Civic Insights with David Billings
Texas lawmakers will be debating property tax relief proposals in the upcoming 89th legislative session, with an eye toward future bills in the 90th. Governor Abbott’s cost-cap proposal is front and center. But will it actually deliver relief? Let’s dig into local government cost caps.
Governor’s Proposal: Cost Caps
Governor Abbott has proposed limiting local-government spending growth to the lesser of:
- Population growth plus inflation, or 3.5%.
The idea is simple: if local governments spend less, property taxes should fall. But in practice, reducing expense growth while simultaneously pursuing pro-housing and pro-growth strategies doesn’t automatically translate into lower taxes.
Legislative Background
Two recent proposed bills provide a roadmap for how cost caps might work:
- House Bill 46 (89th 2nd Special Session):
- Capped annual expenditures at the prior year’s spending or that amount adjusted by population × inflation (CPI).
- Allowed exceptions only if two-thirds of voters approved higher spending.
- House Bill 3537 (89R):
- Added a new section to the Local Government Code (§140.014).
- Limited expenditures to the prior year’s spending or that amount adjusted by population and inflation.
Neither bill passed, but Abbott is now pushing a similar framework with his 3.5% cap proposal.
Local Impact: Rockwall County Case Study
To test the proposal, I applied a 3.5% cap to FY 2026 budgets for Rockwall County and its four cities. Two scenarios were modeled:
- All-In Version – All spending subject to the cap.
- Public Safety Excluded Version – Police, fire, and EMS carved out.
Total Spending Trends
From 2024 to 2026, expenses rose sharply:
- Fate: +31% ($4M increase)
- McLendon-Chisholm: +23% ($867k increase)
- Rockwall County: +15% ($7.7M increase)
Growth-driven communities are seeing the fastest increases, reflecting both inflation and population pressures.
| 2024 | 2025 | 2026 | |
| Fate | $ 12,993,494 | $ 14,989,136 | $ 16,977,924 |
| Rockwall | $ 52,207,136 | $ 51,906,400 | $ 54,397,600 |
| McLendon-Chisholm | $ 3,777,937 | $ 4,255,443 | $ 4,645,435 |
| Heath | $ 10,942,190 | $ 9,935,855 | $ 12,489,823 |
| Rockwall County | $ 51,322,674 | $ 55,524,977 | $ 59,018,950 |
Figure 1 – Total Expense
Public Safety Spending
Public safety costs are rising even faster:
- Fate: +38% ($2.2M increase)
- Heath: +25% ($1.2M increase)
- Rockwall County: +27% ($2.6M increase)
These jumps reflect higher demand for police, fire, and EMS services.
| 2024 | 2025 | 2026 | |
| Fate | $ 5,918,929 | $ 6,953,158 | $ 8,178,266 |
| Rockwall | $ 22,769,067 | $ 23,568,900 | $ 24,391,250 |
| McLendon-Chisholm | $ 1,939,062 | $ 1,958,509 | $ 1,996,650 |
| Heath | $ 4,836,008 | $ 5,191,763 | $ 6,053,617 |
| Rockwall County | $ 9,593,987 | $ 9,992,742 | $ 12,214,046 |
Figure 2 – Public Safety Expenses
The 3.5% Cap in Practice
When applied to FY 2026 budgets, every jurisdiction exceeded the cap:
- Fate: Shortfall of $1.39M
- Heath: Shortfall of $2.12M
- Rockwall County: Shortfall of $1.43M
- Rockwall and McLendon-Chisholm: Smaller but still significant shortfalls
Even excluding public safety, four of five jurisdictions still exceeded the cap. Only Rockwall County fit under the limit, and just barely.
The Core Issue
The mismatch is clear:
- Fate needed $1.99M in growth but was allowed only $594k.
- Heath needed $2.55M but was allowed $437k.
- Rockwall County needed $3.49M but was allowed $2.06M.
A one-size 3.5% cap doesn’t reflect real-world growth. Instead, it creates recurring shortfalls that force:
- Potential delays in first responder services
- Delays in quality-of-life experiences, such as music festivals and parades
- Deferred road maintenance
- Deferred city park maintenance
- Delays in school police (SRO) staffing
- Frequent (and costly) voter-approval elections
| 2026 Approved | 3.5% Cap | Allowed Growth | 2025 to 2026 Growth | Funding Shortage | |||
| Fate | Total General Fund Expense | $16,977,924 | $17,572,151 | $594,227 | $1,988,788 | ($1,394,561) | |
| Rockwall | Total General Fund Expense | $54,397,600 | $56,301,516 | $1,903,916 | $2,491,200 | ($587,284) | |
| MC | Total General Fund Expense | $4,645,435 | $4,808,025 | $162,590 | $389,992 | ($227,402) | |
| Heath | Total General Fund Expense | $12,489,823 | $12,926,967 | $437,144 | $2,553,968 | ($2,116,824) | |
| Rockwall County | Total General Fund Expense | $59,018,950 | $61,084,613 | $2,065,663 | $3,493,973 | ($1,428,310) | |
Figure 3 – The impact
The Cumulative Effect: Fate’s Five-Year Shortfall
The real danger isn’t just one year of underfunding, it’s the compounding effect over time. Using Fate as an example, the gap between actual needs and the 3.5% cap grows dramatically:
| Year | Spending Needed | 3.5% Cap | Allowed Growth | Year over Year Growth | Yearly Shortfall | Cumulative Shortfall |
| 2026 | $16,977,924 | $16,977,924 | $0 | $0 | ||
| 2027 | $18,845,496 | $19,505,088 | $659,592 | $1,867,572 | ($1,207,979) | ($1,207,979) |
| 2028 | $20,541,590 | $21,260,546 | $718,956 | $1,696,095 | ($977,139) | ($2,185,118) |
| 2029 | $21,979,502 | $22,748,784 | $769,283 | $1,437,911 | ($668,629) | ($2,853,747) |
| 2030 | $23,518,067 | $24,341,199 | $823,132 | $1,538,565 | ($715,433) | ($3,569,180) |
| 2031 | $25,164,331 | $26,045,083 | $880,752 | $1,646,265 | ($765,513) | ($4,334,693) |
By 2031, Fate would face a $4.3 million cumulative shortfall under the cap. That’s not a minor gap.
Final Thoughts
Governor Abbott’s cost‑cap proposal may sound like property tax relief, but the math tells a different story.
In fast‑growing counties like Rockwall, a blanket 3.5% cap is less discipline than a widening fault line. Year after year, that fault line stretches into a rift and deepens into a canyon between what communities actually need and what they’re allowed to spend. By 2031, Fate alone would face a $20.6 million cumulative shortfall. Multiply that across Texas, and “relief” becomes systemic underfunding.
Once the canyon opens, services fall in, such as public safety, roads, staffing, maintenance, each layer eroded by growth. What begins as a crack becomes a landslide, and what looks like fiscal discipline from Austin turns into collapse for local governments.
Local leaders aren’t asking for blank checks; they’re asking for the ability to keep pace with growth and inflation. A one‑size cap ignores those realities and sets cities up for cuts, deferred projects, and frustrated voters dragged into election after election just to approve basic spending.
You can’t bridge a canyon with slogans, and you can’t balance a fault line with wishful thinking.
About the Author
David Billings, retired Mayor of Fate, has served the community for over a decade. A longtime business leader in the telecommunication industry, Navy veteran, and resident of Rockwall County, he brings both professional and civic experience to his writing on government, budgeting, and local economics. He is a graduate of Leadership Rockwall, North Texas Commission Leadership Program, active in several Rockwall County non-profits boards, and the American Legion.
He is passionate about civic involvement in local government, maintaining transparent governance and thoughtful strategic planning to preserve a bright future for the regions.
