Who's For It?

Officeholders who weren't in the Pink Building in 1997 are finding out now what George W. Bush found out then: Even when everything appears to be lined up just right, it's almost impossible to pass a tax bill.

When the circumstances aren't perfect — now is a good example — it's even harder. Lt. Gov. David Dewhurst blew off some steam at business lobbyists early in the week, basically saying they were out there protecting the loopholes they currently enjoy. That came after representatives of some of the bigger taxpaying businesses gave him a thumbs-down on the Senate's tax plan. They prefer the House plan, or nothing, or something they haven't seen yet, to what the Senate was pitching.

The kvetching deepened as the week wore on, and the twin bills to rewrite state education laws and cut local school property taxes — bills that were supposed to come up for floor votes in the last week of April and the first week of May — were pushed back another week.

Sen. John Carona, R-Dallas, wrote a letter to his fellow senators that outlines a less ambitious package for school finance. That gave voice to previously quiet concerns that the Senate bit off more than it can chew politically. Carona opposes a state property tax, wants to lower local property taxes a quarter instead of 40 or 50 cents, wants to revise the current corporate franchise tax while leaving out real estate and oil and gas partnerships, and wants to add about $4 billion to what the state spends now on schools.

"Nobody deserving of the office of state senator is going to be defeated at the polls for adequately funding our schools and casting a vote for lower property taxes," he wrote. "This is one among several possible alternatives that will fix the problem without devastating the Texas business climate." You can see the whole letter here.

While that noise level rose, the wonks chewing on the legislation started finding problems. The biggest might be with the Senate's plan for a state property tax, which, as proposed, would put voters in the state's two biggest counties in the position of voting for a constitutional amendment that would increase their school property tax bills. The timing mismatches in the bill have been mentioned here earlier — new tax money initially comes in faster than it's needed for buying down local property taxes. That makes it harder to argue that the legislation is a net tax shift — not a decrease or an increase. That claim would be true over time, but not at first. And it creates a real problem if voters decide they don't want a state property tax. State tax increases, in that instance, would outrun local property tax cuts. That's a tax increase, and Republican lawmakers don't like the sound of that.

Dewhurst was hoping the biggest taxpayers in the state would get on board and help sell the Senate plan to the House, to the governor, and eventually, to the public. Like the last guy who attempted this (and went on to much higher office), he's getting schooled. The current franchise tax applies to about 17 percent of the state's businesses, according to the tax wonks who watch this stuff. You're more likely to hear it described as five out of six businesses taking advantage of loopholes, but the fact is that only one in six is legally required to pay the tax.

The replacements cooked up by the House and the Senate are designed to spread that out, to increase the number of businesses paying the tax and to lower the rate so that they won't pay so much. The first problem is that 83 percent of the state's businesses — those not in the 17 percent paying now — would be subject to a new tax. There are cutouts for small businesses and so on, but that's the general idea.

For many of those new taxpayers, property tax cuts will offset the taxes. But one of the political questions is whether the Legislature can add that many taxpayers to the rolls without inciting a mob to grab the torches and pitchforks and march on the castle. Ask a legislator if she's more likely to hear from the new taxpayer or the old one when she goes home after voting to broaden the franchise tax.

Business lobsters have been telling the Senate and for weeks that they prefer the idea baked up in the House, which would let businesses choose from two different business taxes. Sen. Kim Brimer, R-Arlington, has been pitching a "basket" tax for nearly a year. The idea is similar to what got out of the House: Offer businesses the choice of a tax on payroll, one on compensation (which grabs partners and others who aren't technically on the payroll) and gross receipts. They'd pay some tax no matter what, but they'd have some flexibility. That's one of the options back on the table now that the Senate plan has unraveled.

As we went to press, the Senate Finance Committee, led by Sen. Steve Ogden, R-Bryan, was reworking the bill, trying to more closely match state tax increases with local tax cuts, incorporating appraisal caps for local school taxes, and trying to wire around exemption differences from one district to the next. They hope to get a bill in front of the full Senate after Mother's Day.

A Tax Break that Costs Homeowners Money

A state property tax will cost taxpayers in about a quarter of the state's school districts their optional local homestead exemptions, cutting into their property tax savings. In 180 districts — including Houston, the state's largest, current proposals for a state property tax could result in higher residential property tax bills.

If lawmakers choose a state property tax to solve school finance, state property tax rates will have to be 20 percent lower than current local property taxes before homeowners in many school districts would see any property tax relief. The state's top rate for maintenance and operations taxes would have to drop from $1.50 to $1.20.

The first-year cut proposed by the Senate is lower than that — dropping 13.3 percent to $1.30 — but homeowners would keep their local property tax exemption that year, so they'd be ahead. In the second year of the cuts, a state property tax would replace the local tax — and also the local exemption. That year, voters in districts with high local exemptions would tax bills increase.

With local add-ons, the overall property tax rate would eventually top out at $1.25, resulting in higher tax bills in some districts than homeowners pay today. Houston homeowners could actually do better if the legislative plans are a half-success, cutting local school property taxes but failing to replace them with a state property tax that kills local homestead exemptions.

Under current law, school districts are allowed to exempt up to 20 percent of a homestead's value from their tax rolls, in addition to the exemptions allowed under state law ($15,000 for homesteads, and another $10,000 for taxpayers over age 65).

The Senate's state property tax leaves state exemptions in place, but does away with the local options. It's not a local tax anymore, and that kind of local variation would make the tax higher or lower depending solely on the location of the taxpayer, which is probably unconstitutional. Houston might cut homeowners a break while McAllen might not, and that would result in unequal taxation at the state level.

The 20 percent tax break is, for the moment, a boon to homeowners in Houston and 179 other districts — including most districts in Harris County, in the Highland Park ISD in Dallas County, Galveston ISD, West Orange-Cove (the lead district in the lawsuit against the state's current school finance system), Mineral Wells, Lago Vista and Lake Travis in the Austin area, Ysleta in El Paso, and a mess of others. Other districts around the state give smaller but still significant local exemptions. Dallas ISD, the state's second biggest, knocks 10 percent off the value of homes for tax purposes. So do Richardson ISD, Midland ISD, Jefferson ISD and several others. The local breaks are in addition to the exemptions in state law for homeowners and, separately, for the elderly.

And the rest of the state's districts — the 700-plus that don't give local exemptions to homeowners — base their taxes on appraised values less the state's exemptions. Homeowners in those districts aren't getting a local break today, but they would get the full benefit of property tax cuts under a state property tax.

The Senate wants to lower the cap on local school property taxes to $1.30 from the current $1.50. Senators would give voters a chance to replace those local taxes with a $1.10 state property tax. Local schools could add back up to 15 cents in local money onto that over time, bringing the ultimate rate to $1.25. If voters rejected the constitutional amendment, the state cap on local school property tax rates would stay at $1.30. As long as that's a local tax, the school districts have the option of continuing their 20 percent homestead exemptions. Even with a state property tax, they'd be able to grant the local exemption from taxable values for the locally added 15 cents for local enrichment. If they find themselves needing more money, they could also kill the local exemption altogether, bringing themselves in line with most of the school districts in Texas.

Some examples:

The owner of a $100,000 home in a district that gets only the state exemption takes $15,000 off the appraised value and thus pays taxes only on $85,000. At a $1.50 tax rate per $100 in value, that's $1,275. Under the Senate plan, the base value would remain at $85,000. In the first year, with a $1.30 local tax rate, the bill would come to $1,105, for a savings of $170. In year two, assuming voters went along, the state rate would drop to $1.10; the total bill would drop to $935, or $340 less than the current tax.

In a district with the 20 percent exemption, the numbers change. Take off $15,000 for the state exemption, and $20,000 for the local exemption. The taxable value of that $100,000 house drops to $65,000. At a $1.50 tax rate, they're getting a deal right now, paying $975. The Senate plan would lower the rate the first year and leave the exemption in place, resulting in a tax bill of $845, a savings of $130. But with the constitutional amendment and the state property tax, the exemption would disappear as the rate fell to $1.10, bringing the tax bill to $935. That's a net annual savings of $40. Rising property values and local enrichment taxes would eat at that amount.

For folks with 10 percent local exemptions, those $100,000 homes are on the tax roll at $75,000 now, meaning the tax at the $1.50 rate is $1,125. Their first year deal would net out at $975, a savings of $150. Their third-year number would be $935, a drop of $190 from current law.

Assuming voters approved the constitutional amendment, third-year savings for the owner of a $250,000 home would be $940 in the district with no local exemption, $565 in the district that currently has a 10 percent local exemption, and $190 in the district with the 20 percent cut.

That's how the state property tax is set up in the tax bill. There's an alternative version in the Senate version of the school finance bill that would replace the $1.50 cap with a $1.30 cap the first year, and then replace that with an 85-cent state tax combined with a 25-cent local tax. That still brings the second-year total to $1.10, but the local homestead exemption would apply to the local part of the tax, lowering the size of the final bill for people whose districts cut them a break.

For the owner of a $250,000 home in a district with the 20 percent exemption, the current tax at $1.50 is $2,775. It would drop to $2,405 at $1.30, and then would rise to $2,460 when the state/local property tax kicked in. That third-year would only set up that way with a constitutional amendment. As with the other state property tax, most voters in Harris County, under that plan, would be asked to vote to raise their school property taxes. In places with lower local exemptions, the tax bill would drop in both the first and second years of the shift.

Think about voting patterns when that constitutional amendment goes on the ballot: The first break would go to homeowners in places like San Antonio and Austin, the second in Dallas, the third in Houston. And remember that Houston homeowners (and others with 20 percent breaks now) would actually get a better deal if the Senate plan passes and the constitutional amendment fails. For them, that's the best mix of tax cuts and continued homestead exemptions. Remember, too, that Harris County accounts for more than 25 percent of the entire state vote in most constitutional amendment elections.

In all cases, local districts would be able to add on relatively small amounts for "local enrichment." School districts would be allowed to phase in those local add-ons, up to a maximum of 15 cents under the Senate scheme. That'd put the top tax rate at $1.25, or a nickel more than the break-even tax cut in Houston and other districts with 20 percent tax exemptions.

End of Days

The legislative calendar (get a printable copy here) starts getting very interesting next week.

The rules are designed to end legislative sessions without any sudden stops, kind of like putting on the brakes when the driver's ed teacher says you're supposed to instead of waiting until the red light is above you. This is more important on the House end of the building, since the Senate regularly suspends its rules and ignores internal deadlines. House Committees have to kick out legislation by next Monday, and next Thursday is the last call for House legislation on the floor of that chamber. After that, it's all local bills, Senate bills and conference committees. Committees in the lower chamber have to finish with Senate legislation on May 21, and the full House has to see those things by the 24th. Conference committee reports have to be approved by both houses by the end of business on Sunday, May 29.

Unstuck, Maybe

The slow wheels of legislation are starting to grind on workers' compensation insurance reform. The House committee that has been holding a Senate version for weeks made some changes and sent it along to the agenda-setting Calendars Committee. And the Senate panel that's been sitting on a House version for several weeks started doing some work on that, putting up its own version and voting it out of committee. We're not aware of a deal that gives one bill preference over the other, but at least they're moving. The issue has been held up in a dispute over which version should move forward. The governor's office has been quietly intervening to get the two sides talking, and apparently, they've made a bit of headway.

There are some substantive differences, not the least of which is how to regulate that kind of insurance. The Senate, working from its own interim study on the issue, wants the Texas Worker's Compensation Commission to remain a separate agency. The House, which is carrying the sunset legislation that would keep the agency alive or let it die, wants to merge TWCC into the Texas Department of Insurance. The idea, apparently, is to get the bills to a conference committee for a final fight before time runs out.

Tales of Self-Regulation

While the House was still working on legislation (HB 1706) that raises the level of identification voters must show election judges, 11 of the 12 Democrats in the Senate were signing a petition saying they'll vote against consideration of that legislation.

Unless somebody flips (or leaves the room when the measure arises), that kills the bill. It takes two-thirds of the 31-member Senate to bring up legislation for debate; 11 votes are enough to block it. Sen. Ken Armbrister of Victoria is the only Democratic senator who didn't sign the petition; the signers are the same 11 senators who moved to New Mexico for a month in a failed attempt to block a congressional redistricting bill in 2003.

That legislation, sponsored by Rep. Mary Denny, R-Aubrey, in the Houston, has been a pet project for the state GOP. It would require voters to show photo identification to prove they are who they say they are. Democrats in the House opposed it — some branded it as a racist measure — but it passed 78-67 after a fairly long debate. The Senate petition says the bill's requirements are "onerous" and says allegations of voter fraud in recent elections have been overblown. "The bill attempts to solve a problem that has not been proven to exist," the petition says.

• The House spiked another piece of election reform legislation last week, but there's more news to come on that front. Reps. Todd Smith, R-Euless, and Jesse Jones, D-Dallas, filed papers saying they'll be writing a minority report on HB 1348, which stalled on a 4-2 vote in Denny's House Elections Committee. That legislation would limit the uses of corporate and union money in campaigns, and would prohibit so-called "issue ads" in the last weeks before an election. The House voted down an effort to pull the bill out of committee for consideration; the Senate companion bill is still alive, but stalled.

Back to the Future

Feeling the sting of a two-year-old vote to deregulate college tuition, the Texas Senate voted to reconsider. They're not lowering tuition, and they're not telling public colleges and universities to lower the price of higher education. But lawmakers who meet in two years would have to decide whether the Legislature or the schools should decide the price of public higher education.

The Senate voted to take away the schools' pricing freedom in September 2008, unless the Legislature votes sometime between now and then to let the schools set their own tuition prices. In the meantime, it assigns state officials to study the effects of tuition deregulation.

For decades, tuition at public universities in Texas was set by the Legislature as part of the budget. But two years ago, House Speaker Tom Craddick and other lawmakers allowed the schools to set their own prices. Prices jumped.

It didn't hurt, for purposes of getting this through the Senate, that it was a pet issue of Craddick's two years ago. The House and the Senate are in their biennial battle over which side is doing most of the work — a battle that at the moment has brought on a most severe case of legislative constipation — and putting an expiration date on a Speaker's pet.

According to Sen. Rodney Ellis, D-Houston, average tuition at state schools has risen 43 percent. The numbers are higher at the bigger and more popular universities, up 104 percent at the University of Texas at Austin, 65 percent at Texas Tech and the University of Houston, and 61 percent at Texas A&M.

The schools say the high prices are more in line with actual costs. And their advocates in the Lege say lawmakers have been under-funding state colleges for years. But the sticker shock had some political backlash (though not yet enough to get anyone unelected). The Senate's "sunset provision" was sponsored by Ellis and passed after Lt. Gov. David Dewhurst helped round up votes and then to work a deal between Ellis and Sen. Florence Shapiro, R-Plano, whose bill Ellis was amending. Her legislation called for a study on the effects of tuition deregulation; Ellis' amendment set up would set up the next Legislature to choose between setting rates itself or letting the colleges continue.

The bill's on its way to the House, where most Senate legislation — like House legislation in the upper chamber — is stuck.

Bells Will Be Ringing

Write about legislation for an audience interested in government and politics and you get some feedback. But write about a wedding on the House floor... Rep. Mary Denny, R-Aubrey, is supposed to get married on the House floor, during a break in the usual proceedings, on Friday, May 6, to Mr. Norman Tolpo. We noted that a couple of weeks ago, and said it was unusual. Maybe, but three exceptions came quickly to the minds of readers. Former Rep. Bill Carter, R-Fort Worth, and his wife Virginia, who was a Senate employee at the time, got married in the House Chamber. Helen Dey Valdez, (Dey then, Valdez now) got married to her former husband in a ceremony that required a House resolution for permission, in 1993. And former state Rep. Ralph Wallace was married in the House Chamber in 1979, also after a special resolution. Thanks (honest!) to the emailers for the history lessons.

It Tolls for Thee

Comptroller Carole Keeton Strayhorn's appearance at a rally against new toll roads in the state prompted the crowd to change its road chants to political chants against Gov. Rick Perry.

There, at the South entrance to the Capitol right outside the governor's state offices, the crowd of about 150-200 broke into chants of "No more Perry!" and "Impeach Perry!"

Strayhorn was hard against toll roads, blaming the resurgence of the idea on Perry and his appointees at the Texas Department of Transportation. She also took several swipes at the contractors who won the right to build the first part of the Trans-Texas Corridor, an enlargement of the state's highway, rail and other transportation systems being implemented by TXDOT. A Spanish company dominates that consortium, leading Strayhorn to a "TXDOT, not Euro-DOT" line. And she said the roads ought to be approved only after public votes.

Perry aides shot back with a list of past performance reviews from her office they said sympathetic to toll roads. But she refuted that item by item, saying the reports talked about toll roads, sometimes in the context of solutions to transportation problems, but didn't endorse them.

And One More Thing...

Sen. Chris Harris, R-Arlington, got three bills affecting ethics and lobby regulation passed on the local calendar. What was unusual about that? They weren't on the local calendar.

We have to give credit where it's due: the Texas Legislative Service noted the discrepancy and flagged subscribers. Harris, the author of all three bills, is the chairman of the Senate Administration Committee that's responsible for assembling the local calendar and seeing it through in a weekly session in the always empty Senate Chamber — a "trust me" system where the vote is always 31-0.

Two of the three unscheduled bills (SB's 1009, 1010, and 1161) require lobbyists to report buying gifts worth under $50 that are delivered to legislators somewhere other than in the Pink Building; and allows lobbyists to represent clients that conflict with each other if the clients know about the conflict. The third gives candidates and officeholders some slack if they file reports late with the Texas Ethics Commission.

Up, Up, Up

Former U.S. Rep. Nick Lampson, D-Beaumont, has filed his papers and is officially raising money to challenge U.S. House Majority Leader Tom DeLay, R-Sugar Land in next year's elections. The districts are barely adjacent — a finger of Lampson's old district touches DeLay's. After the GOP-dominated Legislature redrew his congressional district, Lampson lost to Republican Ted Poe. Houston City Councilman Gordon Quan is also considering a run against DeLay. Richard Morrison, who lost to DeLay last year, has said he won't seek a rematch.

• Republican attorney and banker Francisco "Quico" Canseco of Laredo says via press release that he deposited $1 million into a federal campaign account, to be used in his race to succeed U.S. Rep. Henry Bonilla, R-San Antonio, should Bonilla run for the Senate spot currently occupied by Kay Bailey Hutchison if she decides not to seek reelection next year. Hutchison has been looking at running for governor, and told voters years ago that she'd limit herself to two terms in office. Bonilla says he won't run if she does, and Canseco won't run if Bonilla stays put. Canseco says the state's "Hispanic Republican seat" should remain just that if Bonilla moves on. He says the contest, if there is one, would cost him $2.5 million to $3 million. Republican consultant Todd Smith is signed up for that one. And of course there's a website: www.cansecoforcongress.com

• This one's just a website so far, but along those same lines: Juan Garcia III of Corpus Christi is starting up a campaign for U.S. Senate. He's a naval aviator and Gulf War vet who left the service last October. He claims college degrees from UCLA and John F. Kennedy School of Government at Harvard, and Harvard Law School. He doesn't note his party affiliation anywhere on his website, which can be found at: www.garciafortexas.com

Political People and Their Moves

Kinky Friedman, one of only two people definitely running for governor of Texas, went and got the same hired hand who helped make Jesse Ventura the governor of Minnesota. Dean Barkley, founder of that state's Independent Party, will be campaign director and chief strategist for Friedman. Barkley, appointed by Ventura to fill in when U.S. Sen. Paul Wellstone was killed in a plane crash, said the Ventura candidacy increased voter turnout. In Texas, where 29.3 percent of eligible voters showed up for the last governor's race, he's hoping to repeat the performance.

Former U.S. Commerce Secretary Don Evans signed on as chief executive of the Financial Services Forum, which describes itself as a group 18 CEOs of large diversified financial institutions designed "to promote policies that enhance savings and investment in the United States, and that ensure an open, competitive and sound financial services marketplace."

Former Texas Secretary of State Geoff Connor is joining the Jackson Walker law firm's Austin office, where he'll work on administrative, regulatory and governmental affairs. He did stints in the governor's office, the agriculture department and the Commission on Environmental Quality, and also worked as a lobbyist, before becoming the state's chief elections officer.

Appointments

Gov. Rick Perry appointed Lupe Fraga of Sugar Land and Gene Stallings of Powderly to the Texas A&M University System Board of Regents. Fraga is chairman and CEO of Tejas Office Products and chairman of the Dallas-Houston branch of the Federal Reserve Bank. He's an Aggie alum, and played baseball there. Stallings is an Aggie, too, and was the school's head football coach, an assistant coach for the Dallas Cowboys, head coach at the University of Alabama, and for the St. Louis-turned-Arizona (football) Cardinals.

The Guv appointed Cindy Lyons, a CPA from El Paso, to the state's Finance Commission, which oversees state-chartered financial institutions.

Perry named Andy Sheppard of Rockwall to the Texas Polygraph Examiners Board, which regulates Sheppard and other lie detector operators in the state.

Carlos Chacon of El Paso and Whitney Wolf of San Antonio are Perry's latest picks for the Texas Skill Standards Board. He directs federal sales for Computer Assets; she's VP of labor relations for SBC.

Add three names to the Texas Board of Architectural Examiners: James Walker II of Houston, president of James S. Walker Architects; Rosemary Gammon of Plano, a national account manager with Orthofix, Inc.; and Peggy "Lew" Vassberg of Lyford, president of Valley Designs, Inc. 

The governor picked Kenneth Mitchell of El Paso for a spot at the State Office of Risk Management. He's the president of an insurance agency there.

Quotes of the Week

Sen. Robert Duncan, R-Lubbock, arguing over whether public colleges should be allowed to continue setting their own tuition, as the Legislature ordered two years ago: "This is a great debate we're having. We should have had it last session."

Gov. Rick Perry, telling The Dallas Morning News that the state law that gives college admissions preference to students in the top ten percent of their high school class drives good students out of Texas: "I'd do away with it tomorrow... The top 10 percent [law] is the best thing that ever happened to LSU and Arkansas and Oklahoma."

Sen. Steve Ogden, R-Bryan, on why booze got included in the Senate's tax plan: "There is no particular social motive behind it. If you're going to raise sales tax, you're going to raise cigarette tax, the question is why not alcohol. The answer is there is no good reason."

Rep. Robert Talton, R-Pasadena and the chairman of the Harris County delegation, letting groups dine with and lobby lawmakers in a room at the Capitol: "I told them when I was elected that the only time I was going to meet was if somebody fed us and talked to us."

Travis County District Attorney Ronnie Earle, in the Fort Worth Star-Telegram: "Justice depends on the law. The law depends on democracy. Democracy depends on clean elections. Elections in which large corporations and large labor unions buy elections represent a threat to democracy, so the job of a prosecutor is to safeguard democracy."

Dallas County Commissioner Kenneth Mayfield, a Republican, telling The Dallas Morning News that state attempts to limit local government growth will hurt business development: "The governor clearly doesn't understand — perhaps he doesn't have the capacity — that local governments can attract businesses, not the state. It's the city and county, by offering more attractive tax abatements, that bring in business."

Russell Shannon with the Andrews Industrial Foundation, quoted by the Associated Press on that town's efforts to attract a hazardous waste disposal facility: "If we thought we could get an NFL franchise or a river walk, we wouldn't have looked at this industry. We just believe it will bring us some jobs, bring people to our community to get involved in an industry, like they did with oil."

Comptroller Carole Keeton Strayhorn, talking to toll road opponents outside the state Capitol: "Perry and his hand-picked highway henchmen say we have a choice: No roads, slow roads or toll roads. I say to Governor Perry and his highway henchmen, 'Hogwash.' Vote our way today for freeways."

Rep. Al Edwards, D-Houston, arguing for his legislation regulating cheerleading routines in public schools: "Girls can get out and do these overtly sexual performances and we applaud them. And that's not right. This is the beginning of an era to change some of what we've been seeing."

Rep. Senfronia Thompson, D-Houston, arguing against that same bill (which passed the House): "This is a ridiculous bill. I don't know how it got to the floor. We don't have any business mandating anything. We are spending time on '2-3-4, we can't shake it anymore.' It's an embarrassment."

Sen. Florence Shapiro, R-Plano, quoted in the San Antonio Express-News saying cheerleader regulation ought to remain in the school districts: "What happens in those local districts needs to stay in local districts."

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Texas Weekly: Volume 21, Issue 45, 9 May 2005. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2005 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 info@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.