New Twist in Budget Agreement Would End System Benefit Fund

Updated, 11:30 p.m.:

State Rep. Sylvester Turner, D-Houston, confirmed that he is on board with a deal to wind down a government program he has long been a proponent of, the System Benefit Fund.

"This agreement honors the proper purpose of the fund and I believe represents a shining example of fiscal transparency and integrity within the state's budgeting process," Turner said via email. "Low-income Texans will receive a significant rebate to their utility bills in the amount of $614 million which will result in an 82 percent discount to their utility bills in 2014 with additional credits provided to their utility bills in 2015 and 2016. The surcharge on people's electricity bills will be discontinued effective 2017, which I also support. If the surcharge is not going to be used for its intended purpose, it needs to be eliminated."

Original story:

A late-session battle between the Texas House and Senate over the tax relief in a budget deal may be resolved with an unexpected twist.

Senate Finance Chairman Tommy Williams, R-The Woodlands, said Friday evening that a deal among budget leaders is in place that would repeal the state’s System Benefit Fund by 2016 but not before spending down its balances to help millions of low-income Texans with their utility bills.

The fund is fed by a fee that most Texans and businesses pay on their electric bills. Under the budget deal, Texans would stop paying the fee beginning in September.

“I never in my wildest dreams believed we could actually end the program,” Williams said. “I couldn’t be happier how this turned out.”

Since the beginning of the session, lawmakers have been focused on the state’s dedicated funds, hundreds of accounts that are each supplied by fees paid by Texans. Instead of using all of the money in each of the funds for its intended purpose, lawmakers have spent more than a decade allowing the funds’ balances to amass to nearly $5 billion, and using that money to make state budgets meet a legal definition of balanced. The System Benefit Fund had the largest balance, at more than $800 million.

Williams had been pushing all session to refund the majority of the System Benefit Funds balances to those who paid the fees. State Rep. Sylvester Turner, D-Houston, the Democrats’ lead budget negotiator in the House, has long championed the fund and was adamant against the balance being used for anything but its intended purpose.

This disagreement threatened to derail the budget in the final week of the session, as Williams argued that the refunds from the fund were a key part of the overall plan for tax relief this session. Though the refunds would have technically been relief from a fee rather than from a tax, Williams had hoped the savings would still be viewed as tax relief to Gov. Rick Perry, who has threatened a special session if $1.8 billion worth of tax relief doesn’t reach his desk.

Negotiations were ongoing between state Rep. Drew Darby, R-San Angelo, and Turner for the House and Williams and Robert Duncan, R-Lubbock, for the Senate. Darby is the lead author of House Bill 7, a bill focused on dedicated accounts that is expected to include the repeal of the System Benefit Fund in its final version.

Earlier in the evening, House Appropriations Chairman Jim Pitts, R-Waxahachie, said a deal on the System Benefit Fund issue was being worked out.

“We’re working on that with Sylvester, and I think we’ve got an agreement on that,” Pitts said.

A request to Turner's office for comment was not immediately returned.

Along with ending the fee in September, Williams said the deal in place would allow a dramatic increase in the spending of the fund’s balances — all of it helping low-income Texans with utility bills — until it’s completely depleted by 2016. At that point, the fund will be abolished, he said.

“It’s a better deal than I was bargaining for,” Williams said.

The deal would mean $300 million over a biennium in fee savings for Texans around the state, Williams said. While that’s less than the $630 million he was hoping to arrange in refunds from the fund, that would have only been a one-time savings.

“It’s $300 [million] every year henceforth and forevermore,” Williams said. “I’ll take that any day, baby.”

As the session enters its final weekend, the other sticking points on passing a budget deal appeared to be working themselves out, Williams said.