As Texas enters the summer stretch when appraisal rolls are certified and local governments set next year’s tax rates, more than 130 cities are entering it under an order that they cannot raise property taxes at all above the no-new-revenue rate.
Attorney General Ken Paxton’s office has notified those cities that they are out of compliance with Senate Bill 1851, the 2025 transparency law that bars a city from collecting more property-tax revenue than the prior year unless it completes an annual financial audit and publishes a financial statement based on it. The enforcement lands just as the rate-setting calendar begins: chief appraisers must certify tax rolls by July 25, and taxing units hold rate hearings in August.
Paxton’s push began as a statewide investigation of nearly 1,000 municipalities opened late last year, followed by document demands and, in May, letters prohibiting the noncompliant cities from raising taxes above the no-new-revenue rate. The no-new-revenue rate is the rate that would raise the same total revenue as the previous year on the same properties. Paxton has framed the effort as forcing transparency before any increase, telling cities they must be “transparent with taxpayers” to justify collecting more.
Under Senate Bill 4 and the constitutional amendment voters approved as Proposition 13 in November 2025, the mandatory school-district homestead exemption rose from $100,000 to $140,000 for the 2026 tax year, with an added $60,000 for homeowners who are over 65 or disabled, bringing their exemption to $200,000. The Comptroller’s office has estimated the higher exemption is worth roughly $560 a year in average school-tax savings.
Combined with a homestead appraisal cap that limits taxable-value growth to 10 percent a year, the state-level relief lowers the base on which local rates are applied — though a taxing unit that raises its rate can still offset part of the benefit, which is the gap the SB 1851 enforcement is meant to close on the city side.
Cities have pushed back on the mechanics rather than the goal. Municipal officials and the Texas Municipal League have argued that the audit-and-statement requirements are demanding for smaller towns with thin staff and that many flagged cities are working toward compliance rather than trying to evade the law.
Local-government advocates also warn that capping revenue at the no-new-revenue rate can squeeze services when costs rise, and that transparency failures are often administrative rather than intentional. The dispute turns less on whether taxpayers deserve disclosure than on how much room cities retain to fund budgets once they provide it.
For homeowners, the practical question is what lands on the bill this fall, and that will be set county by county as certified values post through late July and taxing units adopt rates in August. The combination now in place — a larger homestead exemption, rate compression on the school side, and a hard cap on revenue growth for cities that have not opened their books — points toward smaller increases than Texans have seen in recent years, maybe even decreases for some.