House Votes to Keep Schools Dealing With Businesses

Despite opposition by high-profile conservative and liberal groups, the Texas House was nearly unanimous Friday in its support for continuing a program that allows school districts to use tax incentives to lure businesses.

The House voted 127-6 in favor of House Bill 3390, a 10-year extension for the Texas Economic Development Act, better known as “313 agreements” for the relevant chapter of the tax code. School districts use the programs to offer property tax credits to businesses as an economic incentive tool. Wind farms in particular have made strong use of the program in recent years, drawing more than 30 percent of the incentives. The program was created in 2001 and is scheduled to go away in 2014 unless the Legislature passes an extension.

“It’s the most important economic development tool that we have at our expense to compete with other states,” said state Rep. Harvey Hilderbran, R-Kerrville, the bill’s author. He credited the program with drawing companies like Toyota and Samsung from bringing more jobs to the state.

Critics have charged that the program allows school districts to pick winners in the marketplace and is not worth the resulting increase in jobs and investment. Both the liberal Center for Public Policy Priorities and the conservative Texans for Fiscal Responsibility urged lawmakers to vote against the program, a rare area of agreement between the two groups.

“Particularly because the Legislature may have to reform Texas’ school finance system to meet new court orders, the Legislature should not prolong a program that would allow reductions in school property tax revenue by over $4 billion,” said Dick Lavine with the Center for Public Policy Priorities.

Along with calling the program expensive, Texans for Fiscal Responsibility also criticized a provision in the bill that would have required only jobs that provided workers with health insurance from “a group health benefit plan that complies with the Patient Protection and Affordable Care Act" would be viewed as eligible for economic incentives under the program. The group’s president, Michael Quinn Sullivan, described the provision as “a backdoor endorsement of ObamaCare.”

Hilderbran removed the language from his bill Friday and said he didn’t know how it got in there.

The comptroller’s office and others have been particularly critical of a provision in the law that lets school districts negotiate with companies to receive separate payments outside of the statewide school funding formula.

Hilderbran said that his bill addresses some of the criticism of the program by requiring that the comptroller evaluate the economic impact of any applications.

"We put the state as a gatekeeper in front for the first time ever," Hilderbran said.

State Rep. Jim Murphy, R-Houston, offered an amendment that would have changed how the payments are calculated, which would have led to some schools being able to negotiate larger payments but others receiving lower payments. Murphy said the current rules make the deals unattractive for certain school districts due to their size, including the Houston independent school district.

“Let’s make it an automatic program, where it’s easily defined, that provides opportunity for both small districts” and big districts, Murphy said. The amendment failed.