Texas lawmakers are examining whether the state could replace local school maintenance-and-operations property taxes with state revenue, a proposal that would substantially change how Texas funds public education.
Texas Scorecard reported that the House Ways and Means Committee reviewed property-tax relief options Tuesday as lawmakers prepare for the 2027 legislative session. Gov. Greg Abbott has proposed eliminating school M&O property taxes for homeowners and replacing that local revenue with state funding. According to the report, Abbott has said the change could reduce the average homeowner's property-tax bill by about half.
The proposal is not enacted policy. It would require lawmakers to identify a durable state revenue source large enough to replace a major portion of school funding. Texas Education Commissioner Mike Morath told the committee that school districts are expected to collect about $29.2 billion in M&O property taxes during the current school year. Replacing those collections while maintaining school funding would therefore require approximately $29 billion to $30 billion each year from other state revenue.
Morath also said annual state relief for school M&O taxes has reached about $23.5 billion since 2019, while debt-service relief totals about $1.3 billion annually. The state's current two-year budget is approximately $338 billion, giving lawmakers a sense of the scale involved in a full replacement plan.
Abbott has paired his proposal with limits on local spending growth. Texas Scorecard reported that his framework would cap growth at population plus inflation or 3.5 percent, whichever is lower, and require approval from two-thirds of voters for local property-tax increases. He has also proposed five-year appraisal cycles and a lower cap on homestead appraisal increases.
Lt. Gov. Dan Patrick has outlined a narrower approach, including an additional $40,000 homestead exemption, tax freezes beginning at age 55, and a 3.5 percent growth limit for city and county budgets. House Speaker Dustin Burrows has not expressly endorsed Abbott's plan, although his office has said property-tax reform will remain a priority.
The hearing begins a policy debate that will affect both household tax burdens and the stability of public-school financing. Any final plan would need to specify how the state would replace local revenue during economic downturns and how it would limit future cost growth without shifting obligations elsewhere.