Just When You Thought Things Had Changed

It's been a bummer of a week for optimists. It looked for a minute there like the Texas Senate had everything lined up for a quick resolution on school finance, but they reverted to form and fell into a series of old and new traps.

More than a week remains in the special session — plenty of time to pull everything together. But as the third week came to an end, only one bill in the inventory had gone to the governor and two of the six bills in the package were mired in Senate Finance and the folks in charge in the upper chamber were fumbling for a strategy. Several Republican senators appear ready to strip extras from the legislation and to push through just the parts needed to solve school finance.

That one bill on Rick Perry's desk is the biggest tax bill in state history. Taken alone, it might as well have a skull and crossbones on it; Perry isn't likely to sign it without companion legislation that directs the money it raises to relief from local school property taxes. The rest of the package — two more tax bills, a bill forcing newly raised funds into property tax relief, another that uses part of the budget surplus to pay for the first year of cuts, and a last one that's supposed to catch any mistakes in the first five — is still winding its way through the Legislature. And as time has passed, the obstacle course has become more difficult.

New traps: Tobacco industry lobbying on the amount of the cigarette tax increase and on an intra-industry dispute over taxes on snuff; an insurance-friendly provision to a sales tax bill that would have the effect of lowering, in some cases, what you're paid when you total your insured car; and whether there's really enough money to cut M&O property taxes to $1 or anything in this legislation that forces local property taxes to that much-hyped mark.

Old traps: Recapture and equity; election dates; school start dates; homestead exemptions; caps on annual increases in property taxes; teacher pay raises (and amounts); and the health stipend for teachers and other school employees that has yo-yoed between $0 and $1,000 since it was put in place in 1997. Sen. Florence Shapiro, R-Plano, had been pushing to let local districts keep at least some of their locally raised money — the recapture/equity issue — but says she'll back down for now. Homestead exemptions won support in the House a year ago, but money spent there can't be spent to lower rates, a formula that drains business support. The other provisions have proponents, but remain controversial; they cost votes, too. And the list of add-ons helped kill previous efforts to patch the state's school finance system. 

Not a Penny More

Kids will teach you -- quickly -- that an easy to understand promise is one you'd better keep. It's a useful lesson when you're thinking about voters. Tell them you're gonna lower local school property taxes to $1, and anything else -- from $1.01 to $1.50 -- will make you look like a cheat.

So Gov. Rick Perry, prompted by the business groups who traded their endorsements on the tax bill for a 50-cent cut in property taxes, is doubling up his wager. His marketing machine is pushing the $1 promise hard. The state's eight biggest chambers of commerce held a press conference to push the point. Texans for Taxpayer Relief — the non-profit corporation that's raising money to promote Perry's tax plan — sent letters to lawmakers urging them to put the full cuts to $1 into law. Perry himself held a session with Senate Republicans — they've apparently given up on the Democrats — to tell them nothing less than $1 would do.

That puts him at odds, kinda, with Lt. Gov. David Dewhurst. Dewhurst says the House's legislation doesn't balance, and promising a tax cut of a particular size could push future legislatures into a jam. If the taxes that pass during this session don't raise the money needed for the school tax break, lawmakers will have to scrape up the funds from other sources.

A 50-cent cut in taxes costs some $5.5 billion to $6 billion. Former Comptroller John Sharp, who headed the Texas Tax Reform Commission appointed by Perry, has acknowledged the panel's plan will need to use $1.4 billion of the state surplus as it gets off the ground. He says growth in the economy and in the new business tax will cover that in the years that follow.

But the current comptroller, Carole Keeton Strayhorn, says the plan has built-in deficits that will have to be covered in future years by money that's not coming from this session's new taxes. Sharp and others on Perry's end of the seesaw disagree. So you have two competing assertions, and Dewhurst has weighed in with his own numbers. They don't exactly match Strayhorn's, but they're along the same lines. And her numbers are the only ones with any legal weight.

The proposal from the tax commission included a 17-cent first-year cut in property taxes and a 33-cent cut in the second year. It also lowered the state cap on school property taxes to $1.30 from $1.50. All three numbers disappeared in the House; the first one was replaced with a provision that would take 11.3 percent off a district's current tax rate. The House bills make no promise for year two, other than saying the money from the new taxes will go to cuts. If more is needed to get to the promised dollar rate, they didn't make any provision for it.

Dewhurst has been reluctant to put the promise in law without some certainty that the money will be there. Perry and a fair number of Senate Republicans want to put the buck in the bill and hope for the best. Without a constitutional change, this Legislature can't force future lawmakers to do anything; as a practical matter, this could all change the next time the Lege meets. But it would be politically difficult, and that's probably enough.

Three timing issues ought to get mentioned somewhere in here.

First, even if she thinks the tax package is out of balance, Strayhorn's official pronouncement will only cover whether the plan balances between the time it takes effect and the end of the current two-year budget in August 2007. Since it uses surplus money for its startup, it probably will. And it was designed to get around a comptroller who's also running for governor. By the time the bills come due, Strayhorn's replacement will be running state finances.

Second: The last phase of the local school property tax cuts show up on tax bills due in January 2008, two months before the next primary elections. If voters like it, that'll be good for incumbents. If voters don't get what they want, it'll be a good year for challengers.

Third: The new business tax will come due for the first time in May 2008, and accountants and other number crunchers will be looking hard at the numbers at the first of that year. Again, it could influence primaries, for better or for worse.

A Deal on Teacher Pay

State legislative leaders have reached agreement on a $2,000 across-the-board pay raise for teachers and an average of $1,000 more in incentive salary increases that would be phased in over two years, but teacher groups wanted more and school workers who aren't in the classroom are miffed that legislators are cutting them out of a $500 annual stipend.

The incentive pay agreed to by House and Senate leaders would start with teachers in high-poverty districts that show big performance gains. About $100 million would be available for that. In 2008, they've proposed adding another $200 million that would go through both local and state incentive programs. They'd phase in spending on "high school improvement measures" of up to $500 per student with the goal of preparing students for college.

The deal doesn't restore the full $1,000 stipend that educators were hoping for. That started as a health care stipend and was later freed so teachers could use the money for whatever they wanted. In tight budget times, though, lawmakers cut the stipend in half. It'll stay that way for now, and non-teachers will lose it altogether. The griping from the educators irked Republican senators; one told us they might as well not have done anything, for the reaction they're getting; another suggested they should take all the money and put it into incentive pay.

That stuff has all been tucked into HB 1, which also includes using $2.37 billion of the state surplus to lower school property taxes by 11.3 percent, or up to 17 cents.

The agreement — nobody's actually voted on it as we write this — follows a month or so of talks between House Speaker Tom Craddick, Lt. Gov. David Dewhurst and a handful of legislators. It's designed to keep the state budget from triggering a cap on spending — the growth in spending isn't allowed to exceed growth in personal income without legislative approval, and nobody wants that vote on his or her record. The pay raises fit inside the cap, as does that first $2.4 billion spending of the surplus. But the high school program might have to start slowly.

Al's Not Here, but Lockboxes are Back

In the House version, any new tax money coming out of the special session would go into a special account, and all of the money in that account had to be used to cut local property taxes. The House made no reference to target tax rates and didn't require the state to lower school taxes to $1, as had been proposed by the Texas Tax Reform Commission.

In the Senate version, the lockbox money is dedicated solely to property tax reduction until the school tax rates all reach $1 (like the House version, it doesn't require that the rates be lowered to $1 — but the Senate decided to say what'll happen if they do reach that point). If the trigger is reached, additional lock box money would be split between local property tax cuts and education.

The education money — one-third of the money — would be used to for "basic allotments" in school finance formulas, and to help balance school finance funds between rich and poor districts. If the money ever lowers local property tax rates to 75 cents, any additional money would go into those school formulas.

Watch This Space

The main tax bill might be safe from tampering, but it's got a satellite that's built for hijinks.

The Senate added a sidecar to the business tax bill, opting to leave the tax bill in the exact form it passed the House and to put any changes or amendments or fixes or tricky lobby schemes into a new piece of legislation, SB 6 (that's how the tax bill got to the governor's desk without more stops). As filed, that sidecar is pretty unthreatening. But Lt. Gov. David Dewhurst and House Speaker Tom Craddick are trading off a list of proposals that would go into that bill.

Craddick cautioned the Senate against anything that could turn the sidecar into a tax bill — those can't start anywhere but the House — and said a Senate-started tax bill wouldn't survive. That prompted Dewhurst to script a "parliamentary inquiry" from Sen. Steve Ogden, R-Bryan. Dewhurst answered the planted question by saying Craddick was in on the creation of SB 6 and even requested a half-dozen provisions that ought to be included. 

Outside Pressure

At least one of the big tobacco companies bought full-page newspaper ads blasting the proposed $1 increase in the tax on a pack of cigarettes. The ads urged people to call in, and their calls were then routed to their senator or state representative. The lawmakers said the pressure wasn't working, but the cigarette tax had stalled in the Senate Finance Committee by the end of the week. Democrats who generally support it came off when none of the money was dedicated to health care, and some Republicans were nervous about a big tax increase that is so apparent to end consumer/voters. At least the proposed state business tax won't be paid directly by or seen directly by most voters. Without the tax on smokes, lawmakers would be $700 million short of what they need for tax relief. In property tax terms, $700 million would buy a reduction of about six cents. Put another way, that's about 12 percent of what's needed for the whole tax cut. You can look at a copy of the ad in our Files section: www.texasweekly.com/documents.

The tobacco lobby is all hired up — so much so that even some of the hirelings have remarked on it. Texans for Public Justice did a report on the damage: The companies have paid Texas lobsters between $1.4 million and $2.9 million so far this year (Texas' lobby reporting laws are, um, imprecise). The report's online: www.tpj.org; look under "Lobby Watch."

• Gov. Rick Perry's political operation is apparently of two minds about the progress of the tax package through the Senate. They want people to give the Senate a smack. But it's not clear which sort of smack they want. Suggested Smack Number One was the kind that leaves a bruise. Smack Number two, about an hour later, was a big, wet kiss...

Take a look at excerpts from these emails from the Guv's political office. The first, sent between 5:30 and 6pm last Friday evening (the punctuation and emphasis is from the original):

"It is becoming apparent that the Lt. Governor and the Texas Senate are NOT committed to lowering your property taxes by 33% to the $1 tax rate!! ... We will lose support for the plan in the House if the Senate does not get "Back on the Buck" and lower the rate to $1. "Please call the Lt. Governor and your Senator NOW!!! Your property tax cut depends on it."

The second went out about an hour later:

"Today the Senate took decisive action and passed school finance reform and taxpayer protection legislation. This legislation, almost identical to the bills earlier passed by the House of Representatives, are part of a plan that will provide historic property tax relief to homeowners and businesses and long-term protections to taxpayers. The Lt. Governor and the Senate are to be commended for moving swiftly. The Senate action will result in the largest property tax cut in Texas history, will make homeownership more affordable for millions of Texas families, and will allow employers to spend more resources on jobs and growth.

• The anti-tax wing of the GOP has been in high dudgeon over the governor's plan to increase taxes on business, smokes and used cars while the state is also in possession of an $8.2 billion budget surplus. They've generated a bunch of email and a bit of testimony in the tax committees, but the angry mob some lawmakers feared hasn't materialized.

• Teacher groups that want the stipend raised (or replaced, for support personnel in the schools) are pushing their members to call senators to press their case. No word on whether that's tangled up anyone's switchboard.

• And textbook publishers are crying foul over a Senate provision that would free the state from the "proclamations" that set up the schedules for replacing math books in elementary schools in the 2008-09 school year. The new books line up with the standardized tests the Legislature requires kids to take in school.

Dewhurst Standard Time

A group of senators, irked by the lieutenant governor's chronic tardiness, are circulating a letter asking David Dewhurst to let them know when he's not gonna make it to the start of each legislative session so they can put someone in the chair to get things going until he's present.

Sen. Jeff Wentworth, R-San Antonio, wouldn't give us a copy of the letter and said the senators are not trying to embarrass anyone. He didn't say how many senators have signed, or which ones. But they'd like to get going when they're supposed to get going, and the letter is meant as a gentle prod in that direction.

Other senators have talked about changing the rules in the upper chamber to automatically put the president pro tempore or the Dean of the Senate in the chair when the Lite Guv isn't on hand. That would be more than a gentle prod.

A Little Parliamentary Note

You know that two-thirds rule that requires a supermajority in the Senate to consider a bill out of the "regular order of business"? You can find some loud voices on the Republican side of the plane — Houston radio host and (probable) senator-to-be Dan Patrick is one — who want to get rid of that thing because it empowers minority parties. But there's a loophole in the rule and if the Senate uses it, Patrick and others who don't want any new taxes will be on the losing side. That regular order of business flips in mid-week, so that House bills are at the top of the lineup instead of Senate bills. On the Senate list, there's a "blocker bill" that's in the way of the real business; it takes two-thirds to cut in line ahead of that one. On the House list, there's usually a blocker (especially during regular sessions), but there's not one this year. If they don't have two-thirds but want to take up one of the House's tax bills, all the Senate has to do is wait until Wednesday.

Political Notes

 • The Texas AFL-CIO will hear from all three challengers to Gov. Rick Perry next week, but not from Perry himself. Democrat Chris Bell and independents Kinky Friedman and Carole Keeton Strayhorn will all talk at that group's annual convention in Irving on Monday.

• Friedman and Strayhorn have to turn in the signatures they've collected to get on the ballot by the end of business May 11, but it's still not clear how those signatures will be checked, or how quickly. Strayhorn went to court to force Secretary of State Roger Williams — a Perry appointee and supporter — to sample the names to determine whether she's got enough to get on the ballot. He has said he wants to check each of the signatures on her petitions and Friedman's, and that it'll take up to two months. The federal judge who's got that case, Lee Yeakel, said this week he'll decide quickly.  To refresh your memory: Independents running for governor need 45,540 signatures from registered voters who didn't vote in the primaries or the runoffs and who didn't sign petitions for any other gubernatorial candidates. Strayhorn says the two-month counting delay would make it hard to raise money. If that's so, it would probably be good news for Bell, the Democrat in the race. Perry, as an incumbent, can raise money. Anti-Perry money that's not sure independents are a good investment might jump into the Bell camp.

• U.S. Rep. Chet Edwards, D-Waco, has taken to running an Exxon sign with high gas prices on it in his emails. It emphasizes a shot he took at the Republican in the race: Van Taylor's personal financial disclosures indicate he owns $5 million to $25 million in Exxon stock. Edwards has been pressing him to say how much he's made off of the surge in gasoline prices.

• There's a third "kinky-toon" up on Friedman's website. He isn't the richest candidate, but he can attract endorsements: the Dixie Chicks, Pat Green, Willie Nelson, Bruce Robison, Billy Joe Shaver, and Kelly Willis. It's online: www.kinkyfriedman.com/multimedia/_video/kinkytoon_03/.

Political People and Their Moves

Tanya Vasquez, until now a staffer with Rep. Trey Martinez Fischer, D-San Antonio, is leaving to join Equitas Strategies, a new Democratic consulting firm in Austin started by the Robert Jones who's not a lobbyist.

Matt Phillips is leaving Sen. Steve Ogden's employ after five years with the Bryan Republican; he's the new government relations director for the Brazos River Authority.

The Associated Republicans of Texas has new officers: Hector DeLeon of Austin will be chairman and treasurer; Dr. Walter Wilkerson of Conroe, vice chair; William McMinn of Houston will be finance chairman and Pat Sweeney Robbins of Austin will be the secretary. Related: Norm Newton, who's still on that group's board, is cooking up a new political action committee: The Alliance PAC will back pro-bidness candidates.

Gov. Rick Perry named Conrith Davis, a sales exec with AS Legal in Sugar Land, to the Texas Board of Pardons and Paroles.

The governor named Juan Sanchez Munoz of Lubbock to the Texas Youth Commission. He's an associate professor at Texas Tech University and a special assistant to that school's president.

Perry named James Greer, an exec and engineer with TXU Electric Delivery in Keller, and G. Kemble Bennett, vice chancellor for engineering at the Texas A&M University System, to the Texas Board of Professional Engineers.

Perry reappointed John Snider as chairman of the Finance Commission; he's president of Shelby Savings Bank in Center.

And the State Health Services Council has two new members and two reappointed ones. The newbies are Graciela Cigarroa, a San Antonio attorney, and Jacinto Juarez, a computer science prof and dean emeritus at Laredo Community College. Perry reappointed Dr. Jaime Davidson, who teaches at UT Southwestern Medical School and is president Endocrine and Diabetes Associates in Dallas, and Jim Springfield, president and CEO of Valley Baptist Health System in Harlingen.

Quotes of the Week

Don Stewart, a spokesman for U.S. Sen. John Cornyn, telling The New York Times about the public reaction to Republican proposals to send every taxpayer $100 to offset high gasoline prices: "The conservatives think it is socialist bunk, and the liberals think it is conservative trickery."

Attorney Randall "Buck" Wood, quoted by the Houston Chronicle telling a federal judge he's not worried people have signed petitions for his client, Carole Keeton Strayhorn, and also for Kinky Friedman: "My client is not soliciting signatures in bars and dance halls, and Mr. Friedman is not soliciting signatures among teachers or around schools."

Former Texas Supreme Court Justice Craig Enoch, quoted in the Midland Reporter-Telegram on whether there will be challenges to whatever lawmakers do with school finance in this special session: "I don't think there's any question."

Comptroller Carole Keeton Strayhorn, after Attorney General Greg Abbott said she doesn't have the legal authority to review state agencies: "I was asked by a legislator to investigate the Texas Residential Construction Commission. I did it, and if the Attorney General wants to take me to court, let's go."

Texas Secretary of State Roger Williams, whose office regulates elections and health clubs, among other things, quoted in the Houston Chronicle: "If I can't get you in a hot tub, I want you in the voting booth."

Texas Weekly: Volume 22, Issue 43, 8 May 2006. Ross Ramsey, Editor. Copyright 2006 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 (512) 302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.