Texas Governor Greg Abbott called lawmakers back for a special session to address Texas’ property tax burden. In his special session proclamation, Abbott has asked lawmakers to focus on two complementary items. The first is allocating more state money to reduce property taxes, and the second is to impose more strict spending restraints on local government.
The call is straightforward and general, so the specifics will be figured out in legislation. Abbott requests “Legislation reducing the property tax burden on Texans and legislation imposing spending limits on entities authorized to impose property taxes.”
Each session, Texas allocates increasing amounts of state funds to buy down local property tax rates. The 2025-2026 two-year budget allocated $51 billion for property tax reductions. The state can do this relatively efficiently because a large portion of the property tax – the school district maintenance and operations tax – functions like a state-equalized property tax. In other words, the state shifts the M & O property tax revenue across districts. Therefore, when the state allocates funds to buy down the M & O property tax, it is effectively replacing a state-redistributed property tax with explicit state revenue sources. This structure allows Texas a simpler approach to state-local tax swaps, because the “local” M & O property tax is a quasi-state tax.
Texas lawmakers are considering additional state revenues to buy down the M & O property tax beyond the $51 billion they already allocated.
In addition, Abbott points to local government spending as the ultimate driver of property tax burdens. He has called upon the legislature to tighten up spending caps for local governments beyond the 3.5% cap for cities and counties enacted in 2019.
Abbott’s goal is to limit local jurisdiction spending to a combination of inflation and population. Texas’ state government imposes such a limit upon its state spending, so this change would apply the state restraint to local governments. In Abbott’s words:
“What I would like to see done is to make sure that every property taxing jurisdiction must live just within the same spending limits that the state has to live in…And if they’re confined in that … their ability to impose greater property taxes is going to be hamstrung.”
Local governments who wish to spend more than this cap would need to receive approval from their voters. Under current law, they can take advantage of disaster exemptions, fee increases, and debt issuance to increase spending. All of this would come under a more strict spending cap of inflation plus population.
Nebraska and Texas similarly face a legacy burden of high property taxes. In fact, they rank very near each other in nationwide rankings of property tax burdens. Nebraska lawmakers can keep an eye on property tax reforms and spending caps in the Lone Star State as they consider proposals for the 2026 legislative session.
