The Texas Tax Reform Commission held a public hearing Jan. 9 to take testimony on how to fix the state’s tax system. One of the commission's objectives is to recommend methods that would lower property taxes by one-third.

However, in light of the recent Supreme Court decision that ruled part of the state's school finance system unconstitutional, Solicitor General Ted Cruz cautioned members that efforts to lower the property tax ceiling would do nothing to help remedy the legal claim made by school districts.

Cruz said school districts are constrained by two critical elements: the floor and the ceiling. The floor is the minimum amount of funds that a school district must spend in order to comply with state mandates, and the ceiling is the maximum property tax rate, currently set at $1.50, that school districts can set in order to raise revenue.

The Supreme Court determined that school districts lacked meaningful discretion in setting property tax rates, which in effect constituted a statewide property tax. “In order to respond to this [legal] claim, absent fundamental [tax] reform, the only option for the state is to increase the spread [between the floor and the ceiling] so functionally the districts have a real choice," Cruz said. "The districts, when they are setting their tax rates, have a window of what the court has called 'meaningful discretion'… if they have meaningful discretion, that should resolve this claim.”

Cruz outlined five ways in which the state could remedy the constitutional violation:
1. Pass some form of constitutional amendment to allow a statewide property tax.
2. Pass fundamental reform of the system such shifts away reliance on property taxes all together.
3. Raise the ceiling by increasing the property tax cap. “If the cap were raised enough that it provided meaningful discretion, the [legal] claim would go away," Cruz said. "It could literally be possible to have one sentence legislation that changes $1.50 to a higher number and legally the tax claim would go away."
4. Lower the floor by reducing mandates on school districts.
5. Buy down the floor by giving school districts additional money

“At the end of the day, if you stay within the construct of property taxes, your only way to increase meaningful discretion is to raise the ceiling or lower the floor,” Cruz said.

The Supreme Court gave the legislature a June 1st deadline in which to come up with a solution of school finance reform.

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