From State Senator Ken Paxton
Texas Insider Report: AUSTIN, Texas – The Texas Constitution is one of the longest in the nation and is still growing. The 1876 Texas Constitution, which our State currently operates under, was drafted after reconstruction and serves as the fifth constitution since statehood.
Texas voters have approved 474 amendments to the state Constitution since its adoption in 1876.
The Constitution is updated biennially through amendments proposed by the Legislature and adopted or rejected by the Texas electorate. No legislative rules or other restrictions limit the number of amendment proposals, provided each receives the required two-thirds vote in both the Senate and the House.
Nine more proposed amendments will be submitted for voter approval at the general election on Tuesday, November 5, 2013. Early voting begins today (Monday, October 21) and runs through Friday, November 1. Please remember that voters must now present a Photo ID in order vote in Texas elections.
Below is a brief analysis based on information from the House Research Organization for each proposed amendment, including ballot wording, background and pros and cons. For a complete analysis for each bill, please visit the following website http://www.hro.house.state.tx.us/pdf/focus/amend83.pdf.
Proposition 1 – Property Tax Exemption for Surviving Spouses of Certain Service Members
The ballot proposal reads: “The constitutional amendment authorizing the legislature to provide for an exemption from ad valorem taxation of all or part of the market value of the residence homestead of the surviving spouse of a member of the armed services of the United States who is killed in action.”
Summary: Proposition 1 would amend the Texas Constitution to authorize the Legislature to grant the surviving spouse of a member of the United States military who was killed in action a complete property tax exemption on his/her residential homestead until the surviving spouse remarries. The amount of the property tax exemption can be transferred from the home the military member and his/her spouse owned at the time of death to another property.
Pros: A property tax exemption would provide real relief to a husband or wife who may be experiencing a financial burden that typically affects individuals who lose a spouse. Texas is a national leader in honoring the service of veterans and their families, and this amendment provides meaningful assistance during a surviving spouse’s time of need.
Cons: Proposition 1 would reduce revenue available to local governments thus potentially leading to a tax increase on other individuals in order for local governmental entities to stay revenue neutral.
Proposition 2 – Removing Provisions for the State Medical Education Board
The ballot proposal reads: “The constitutional amendment eliminating an obsolete requirement for a State Medical Education Board and a State Medical Education Fund, neither of which is operational.”
Summary: Proposition 2 would remove the constitutional authorization for the State Medical Education Board and the State Medical Education Fund, both of which are currently required by the Texas Constitution. Both the Board and the Fund were created in 1952 to provide grants, loans or scholarships to students who wished to study medicine and agreed to practice in rural areas of Texas. However, this effort to help prospective physicians fund their education proved to be ineffective and these functions were eventually transferred to the more efficient Texas
Pros: The Legislative Budget Board and the Sunset Advisory Commission recommended decades ago that the State Medical Education Board and the State Medical Education Fund be abolished. References to both the entities have been removed from state law, and passing this proposition would officially remove all references to the defunct State Medical Education Board and the State Medical Education Fund from all official governing documents in our State.
Cons: There is no apparent opposition to this proposition.
Proposition 3 – Allowing Extension of Exemption from Inventory Taxes for Aircraft Parts
The ballot proposal reads: “The constitutional amendment to authorize a political subdivision of this state to extend the number of days that aircraft parts that are exempt from ad valorem taxation due to their location in this state for a temporary period may be located in this state for purposes of qualifying for the tax exemption.”
Summary: The Texas Constitution currently allows for what is known as the “Freeport Exemption,” meaning that goods that are brought to Texas and pass-through our state for a limited amount of time are exempt from ad valorem taxation. To qualify for such an exemption from inventory taxes, good, wares, merchandise and other personal property must have been:
– Acquired in or imported into Texas;
– Detained for assembly, storage, manufacturing, processing or fabrication, and
– Transported outside of the state within 175 days after acquisition or importation.
This constitutional amendment extends the 175 day freeport exemption to 730 days (approximately 2 years) for aircraft parts before the parts must be transported outside of the state.
Pros: Companies that ship aircraft parts currently utilize the freeport exemption. However, aircraft parts are often stored for longer than 175 days and after the 175 days, these goods are subject to property taxes. Extending the number of days aircraft parts may sit on the shelves of warehouses and distribution centers from one-half a year to two years before being subject to property taxes will allow additional distribution centers for aircraft parts to develop in Texas around our airports. This growth in distribution centers and warehouses will provide additional economic development, which would offset any potential revenue decline. This measure would be applied entirely at the discretion of local taxing entities.
Cons: The Legislature should promote uniformity of taxation, rather than single out specific industries for tax breaks. Some even argue further that the Legislature should consider exempting other types of goods, wares and merchandise travelling through pass-through distribution centers or warehouses that were excluded by this law, or simply eliminate this antiquated and punitive inventory tax altogether.
Proposition 4 – Tax Exemption for Disabled Veterans Whose Homesteads Were Donated by a Charity
The ballot proposal reads: “The constitutional amendment authorizing the legislature to provide for an exemption from ad valorem taxation of part of the market value of the residence homestead of a partially disabled veteran or the surviving spouse of a partially disabled veteran if the residence homestead was donated to the disabled veteran by a charitable organization.”
Summary: Proposition 4 proposes providing a disabled veteran a homestead exemption equal to the percentage of their disability rating for a home that has been donated to the veteran by a charitable organization at no cost to the veteran. Currently, veterans who are 100% disabled receive a 100% homestead exemption for this donated home. However, a service veteran who is not 100% disabled does not currently receive a partial homestead exemption on a donated home. The law is tailored to only allow service-connected disabled veterans the opportunity for a property tax reduction.
Pros: Proposition 4 would help certain disabled veterans injured during their military service to stay in homes that were donated to them by charitable organizations. Oftentimes these injuries require rehabilitation and/or other forms of therapy before a veteran can return to work. Also, a veteran’s injuries may limit the type of work he/she can do, thus assuming the full tax liability on a donated home particularly financially burdensome. Providing property tax relief is appropriate considering the sacrifices made by these veterans.
Cons: This constitutional amendment will provide for another property tax carve-out, which will shift the burden to other property owners.
Proposition 5 – Authorizing a Reverse Mortgage Loan for the Purchase of Homestead Property
The ballot proposal reads: “The constitutional amendment to authorize the making of a reverse mortgage loan for the purchase of homestead property and to amend lender disclosures and other requirements in connection with a reverse mortgage loan.”
Summary: This constitutional amendment would allow for a reverse mortgage for the purchase of a residence homestead in Texas for homeowners who are or whose spouses are at least 62 years old. A reverse mortgage is a loan advanced on the basis of equity in the borrower’s homestead, which is the difference between a home’s market value and what is owed on the home. These advances may be provided in a lump sum or in monthly installments or structured as a line of credit, and repayment of reverse mortgage loans does not begin until the homeowner transfers the home to another owner, passes away, or no longer occupies the property.
Texas laws relating to home equity loans are entirely contained within the Texas Constitution. Recent federal legislation now allows seniors age 62 or older to purchase a new principal residence using loan proceeds from a reverse mortgage. The program allows qualifying seniors to purchase a new principal residence and obtain a reverse mortgage with a single transaction.
Pros: Reverse mortgages will allow senior citizens more flexibility in meeting their financial needs. The legislation also has safeguards to ensure persons seeking a reverse mortgage have received financial counseling and information regarding the transaction is disclosed to the buyer. Texas is the only state that does not allow for a reverse mortgage for a purchase transaction as the Texas Constitution does not currently allow for it. A person will have to take multiple steps to secure a reverse mortgage under current law.
Cons: Texas was slow to offer reverse mortgages as a result of a long history of skepticism toward home equity lending in this state. Many argue that Texas was spared from much of the fallout from the 2008 financial crisis because of our state’s restrictions on home equity lending.
Proposition 6 – Creating Funds to Assist in the Financing of Priority Projects in the State Water Plan
The ballot proposal reads: “The constitutional amendment providing for the creation of the State Water Implementation Fund for Texas and the State Water Implementation Revenue Fund for Texas to assist in the financing of priority projects in the state water plan to ensure the availability of adequate water resources.”
Summary: This constitutional amendment creates the State Water Implementation Fund and the State Water Implementation Revenue Fund for Texas. Both of these funds will be special funds in the state treasury and funds will not be subject to the state spending limit. These funds will be administered by the Texas Water Development Board and will be used for implementing the state’s water plan. The Texas Water Development Board may use the funds to provide direct loans for water projects and enhance the credit of existing bonds to reduce interest rates. Revenue for these entities are comprised of funding appropriated by the legislature, any future tax revenue that is dedicated to the fund, investment earning, and repaid principle and interest on loans.
Pros: The Texas Water Plan calls for $52 billion in water projects that promote conservation, add capacity, and create a water/waste- water infrastructure by the year 2050 to keep pace with the expected population growth in our State. House Bill 1025 appropriated $2 billion from the economic stabilization fund (also known as the Rainy Day Fund) to capitalize the funds to begin investments in water projects. These funds, along with the $6 billion in authorized bonds the Texas Water Development Board currently has available, will operate as a bank to allow for necessary water projects without creating new state debts from general revenue funds. The importance of water projects is made all the more obvious to Texans due to the recent drought.
Cons: There is no doubt that water is important to Texas, and we need to fund the state water plan. However, given the high importance for the projects, the legislature should have capitalized the water implementation funds from general revenue within the budget, especially given that we entered the recently completed legislative session with a budget surplus. The water implementation funds are also exempt from the state spending limit, so they will be able to grow faster than personal income growth within the state.
The economic stabilization fund must remain strong to meet future economic downturns, potential natural disasters, and to maintain a strong state credit rating.
Proposition 7 – Allowing Home-Rule Cities to Decide How to Fill Vacant Elected Seats
The ballot proposal reads: “The constitutional amendment authorizing a home-rule municipality to provide in its charter the procedure to fill a vacancy on its governing body for which the unexpired term is 12 months or less.”
Summary: Proposition 7 allows a home-rule city (a city with a population of more than 5,000 that has adopted a home-rule charter) to specify through its charter the procedure to fill a vacancy in city government that had an unexpired term of 12 months or less.
Currently, the Texas Constitution prohibits a city with terms of office between two and four years from filling vacancies by appointment. Rather, cities must fill vacancies by majority vote during a special election held within 120 days after the start of the vacancy, regardless of the time of the vacancy.
Pros: Proposition 7 could allow some cities to avoid paying for certain costly special elections, thus cutting taxpayer costs. Under current law, if a city has a vacancy in its governing body, the city must hold an election within 120 days. Hypothetically, if a city has a regularly scheduled election 125 days after the vacancy is declared, the city must hold two separate elections within 5 days of each other. This constitutional amendment provides home rule cities with flexibility in their charters to determine the timing of the elections to fill a vacancy, which could save the city money in election administration. This will only apply to a vacancy that occurs for an unexpired term if there are fewer than 24 months remaining.
Cons: Voters should have an opportunity to elect their city leaders regardless of the cost. Proposition 7 deters the democratic process and could possibly reduce accountability at the local level.
Proposition 8 – Repealing the Provision Authorizing a Hospital District in Hidalgo County
The ballot proposal reads: “The constitutional amendment repealing Section 7, Article IX, Texas Constitution, which relates to the creation of a hospital district in Hidalgo County.”
Summary: Proposition 8 would repeal the section of the Texas Constitution that authorizes the creation of a hospital district in Hidalgo County and authorizes a maximum tax rate of 10 cents per $100 valuation of taxable property for the hospital district.
Pros: Hidalgo County does not currently operate a hospital district because the Texas Constitution caps the potential hospital district’s maximum property tax rate at a rate that is well below the maximum tax rate for every other hospital district in Texas. Removing this provision would allow Hidalgo County to create a hospital district like those found in other counties in Texas in order to help the County provide health care services to its residents, many of whom are uninsured. The hospital district will also provide for an anchor for Medicaid funds and allow Hidalgo County to draw down existing Medicaid funds.
Cons: This constitutional amendment will likely lead to a property tax rate increase in Hidalgo County up to the cap of 75 cents per $100 in valuation that the other hospital districts operate under. Efforts should be made to reduce healthcare costs and improve access instead of raising taxes to acquire federal funds.
Proposition 9 – Expanding the State Commission on Judicial Conduct’s Sanctioning Authority
The ballot proposal reads: “The constitutional amendment relating to expanding the types of sanctions that may be assessed against a judge or justice following a formal proceeding instituted by the State Commission on Judicial Conduct.”
Summary: The Texas Constitution creates the State Commission on Judicial Conduct, which is responsible for ensuring that Texas judges comply with constitutional standards of conduct. Current law only allows for the Commission to issue an order of public censure of a judge after a formal proceeding. This constitutional amendment will expand the types of sanctions the Commission may issue after a formal proceeding to include a public admonition, warning, censure, reprimand, or a requirement for a judge to receive additional training.
Pros: This constitutional amendment will allow the State Commission on Judicial Conduct to use a wide range of disciplinary actions that more appropriately address judicial misconduct.
Cons: Provisions restricting potential actions by the Commission helps protect the confidentiality of judges and shields them from public exposure resulting from low-level or unwarranted allegations from individuals upset with the outcome of a case or political foes.
Voter turnout during Constitutional Amendment Elections tends to be very low. Therefore, those who do vote will have that much more say in the outcome of this election.
To learn more about the Texas Constitution, including historical information, please visit the Texas State Library’s “Texas Treasures” website at http://www.tsl.state.tx.us/treasures/constitution/index.html.
To access the complete text of the Texas Constitution, please visit the Texas Legislature Online at http://www.constitution.legis.state.tx.us/.
