State Narrows ‘Disaster Loophole’ for Property Taxes As Federal Aid Slows

Texas lawmakers narrowed a law that allowed cities and counties to temporarily raise property tax rates to pay for debris removal after disasters, as the Trump administration seeks to shift more responsibility for disaster cleanup to state and local governments.

House Bill 30, authored by Ellen Troxclair and sponsored in the Senate by Paul Bettencourt, revises the Texas Tax Code provisions that govern how cities, counties, and other taxing units calculate property tax rates following a declared disaster.

Previously, some local taxing authorities were able to exceed the voter-approval tax rate in the year after a disaster without holding an election — a practice critics often label the “disaster loophole.” HB 30 amended the law to create a new “disaster debris rate,” allowing local taxing units — excluding school districts and special taxing units — to modestly adjust their voter-approval tax rate to cover documented costs for debris removal, emergency sheltering, and overtime pay for emergency personnal after a federally or state-declared disaster.

The taxing entity must get approval for its disaster relief costs from the Texas Division of Emergency Management. The alternative tax calculation can be used for up to three years, or until local taxable property values recover to pre-disaster levels. Any increase adopted under the provision may not affect future tax rate ceilings.

Supporters say the approach adds predictability and transparency, tying any tax increase directly to measurable recovery costs while preventing permanent rate hikes. The Legislative Budget Board projects no significant fiscal impact to the state.

Fiscal watchdog groups, including Texas Policy Research, remain critical. While acknowledging the substitute bill is narrower than the previous law, the group argues it still allows unelected taxing authorities to raise property taxes above voter-approved limits without an election, and undermines voter control established by earlier property tax reforms.

That revision to state law comes as federal disaster assistance becomes less reliable. The National Association of Counties reported in October that the Federal Emergency Management Agency (FEMA) “withheld roughly $11 billion in planned disaster reimbursements to 45 states, shifting the payments to fiscal year 2026 and marking a major change in how the federal government is managing disaster relief funding.”