Storm Warnings

Let's do this backwards, to see where things are and to see what's been proposed in the last week on the theory that no proposals are dead while lawmakers are still working. Particularly when education and taxes are the subjects of the day.

School finance is now on the Senate end of the building, and they're setting it down for the weekend so they can bake their own version, to be rolled out in a committee of the whole – known as a COW – on Monday. They start with a House bill that doesn't balance, that raises too little money for the kind of tax relief senators have been saying they want, that raises money from a list that makes Republicans and Democrats alike reach for the airsick bags, and that includes, as a bonus, a list of controversial changes to education, like killing off the TAKS test for high schoolers and replacing it with end-of-courses tests, which were recently killed by lawmakers who favored the TAKS.

They hoped to have the House's version of a constitutional amendment along with it, but that was assaulted and murdered on the House floor. They'll have to revive it or something like it if they want to talk about slot machines, statewide property taxes, business activity taxes, appraisal caps on homesteads, or a change to the constitutional provision that sets maximum school property tax rates at $1.50 per $100 valuation.

Two items will keep legislative lawyers busy. The House is nervous about a constitutional rule barring consideration of legislation that has already been voted down. It's the legislative equivalent of Mom's Rule #43: Don't ask questions that have already been answered, whether or not you liked the first answer you got. The House already spiked a constitutional amendment with much of this stuff, and the Senate is fooling with patches, like breaking the measures into separate amendments that would each be different from the one omnibus amendment mutilated by the lower chamber.

Second, the House is territorial about raising taxes. The constitution says tax bills have to start in the House. It doesn't say anything about resolutions – the vehicles for constitutional amendments. The House, on this issue, says resolutions and bills are the same thing. The Senate says they're differentiated throughout the constitution, but not in this provision, meaning a resolution on a tax matter can start in either place. Boring but Important: The House couldn't pass a tax resolution, and now has to accept one from the Senate or take the blame for failure. The Senate has agreed to float its stuff through the Texas Legislative Council for vetting in hopes of bridging the difference in opinion.

The Senate is playing slowly. They got the bill after the halfway point in the 30-day special session, and they want to avoid the sort of meltdown the House produced in the show's first act. They officially got the House bill on Thursday and decided to wait until after Mother's Day to start committee work on their substitute for what the House sent over. Every senator is in the committee, meaning the official action, if any, which follows the committee work can be relatively quick.

If they take a week to do what the House did in 16 days, they'll be leaving about half a week for a conference committee to reconcile their work with the House's. That's an advantage for Senate bargainers, if the Senate can produce a bill that balances and has widespread support. Time is on the side of the upper chamber, what with the end of session deadline.

If the Senate can't produce a bill, they can blame the clock and the condition of what they got from the House. And then it falls back to the House: In a new session, a new tax bill would have to start in that chamber, triggering fears that this week's battle in the House could repeat itself.

Autopsy Report

Several elements of school finance depend on passing a constitutional amendment. If you got to class late, that requires votes from 100 members of the House, 21 members of the Senate, no votes from the governor, and approval from more than half of the Texans who register and vote.

The House gave the constitutional amendment well over 100 votes, but they were on the wrong side of the ledger. After hours of debate and several votes to change the measure, the House voted 119-26 to kill the thing. By the time they got to the final vote, they had elected to keep slot machines in, considered allowing the Kickapoo Indians to put slot machines in the location of their choosing, and to set the sales tax rate – currently set by statute – at 6.25 percent in the constitution. And it had a new style of property tax relief for homeowners, in the form of a $45,000 homestead exemption on school taxes. Keep in mind that this is the amendment that goes with the school finance bill passed a day earlier by the House, a bill that includes no payroll tax, no slot machines, and a sales tax increase up to 7 percent.

It's a real dog's breakfast.

Raising revenue has a kind of built-in self-canceling feature: Some House members won't vote for gambling come hell or high water; some won't vote for sales tax increases no matter how worthy the cause. Put those two groups together and it's tough to get the votes needed to propose a change to the constitution. And at the moment, they're on opposite ends of the see-saw, with gambling proposed as a way to keep sales taxes out of the bill, and sales taxes proposed as a way to kill the gambling feature.

The math: A couple dozen Republicans don't want to vote for slot machines, meaning a 100-vote majority would require around three dozen Democrats. Democrats generally don't like sales taxes, which fall hardest on the poor (the taxes give no consideration to wealth, and Mr. Trump pays the same rate as a fry cook at Wendy's). The House's reliance on sales taxes and House Speaker Tom Craddick's decision to kill debate on their amendments to the school finance bill will make it hard to bring Democrats back for a consensus. That creates a coalition, to use the word loosely, of up to 70 representatives who for various reasons don't like the constitutional amendment.

The Ghost of Sharpstown

The school finance bill got a final tally of 75-68, after representatives voted for the second day in a row not to consider the 200 amendments that were proposed by House members. The anger from Democrats was palpable. Rep. Steve Wolens, D-Dallas, went to the back microphone to rebuke Craddick with a blast from the past. Craddick was one of the "Dirty Thirty" House members who hounded then-Speaker Gus Mutscher for his dictatorial rule. In those days, Craddick was one of the people who went to the back mike to torment Mutscher.

Craddick allowed a motion to cut off debate and vote on the bill – ignoring a stack of pending amendments from House members – and then told Wolens he wouldn't allow a request to extend the time for debating that motion from three minutes to ten. Wolens, who's been the House for 22 years and has a reputation as a tough but even-handed debater, got exasperated that Craddick wouldn't give a reason for blocking a debate on whether to cut off deliberations on the school finance bill. "Mr. Speaker, I ask you with so much respect, and I like you so much, we've been friends for a long time, but let me ask you, if Gus Mutscher had done this to you, what would you do in my position?"

"I'm not advised," Craddick answered.

The sponsor of the school and tax bill, Rep. Kent Grusendorf, R-Arlington, appealed to lawmakers for the second time in as many days to vote for the bill just to keep it moving (after saying the House was "punting" a "shell bill," he changed and said there was no punt and no shell). House members won't be able to amend the conference committee's version if they see one – that'll be a straight up-or-down vote – but they voted to trust Grusendorf and keep things going.

Hold Your Nose and Vote

The banged-up bill that the tribe on the West end of the capitol sent to the tribe on the East end no longer contains slot machines or payroll taxes. It doesn't balance, spending over $800 million more than it brings in. It doesn't kill Robin Hood, settling for a pared down version of the system that has wealthier school districts raising tax money for poorer ones instead of keeping their money to themselves. It puts no new money into education, using all of the money raised by new taxes and fees to lower property taxes. And it doesn't lower property taxes as much as House leaders had hoped, leaving Texas homeowners with an average cut of 27 cents, down from the 47-cent price drop that would have been in place had the two major money-raising components stayed in.

The bill would raise sales taxes to 7 percent, up from 6.25 percent. It would lower school property taxes to a maximum of $1.20 per $100 valuation, down from $1.50 now (the actual average being charged is $1.47). This version doesn't include a $1 surcharge on movie tickets or college sporting events, but adds it to ticket prices for everything from Six Flags to the opera to the Houston Texans to Willie Nelson concerts. It would continue the Telecommunications Infrastructure Fund tax, even though the agency that doles that out is dormant. It adds $1 per pack to the tax on cigarettes, increases taxes on cigars and smokeless tobacco.

It includes a new sales tax on bottled water, a sales tax on mixed drinks (already taxed at 14 percent), and extends sales taxes to billboard advertising, newspapers, subscription magazines, Internet access, and newspaper advertising. The money local governments add on to sales taxes – up to 2 percent – would go to the state instead of those local governments on the newly taxed items (local taxes on existing sales taxable items would still go to the locals). Taxes on smokes and tickets to games and concerts and other events (except college sports) remain in the current version. And since the payroll tax is out, the existing franchise tax would not be eliminated, as had been proposed.

The bill fell out of balance when Rep. Rene Oliveira, D-Brownsville, successfully blocked plans to raise taxes on motor vehicles, boats and to add auto maintenance to the items on the sales tax list. That saved members from voting on what could be an unpopular tax, but it threw the bill out of balance and Rep. Kent Grusendorf, R-Arlington, didn't add in a new source of revenue to replace it.

Ain't No Sunshine Where It's Gone

All of that was cobbled together after Gov. Rick Perry held a press conference blasting the payroll tax proposed by the House, and after conservative Republicans delivered a letter to state leaders detailing their opposition to slot machines.

Speaker Tom Craddick answered with a legislative one-finger-salute to Perry, calling for a straight up-or-down vote on the governor's own plan. The House obliged him a few hours later, voting unanimously against Perry's proposal (126 nays, 16 present-not-voting, and 8 members absent; Craddick himself didn't vote). Craddick later interpreted that result for reporters, saying the House is unwilling to split business and residential properties into separate tax rolls as Perry had proposed, that they want a bigger tax cut (the current House version is only a nickel better than the governor's), and raising serious questions about the health of video lottery terminals, or slot machines.

Perry had signaled his distaste earlier, but the House didn't catch the signs. The governor, who was blasted a couple of years ago for vetoing a sack full of bills without warning legislators, held a press conference to repeat his opposition to any new broad-based business taxes. And to make sure he was getting through, he said he was opposed to the payroll tax touted by the House and to the business activity tax batted around in Senate conference rooms. It wasn't all that new, but Craddick and others in the lower chamber had hoped a strong showing on their side might sway the governor. At the end, Perry made nice, issuing a statement that ended with praise for Craddick, saying the two are good friends and listing some of the issues they pushed through during the regular session.

Salvage Yard

Several things have been killed during the last week – some of them unanimously – that could easily be picked up for use in a conference committee report, a Senate bill, or in another special session that might be in the state government's immediate future.

• House leaders proposed taxing companies 1.25 percent on their payrolls, with the amount charged for each employee limited to $500 per year. For Texas companies, the total cost of keeping all those employees would go up by $3.5 billion a year, with none of the money making it into paychecks. That would have replaced the corporate franchise tax, which pulls in $1.9 billion and is based on corporate capital instead of employment. The payroll tax is an "above-the-line" tax, meaning businesses would have to pay it whether or not they were making profits. And in the attempt to protect companies from paying high taxes on particularly well-paid employees, the authors made the tax hard on companies with large numbers of low-paid workers: Restaurants, for instance, and grocery stores and department stores and for-profit hospitals (government and non-profits would be exempted). A $500,000 payroll at a consulting firm with five employees making $100,000 each would be taxed at $2,500, or $500/head. A $500,000 payroll at a place with 20 workers each making $25,000 would pay $6,250. For some companies, that cost would be offset by cuts in property and franchise taxes. Enough others phoned Austin to make it clear they were against it.

• Video Lottery Terminals – slot machines, if you prefer – were in both the House leadership version and in Gov. Rick Perry's proposal. In the last version that saw light, they'd have been allowed at racetracks and Indian reservations, raising $1.5 billion. Exactly $1.5 billion. That figure coincides exactly with the $1.5 billion that was promised in the House's proposal for increased public education spending and for the first round of phased in local enrichment for public schools. The clear message: No games, no new money for kids. The state would get 60 percent of the profit at tracks, and 75 percent of the profits made by the three tribes that have lands in Texas.

Rep. Linda Harper-Brown, R-Irving, showed off a letter from two dozen House members (and one senator) who won't support a school finance plan that includes slot machines. In the letter, apparently written for Harper-Brown by Allyn & Co., her political consultants (they also coordinated the press conference), the lawmakers detailed their problems with slots. They said the revenue stream is unreliable; that the bill doesn't require the kind of competitive bidding that can drive up licensing fees paid to the state; that lottery regulators would have to have their new rules and a company in place, operating up to 40,000 slot machines within nine months, for the state's estimate of revenue to come true; that racetrack operators in Texas don't have experience running the kinds of casino operations slot machines would create; and that the expansion of gambling would be harmful to Texans. The letter was signed by Harper-Brown and 23 other House members (including one Democrat, Chuck Hopson of Jacksonville), and Sen. Jane Nelson, R-Flower Mound.

Do a little math: There are 88 Republicans in the Texas House. Subtract 23, and remember that VLTs require 100 votes to get on the constitutional ballot. If Harper-Brown holds her votes, House leaders and Gov. Perry need at least 35 Democrats to get the school finance plan they seek (payroll taxes aren't in Perry's plan, but slots are).

• The statewide property tax proposed by the House would have raised $1.05 for every $100 in property value, but was blasted by school districts that saw it as a blow to local control. It also wiggled through school funding formulas in unexpected ways, and got whacked. Another version, proposed by the governor, would create a state property tax for business paired with a local property tax for homeowners. Either would require a constitutional amendment; both are dead at the moment.

• The constitutional amendment that died in the House would have capped yearly increases in taxable values of residential property – including homes, second homes, and everything else that fits in that label – at 5 percent each year. The current growth cap is 10 percent; the governor wants the growth capped at 3 percent. This will almost certainly be revived.

A Nonpartisan Smackdown

Keep an eye on the reports that get attached to tax bills, and spending bills, by the legislative Budget Board. The one on the back of the House leadership bill – publicized by House Democrats – was a doozy. It said the bill that got out of committee would benefit about three percent of Texans, those who saved enough on property taxes to offset what they paid in other taxes and fees. Citing the numbers in the tax equity note attached to the committee version of the school finance bill by the Legislative Budget Board, House Democrats said 97 percent of Texas families would together bear an overall tax increase of $2.6 billion, while the remaining three percent – with incomes above $181,711 – would see an overall cut of $783 million during the first two years of the new law. Another to watch for: Dynamic fiscal notes from the comptroller, which show the economic effect of a tax or revenue bill. It could show whether a particular measure kills jobs, for instance, or adds them.

You Can't Keep Them Down on the Farm

Agriculture Commissioner Susan Combs, making the first announcement of the 2006 election cycle, says she'll run for comptroller and is betting that she'll be running for an open seat. The current occupant, Carole Keeton Strayhorn, has all but declared a campaign for governor, and while Combs says the two have talked, she won't share their conversation. "Suffice to say Carole is a friend of mine, as are all of the other statewides, and I'm running for comptroller," Combs says.

How definitive is this? She says she is now "raising money on that premise" and says the decks are cleared for anyone who wants to run for the job she currently holds. She says she's not aware of any particular candidates for agriculture commissioner.

Strayhorn also says the two have talked, and says Combs has told her she won't run "if I do not." Is Strayhorn running for reelection or something else? It's too early for that kind of talk, Strayhorn says, spouting a line you probably have heard by now: "I'm the comptroller 24-7, and when the people of Texas ask me to serve, I have never turned them down." Asked what she's telling donors who want to know what they're contributing for, she says, "Good government."

Asked (several times, and in a number of different ways) what she'll do if Strayhorn decides to stay put and seek reelection, Combs gives this answer every time: "I have every reason to think it will be an open primary." Several politicos have been mentioned as potential GOP comptroller candidates – from gubernatorial aide Mike Toomey to Harris County Judge Robert Eckels to Harris County Tax Assessor-Collector Paul Bettencourt – but Combs is the first out of the gate and so far, the only serious candidate from either Party to seek the job. It's easy right now to locate someone to speculate about what offices which officials might seek if current statewide officeholders shuffle around, but Combs says this is the only job she's thinking about.

She says the timing of her announcement isn't that significant, that she's doing this because "people have been asking me about it." It gives her time to start raising money (before the people running for governor, among other things, vacuum up all the political money that's left after the presidential vacuums have swept the state), and it comes a few weeks before the Republican state convention, where she'll have an opportunity to get a head start on other potential GOP contenders for the job.

Combs, a former House member elected agriculture commissioner in 1998 – when Rick Perry left that post to run for lieutenant governor – and reelected in 2002, says she thinks it would be "intellectually challenging" and "fun" to be comptroller. She has been saying for some months that she will run for that office if Strayhorn leaves, but that condition is no longer attached. Strayhorn hasn't announced a bid for governor, but has made several moves along those lines, criticizing Perry at almost every opportunity and stressing the differences between what he's doing and what somebody else might do with his powers.

Combs says a primary for comptroller will cost $2 million to $3 million, and the cost of a general election would depend on who's running and what's going on. She'll spend some of that money on a familiar campaign giveaway: "I will have thousands and thousands of combs available."

Feed Bag

Two-thirds of Texas voters support the state's attack on junk food in schools, an effort let by Agriculture Commissioner Susan Combs. A poll done on her behalf by Austin-based Baselice & Associates showed 49 percent strongly favor the restrictions on "low nutritional value" foods in schools, and another 17 percent somewhat favor the idea. That's good news for Combs, and may reveal an opportunity for GOP lawmakers looking for ways to raise money for public education and local property tax relief. For Combs, it's a ratification of what she's been working on for the last several months, attacking obesity among school children by restricting what school districts serve at breakfast and lunch. Lawmakers, meanwhile, are looking for revenue sources, and some have suggested adding taxes or surcharges to junk food. The survey indicates clear support for Combs, and some food for thought for the tax idea: Would voters go for a junk food tax on the same rationale they now support taxes on smokes and drinks?

That wasn't asked. The pollsters, who talked to 801 voters on the telephone from April 16-21, also asked how the respondents felt about the general idea of telling the schools what to do in their cafeterias. They were told some people think it's a good idea to regulate what the schools serve since many kids get two meals a day there, and since parents can stick a cola in the lunch box if they want to. They were also told some think it's a bad idea that limits local control and prevents schools from earning money from sales of soft drinks and other foods. Almost three-fourths of the voters, asked which version they liked, said it's a good idea to impose limits from the state level; 57 percent strongly agreed, and 16 percent somewhat agreed. A total of 21 percent went with local control and fundraising; 13 percent of them strongly, and 8 percent somewhat.

Quotes of the Week

Rep. John Smithee, R-Amarillo, asking House members to vote for a school finance bill just to keep things moving: "If this bill were to pass in the condition it's in today, it would be disastrous... [but] I'm convinced this is the only way to move this process along."

Sen. Kyle Janek, R-Houston, rating the House's school bill in the Houston Chronicle: "They didn't leave us much to work with. They may as well have sent us a piece of paper saying, 'Howdy.'"

Rep. Scott Hochberg, D-Houston, after House Speaker Tom Craddick said he wanted to avoid consideration of about 200 amendments to avoid getting representatives "cut up" voting on various tax and education proposals: "That's our job – we're here to vote on things."

Rep. Rene Oliveira, D-Brownsville, on efforts to explain what's going on with school finance as a cut in property taxes funded by raising other taxes: "When they take more money, they have raised my taxes. I don't care what they call it."

Gov. Rick Perry, nailing the payroll tax proposed by House leaders: "We need a property tax cut that isn't financed on the backs of Texas workers, and at the expense of their jobs."

Rep. Jim Keffer, R-Eastland, quoted in the Dallas Morning News after the House rebuked Perry for killing the payroll tax: "In the Texas House, we don't give press release warnings. No, we just vote bills up or down... He called us here without so much as a consensus and then undermined our process and criticized the committee's plan."

Lt. Gov. David Dewhurst, putting a little daylight between the Senate and Gov. Rick Perry: "If the governor doesn't agree with us, he can veto it."

Rep. Fred Hill, R-Richardson, on whether everyone agreed to remove Gov. Rick Perry's proposed cap on how fast local governments can increase revenues: "Well, there are 1,200 cities, 254 counties and a governor, so it's a moving target. But I think we have a deal."

Sen. Jane Nelson, R-Lewisville, telling the Fort Worth Star-Telegram she'll do whatever is necessary to maintain a filibuster against slot machines: "Catheters work wonders. I will have an internist... on call who will -- how can I word this delicately? -- he will assist with medical technology necessary for females to filibuster."

Texas Weekly: Volume 20, Issue 45, 10 May 2004. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2004 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (800) 611-4980 or email biz@ texasweekly.com. For news, email ramsey@ texasweekly.com, or call (512) 288-6598.