Wednesday, March 23, 2005

School Tax Bill Doesn't Add Up, Strayhorn Says

Strayhorn is being accused of playing politics. She is enormously competent. My guess is that she/her office was largely left out of the discussions on HB3 and to legislators' detriment. -Angela

Comptroller's Office Signed Off on Proposal, House Leaders Claim.
By Jason Embry, Stephen Scheibal
Wednesday, March 23, 2005

Statewide school finance reform was thrown into further disarray Tuesday when Comptroller Carole Keeton Strayhorn assailed the tax overhaul passed last week by the House.

She said it would raise taxes on Texans in the short term and then fail to generate enough money for the state in the long term.

"My heart goes out to them. They just passed the largest tax bill in history, and it does not balance," Strayhorn said.

But House leaders insisted that the numbers add up and said Strayhorn's staff signed off on the bill before the House approved it.

"It's just another frustrating day working with your comptroller," said Rep. Jim Keffer, R-Eastland, chairman of the House Ways and Means Committee and House Bill 3's chief architect.

"We can only conclude that the comptroller's office is either inept, purposely misleading the media and the public, or just playing politics — or maybe all three," Keffer said.

The bill, a key component of a plan to change the way Texas pays for public schools, would raise a series of taxes and would create a business tax to offset a proposed one-third reduction in property taxes for school maintenance and operations. House leaders have said the bill is revenue neutral, shorthand for a measure that creates as much money as it costs, and doesn't raise overall taxes.

Even when officials worked on the premise that the bill is revenue neutral, it faced a very uncertain future in the Senate, where lawmakers have long been working on their own tax plan. Speaker Tom Craddick, R-Midland, showed no plans to pull the bill back, meaning that its differences with a Senate plan will be worked out in a conference committee before returning for votes from both bodies.

"We still feel the numbers are correct. We delayed the vote twice to make sure everything was right," Craddick said. "We don't see where anything has changed."

Strayhorn, a possible GOP gubernatorial candidate in 2006, has a history of tangling with lawmakers but has been relatively quiet during the first half of this session. Until Tuesday.

She said the bill would bring in $6.8 billion in new taxes in the next two years while reducing property taxes by only $5.8 billion, netting an extra $1 billion in tax revenue statewide. The bill would create a surplus, she said, because the property tax cuts would not take effect until the 2007 budget year, the second half of the two-year cycle.

After that, she said, the scales would tip the other way: In the next two years, the cuts in property taxes would exceed the state tax increases by $4.3 billion.

"The imbalance continues to grow each year thereafter," Strayhorn said in a letter to Keffer and Craddick.

Strayhorn said the problem lies in proposed changes to the business tax. The bill would allow businesses to pay either the current franchise tax or a new payroll tax. It originally called for all businesses to pay a payroll tax, but House leaders changed it during the floor debate to give companies the option and appease concerns about a payroll tax punishing labor-intensive businesses such as restaurants.

"The bill does not provide for a minimum tax," Strayhorn said in her letter. "Taxpayers will simply plan around the tax as easily as they do the current franchise tax."

Most businesses in Texas legally avoid paying the franchise tax, many by organizing as partnerships, which are not subject to it. Strayhorn said one way companies could reduce tax payments under the House plan is to replace existing staff with leased staff.

At a Capitol news conference with Craddick, Keffer and other House members launched into an accusatory recounting of the bill's history, saying Strayhorn's staff repeatedly assured lawmakers that the bill was revenue neutral. House leaders accused Strayhorn of contradicting the very advice that, they said, led them to bring the tax bill forward.

Rep. Mike Villarreal, a San Antonio Democrat and the Ways and Means vice chairman, was no softer on Strayhorn.

"Our hands are tied, our work becomes completely impossible, when the calculator that we rely on changes its mind from one day to the next, from one week to the next, and does not accurately report what the numbers are adding up to," he said.

Craddick and Strayhorn offered differing accounts of her staff's involvement. On the day it was passed, when House leaders met for most of the day and considered dozens of amendments to it, Strayhorn aides had no time to analyze the full bill, said Deputy Comptroller Billy Hamilton.

"It was not something we could raise the alarm on," Hamilton said. "Our estimators were deluged with the amendments."

Rep. Pete Gallego, D-Alpine, dismissed the criticisms of Strayhorn, saying the comptroller followed the proper channels in making her concerns known, and he called it disappointing that House leaders lashed out at her.

Enactment of a bill that raises taxes overall or leaves schools starving for revenue probably would help Strayhorn if she challenges Gov. Rick Perry in next year's Republican pri- mary. But Cal Jillson, a political science professor at Southern Methodist University, said Strayhorn will be judged most on the accuracy of her analysis.

"There's certainly going to be politics in the executive summary, the headline on the analysis," Jillson said. "But if the headline isn't right and the numbers aren't sound, she will pay a terrible price for that, because that's her job."

1 comment:

  1. I know that I am not as informed as I need to be about the tangible, fiscal side to the school finance debate, but I don't remember hearing a definitive "this is how much the plan will cost/this is how much revenue it will generate" analysis before. Even in the critiques that accuse Strayhorn of playing politics, there aren't figures that show why her numbers are wrong and misleading. Instead of accusing Strayhorn of playing politics, why don't opponents use data and show that she is incorrect? Unless of course it is easier to accuse her of playing politics than it is to disprove her claims.