HB 166 would fundamentally restructure how Texas school districts are funded by prohibiting districts, beginning January 1, 2028, from levying maintenance and operations ad valorem taxes. In place of the current M&O property tax authority, the bill preserves a limited “enrichment tax” option capped at $0.17 per $100 of taxable value, which districts could use only to provide additional educational opportunities and only on top of state funding. The bill also states that any references in the Tax Code, Education Code, or other laws to a district’s authority to impose maintenance or maintenance-and-operations taxes must be read consistently with this new prohibition.
In addition to changing tax law, the bill creates a joint interim committee on the elimination of school district maintenance and operations taxes. The committee would be made up of five House members and five senators, appointed by the Speaker and Lieutenant Governor, and would study alternatives for funding public schools through consumption taxes. Its charge is to evaluate increasing existing consumption taxes, creating new consumption taxes, and the effects of such taxes on residents and businesses, then report by November 1, 2026 with findings, a comprehensive funding plan, and draft legislation. The committee would be abolished on January 1, 2027.
The bill’s impact on state law would be significant because it would remove a major local property-tax revenue source for school districts and shift the policy discussion toward state-level consumption taxes as a replacement funding mechanism. It would also require conforming interpretation of other statutes that currently assume school districts may levy maintenance and operations taxes, while preserving a narrow local enrichment levy for supplemental educational spending. The bill therefore affects school finance, property taxation, and the balance between local and state responsibility for public education funding.
The general sentiment reflected by the bill text is reform-oriented and exploratory, with a clear intent to move away from property-tax-based school funding and toward a consumption-tax model. Because there are no committee transcripts or recorded votes provided, there is no direct evidence of support or opposition in the available context. However, the structure of the bill suggests it anticipates substantial policy debate, especially around whether consumption taxes can reliably replace school district M&O revenue and how such a shift would affect taxpayers and businesses.
The main points of contention are likely to be the elimination of school district maintenance and operations property taxes, the adequacy and fairness of consumption taxes as a replacement, and the practical effect on school district budgets and local control. The bill itself highlights concerns about whether consumption taxes can respond to annual funding needs and what the broader economic effects would be on residents and businesses. Supporters would likely emphasize property-tax relief and a new funding framework, while critics would likely focus on revenue stability, regressivity of sales/consumption taxes, and uncertainty for public school financing.
HB 166 would amend the Tax Code to bar school districts from imposing maintenance and operations ad valorem taxes starting in 2028, while allowing a limited enrichment tax up to $0.17 per $100 of taxable value. It would also create a temporary joint interim committee to study replacing school-funding revenue with consumption taxes and to recommend implementing legislation. The bill would therefore alter school finance law, constrain local property-tax authority, and require changes to any related statutory references that assume M&O taxing power.
The bill appears to be driven by a strong reform impulse toward eliminating school district M&O property taxes and exploring alternative state revenue sources. No committee testimony or vote record is provided, so there is no documented legislative sentiment in the available materials. Based on the text alone, the bill is framed as a serious policy study and transition proposal rather than a narrow technical change, suggesting it would likely generate significant debate.
The central contention is whether school districts should lose their authority to levy maintenance and operations property taxes and whether consumption taxes can adequately replace that revenue. The bill itself flags concerns about the responsiveness of consumption taxes to changing school funding needs and their effects on residents and businesses. Likely supporters would favor property-tax elimination and a more state-centered funding model, while likely opponents would worry about regressivity, revenue sufficiency, and reduced local flexibility for public schools.