpayers such as tax rate compression and increases to the state mandated homestead exemptions.
For an example of how the math works on this adjustment, click here. This tax reform has significantly reduced property tax bills for seniors and disabled residents with frozen tax bills, in many cases dropping those bills to zero.
- This new tax relief measure was coupled with a hold harmless provision to offset any financial impact on public school districts. As mentioned above, on TEA’s current Summary of Finance, roughly $800 million in funding is being delivered to ISDs through this provision.
- The state became increasingly concerned that the data provided to calculate this hold harmless was resulting in duplicative adjustments. For example, value losses related to exemption increases (such as the recent increase to $140,000 homestead exemption) are already accounted for elsewhere in the Comptroller’s Property Value Study (PVS). Those value losses related to exemption increases, do not need to be duplicated in other deductions related to the freeze loss.
- As a result, the Comptroller revised its reporting requirements beginning this year. The new reporting rules more narrowly measure the impact of SB 12 and the associated value deductions necessary to account for frozen properties on the PVS.
- The hold harmless districts receive is directly tied to the estimated impact of SB 12 that is reported to the Comptroller. More frozen levy losses due to SB 12 result in more hold harmless funding, and vice versa.
- As a result, nearly 600 school districts experienced hold harmless funding losses compared to last year. You can see your district’s impact here. Impacts varied across the state however, due to inconsistent implementation of the Comptroller’s new rules.
What’s next:
- TEA has announced that it will be revising the calculation methodology for this hold harmless to reflect other data elements collected by the Comptroller’s office.
- According to today’s announcement, the Comptroller’s office is not deviating from its new reporting rules in effect for tax year 2025 and beyond.
- We are still evaluating the impact for districts across the state. It is very likely that this change creates winners and losers amongst ISDs depending on the quality of data currently being reported by your CAD.
- For ISDs within CADs that are following the new Comptroller reporting requirements (i.e. those that saw losses in this hold harmless in 2025-26), we do anticipate that this change will restore some funding.
We are seeking some clarifications from TEA to ensure our understanding is correct. Once that occurs, we will issue a revised Summary of Finance template and will announce a webinar to provide additional information and answer questions.