Committee narrows toward homestead exemption; staff models two options and cost tradeoffs

Legislative staff presented two alternative homestead‑exemption structures and preliminary cost estimates, and senators asked staff to rework step sizes and caps to better target lower‑income households.

Julia Reichert, Joint Fiscal Office, described two iterations labeled A and B and the committee’s modeling assumptions: the staff compared each homestead exemption to FY25 net education property tax bills and used the same filer groups and property‑value bands previously used in session work.

The nut graf: the committee asked staff to keep the homestead exemption approach but to return with versions that increase relief at the lowest income bands and use smaller income steps at the bottom of the schedule while holding total FY spending roughly neutral to current law.

Under homestead exemption A (no house‑value cap), Reichert said the modeled package would cost about $26 million less than current law income sensitivity in the FY25 illustration. Under homestead exemption B (the same step structure with a $400,000 house‑value cap on the exempted portion of a homeowner’s property), Reichert reported the model reduced cost to about $61 million less than current law income sensitivity.

Committee members noted the House proposal differed substantially: staff said the House proposal would cost about $45 million more than current law in the staff’s earlier modeling. Members asked staff to explore how applying the $400,000 cap produces different savings assumptions (committee members asked staff to recheck earlier House‑version modeling, which previously showed a smaller savings from a $400,000 cap).

Several senators emphasized targeting relief to the lowest incomes and avoiding large cliffs where a small income or property‑value change substantially changes benefits. One senator told staff she preferred smaller steps at the bottom of the income scale and more “blue” (reduced bills) for low‑income homeowners.

The committee did not adopt final exemption percentages or caps. Instead members directed staff to produce revised versions that: combine the very lowest filer groups (for example, 0–$10,000) to reduce cliff effects; apply smaller percentage step changes at the bottom of the scale; and evaluate whether some or all of the roughly $61 million in modeled savings can be redirected to increase relief for the lowest‑income groups while keeping the package near revenue neutrality relative to current law.

Ending: staff said they will rework the step structure and return with alternatives that show how to prioritize lower‑income households, and will re‑check the previous House modeling about the $400,000 cap.