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Gov. Perry Signs Largest Tax Cut in Texas History into Law

Location: Houston, TX

Gov. Perry Signs Largest Tax Cut in Texas History into Law

HB1 Provides $15.7 Billion Property Tax Cut, Gives Teachers More Money, Improves Schools

Gov. Rick Perry today signed into law House Bill 1, which provides the largest tax cut in Texas history, a $2000 across-the-board pay raise for teachers, and major education reforms. "I wholeheartedly believe this is one of the most significant legislative accomplishments for Texas in a generation, because it is one of the most significant steps we have ever taken to improve opportunity for the next generation," Perry said.

Perry thanked Senator Florence Shapiro of Plano and Representative Rob Eissler of Magnolia, who were present at the bill signing, for their work to secure the votes to pass House Bill 1. The measure passed with an overwhelming margin of 167-8 votes in the Texas Legislature.

"Because of their leadership, homeowners and businesses will save $15.7 billion on school property taxes over the next three years - enough to lower rates by 33 percent - and make the dream of homeownership more affordable for millions of Texas families," Perry said. "And this is a tax cut Texans can take to the bank, and count on in the years to come."

Taxpayer protections included in HB 1:

* School districts can raise the tax rate only 4 cents one time. Beyond that, if local leaders want more money from taxpayers, they have to get voter approval. Under current law, local school boards can raise tax rates by 6 cents every year without giving voters any say at the ballot box. (HB 1)
* If appraisal creep yields more revenue than voters have authorized, school districts must automatically seek voter approval to keep it. This provision will not lower the cap on appraisal increases - something Perry strongly supports - but it caps the amount of money school districts can receive from higher appraisals without a vote of the people.

"I have often said that Texans not only want more money for education, they want more education for their money. House Bill 1 achieves both of these important goals," Perry said. "Teachers are the heart of any successful education effort, and their salaries should reflect the outstanding job they are doing to prepare our children for a lifetime of success. And those who have the greatest impact in the classroom should be rewarded even more."

Education reforms included in HB 1:

* A $2,000 Pay Raise for Teachers: Legislators passed a $2,000 across-the-board pay raise for teachers, restoring the full amount of the teacher health stipend and building on the positive trend in teacher compensation that has seen salaries increase by $11,700 for teachers in the classroom since 1999.
* Performance Pay for Excellent Teachers: The legislation will create the largest performance pay plan in the nation to reward classroom excellence. With $260 million for bonuses of up to $10,000 per teacher for locally-designed incentive programs, and another $100 million for the Governor's Educator Excellence Awards Program, Texas will take the national lead in rewarding educational excellence and attracting top-performing teachers to struggling campuses.
* Improving High Schools: HB 1 provides more than $1 billion over three years to reform Texas high schools and further the goals of the governor's high school initiative, which are to reduce the dropout rate, replicate successful school models and prepare more students for college.
* Raising the Bar: Legislators strengthened the curriculum by requiring four years of math and science to better prepare students for the high-tech economy.
* Robin Hood Relief: By 2008, close to $1 billion in local property tax revenues will remain in local districts to be spent on local students instead of being exported to other areas of the state.
* Greater Funding Equity: The state will make a historic commitment to funding fairness, achieving up to 94 percent funding equity on enrichment dollars.
* Teacher Mentoring: Millions of dollars will be dedicated to teacher mentoring programs to keep young educators in the classroom.
* More Money for Schools: With $1.8 billion to fund teacher pay increases and classroom excellence initiatives, as well as funding provided last session, legislators have increased school funding by $3.4 billion in the current fiscal biennium.
* State Share Increases Dramatically: By next year, the state share of education funding will increase to 50 percent, reversing a trend scheduled to take us to 34 percent in FY2007 if nothing had been done.

"This session was a tremendous success. We passed a historic property tax cut, implemented business tax reforms supported by dozens of employer associations and chambers of commerce, and raised salaries for Texas teachers, even while lowering the overall tax burden by $7 billion," Perry said. "And because of House Bill 1, school finance is now out of the courthouse, and back on constitutional footing."

For more information on the historic school finance legislation, visit

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