After Texas Senate committee approves school finance bill, House panel advances sales tax increase to fund property tax relief

The Senate Education Committee held a hastily arranged hearing Wednesday morning to vote out comprehensive school finance reform legislation — accelerating the bill's journey to the Senate floor and eventual negotiations with the lower chamber.

The fast-tracked revision and vote on House Bill 3 came the day after House lawmakers voted through a property tax reform bill, making it contingent on school finance reform passing this session. State Sen. Larry Taylor, the Senate Education Committee's chair, had originally told The Texas Tribune on Tuesday he did not anticipate a committee vote on school finance until Thursday or next week.

The full Senate is now expected to vote Friday on the legislation, which aims to increase the base funding for each Texas student, increase teacher pay, provide money for full-day pre-K for low-income students, and allow for long-term property tax relief. And a committee in the lower chamber advanced a bill later Wednesday that could provide an ongoing revenue source for property tax relief — an increase in the sales tax that is expected to raise $5 billion to lower school district tax rates.

Many details of the Senate's version of the school finance legislation still need to be ironed out, however, and Senate Education Committee members voted Wednesday without an official analysis of how their districts would fare financially. Still, the vote seemed to address concerns that the Senate was moving too slowly on school finance.

"I know you'd rather not have to vote on this today. I certainly appreciate your help in moving this forward," Taylor told the committee in the Senate chamber Wednesday. "This is a process. Frankly, what we pass off the floor on Friday is not the end of the day."

Many committee members expressed disappointment at having to take a vote without being prepared. Their offices received the newest version of the bill just after 8 p.m. Tuesday.

With arms folded across his chest, State Sen. Paul Bettencourt, R-Houston, declined to vote for the bill, pointing out that there was no agreed-upon way to fund it long-term and that it still had "clear errors." He marked himself as "present, not voting," along with state Sens. Angela Paxton, R-McKinney, and Bob Hall, R-Edgewood.

The vote brings the upper chamber one step closer to catching up with the lower chamber by passing three top legislative priorities: the budget, school finance, and tax reform bills.

In a tweet Wednesday morning, Lt. Gov. Dan Patrick, the Senate's president, congratulated the House for passing property tax reform legislation, Senate Bill 2, and said it would go to a conference committee between the two chambers "ASAP." And he noted that HB 3's trajectory had been "expedited" so it could get to the Senate floor. ("Also ASAP.")

But some committee members expressed frustration that it was hard to get some constituents on board without reports detailing how each district would be affected.

"It's really difficult for them to feel confident about what this looks like for them," said Paxton, who declined to take a vote on the bill.

Senate Education Committee members voted out a version of the school finance legislation that differs in many ways from the version the House voted out in early April. It includes a $5,000 across-the-board raise for full-time classroom teachers and librarians, funding for districts that want to pay higher-rated teachers more, money for districts with better student academic outcomes, and a few different long-term property tax relief proposals.

The House's version of the bill requires districts to use a portion of their additional base funding per student on raises for all school employees and designates extra money for raises to be given at districts' discretion. It lowers school tax rates by 4 cents per $100 valuation — $100 off a tax bill for the owner of a $250,000 home — and lowers rates further for districts taxing higher. But it doesn't include a proposal for long-term, ongoing tax relief.

House members made it clear Tuesday they were happy with the property tax bill being yoked to school finance. An attempt to pry them apart during the hours-long floor debate failed by a large margin, with only five lawmakers on record supporting it.

In the meantime, another time crunch looms. Taylor has indicated the Senate’s long-term school property tax relief proposals will only be viable if lawmakers also find a sufficient revenue source to make up for lost local tax revenue. Currently, there's a blank space where the revenue source should be in the bill.

State leaders, including Patrick, Gov. Greg Abbott and House Speaker Dennis Bonnen, have backed a proposal to increase the sales tax one percentage point and use that revenue for tax relief. The House Ways and Means Committee on Wednesday night voted out legislation — House Joint Resolution 3 and House Bill 4621 — that would give Texans the chance to approve a sales tax swap. The proposal has an unsure future in both chambers, especially since the resolution would require a two-thirds vote.

In an attempt to get more Democrats on board, state Rep. Dan Huberty, R-Houston, filed a version that would use 80% of the money from a sales tax increase for property tax relief and 20% to increase funding for schools. But Ways and Means lawmakers voted out a version that would instead use all the money for property tax relief — more likely to get hardline conservatives on board and less likely to get Democrats. State Reps. Trey Martinez Fischer and Eddie Rodriguez, both Democrats, voted against the legislation Wednesday evening.

Martinez Fischer said that he opposes the idea of raising the sales tax, which is a regressive tax, meaning it takes a larger percentage of income from poorer people than richer people. The San Antonio Democrat suggested lawmakers look at removing existing tax exemptions instead.

"There’s a lot of skepticism about a tax swap particularly when there’s been this environment about placing a revenue cap on schools," he said.

The House has limited time to take a vote on those items. House bills and joint resolutions must get on the lower chamber’s calendar by the end of next Tuesday and must be voted out by the end of next Thursday.