Saturday, May 07, 2005

Clock's Ticking for School Finance Deal

After 4 months, with only 3 weeks to go, House, Senate aren't even close

10:19 PM CDT on Saturday, May 7, 2005

By TERRENCE STUTZ / The Dallas Morning News

AUSTIN – When lawmakers arrived in the capital in January, Gov. Rick Perry declared an emergency: fixing school finance.

But after four months of working on the details, the House and Senate are not even close to a deal that would overhaul education funding and cut property taxes for millions of homeowners and businesses. The Senate, slowed by fights over business taxes, has yet to pass its versions of the bills so negotiations with the House can begin.

And with just three weeks left, most lawmakers and lobbyists agree that a compromise by the session's end, May 30, would be a surprise.

So much for the emergency.

"If I were a betting man, I would say it's going to be very difficult to get something done before the end of the session," said Sen. Royce West, D-Dallas. "Both houses are still pretty far apart on many of the key issues."

Chief among them: how to tax businesses and consumers; how much, if at all, to raise teachers' pay; and whether to enact a statewide property tax to ease complaints of unequal funding.

As if the battle over the $30 billion system wasn't complicated enough, it could have broad political implications – especially for Mr. Perry, who is trying to fend off challenges in the GOP primary.

If lawmakers can't agree, the future is unclear for the whole state, though, not just the governor. A state judge has threatened to cut off school funding Oct. 1 if the system isn't changed. Many lawmakers may be hoping the state Supreme Court, which will hear an appeal of the funding lawsuit, will bail them out. Others anticipate returning for a special session or two this summer.

"It has usually taken an order from the Supreme Court before the Legislature would act definitively," said John Fainter, a former secretary of state and chief of staff to former Gov. Ann Richards.

Mr. Fainter, who had to deal with the school finance crisis that led to the current Robin Hood funding law in 1993, said lawmakers' task is daunting. The legislators seem to know it.

"It's going to take a lot of work and a lot of luck to get everything done," said Sen. Kim Brimer, R-Fort Worth. "It can be done, but there are a lot chances for things to fall apart in the final days of the session."

What's the holdup?

If school finance is the session's biggest priority, and all the major legislative leaders are Republicans eager to cut property taxes, why can't they agree?

Competing outside pressures are one reason – not only from school districts and teachers, but also suddenly from leading business groups who are concerned about the tax changes outlined.

The House plan would increase funding for schools by about $1.5 billion a year, and the Senate proposal would add $1.4 billion. Virtually all of the state's school districts say that's not nearly enough.

And those numbers – representing a boost of about 5 percent – are far less than the $4 billion suggested by state District Judge John Dietz when he ruled the system was unconstitutional.

Teachers and mainstream education groups also are fighting reform proposals in the bills, such as a proposed incentive-pay program for teachers that would be based mostly on student test scores.

"Bringing this inadequate education plan to the Senate is like a student coming to class and saying, 'The dog ate my homework,' " said Donna New Haschke, president of the Texas State Teachers Association. "That excuse doesn't work in the classroom, and it should not work in the Texas Legislature."

Mr. Fainter said he has never seen school districts and education groups so united against such important legislation.

"Rich and poor districts. Urban and rural districts. The teachers. They're sticking together in a way that hasn't happened before," he said.

Following in the footsteps of education groups, leading business organizations are digging in against the plans to offset property-tax reductions with an oft-revised business franchise tax and increases in the state sales, auto sales and cigarette taxes. (The Senate also would raise taxes on alcoholic beverages.)

At a hearing before Senate tax writers last week, business groups ripped the plan, insisting it would increase their overall tax burden and jeopardize the financial health of many companies.

That prompted an angry response from Lt. Gov. David Dewhurst – himself a businessman – who said business lobbyists were more interested in preserving tax loopholes than ensuring adequate funding for schoolchildren.

"The next three weeks will be full of lobbying activity by every interested group we know in the state, but we've got an obligation to do what is right for the state of Texas," Mr. Dewhurst said.

Senate leaders, nonetheless, tweaked the plan before it emerged from the committee.

Much to iron out

The organized opposition merely adds pressure to the long list of differences in the House and Senate plans.

The House tax plan, for example, includes a one-cent increase in the sales tax to 7.25 percent, a half-cent more than the Senate wants. Senate Democrats have vowed to block the House sales tax increase, arguing that it represents a huge tax shift to lower-income Texans.

Senators are pushing a new statewide property tax for schools to replace the current local levy. Senate leaders contend that it will end years of litigation by eliminating property-wealth disparities among districts and providing the same amount of money for all students. It would also end Robin Hood sharing of property taxes from higher-wealth districts.

"This would finally get us out of the courthouse," predicted Senate Finance Committee Chairman Steve Ogden, R-Bryan.

But the shift would require a constitutional amendment – and that sets a major hurdle of a two-thirds vote of each chamber, as well as voter approval in a statewide election.

House Speaker Tom Craddick, R-Midland, says he personally favors the amendment, but he has repeatedly voiced doubts about whether he can get the necessary 100 votes in the House. Most school districts are fighting the idea, complaining that it would rob them of local control.

There are also major differences in the two chambers' business-tax plans. The House would gives businesses a choice of taxes, while the Senate is backing a uniform tax for all businesses.

Political ramifications

A surprise agreement would greatly benefit Mr. Perry, who called a special session on education a year ago only to watch it fail. Sen. Kay Bailey Hutchison and Comptroller Carole Keeton Strayhorn both seem eager to take on the governor in a GOP primary, and both could seize on the lack of a school-finance solution as a sign of failed leadership from Mr. Perry.

Despite that, the governor has done little publicly to prod lawmakers and help them work out their differences, other than to play down the possibility of another special session.

"I have the sense that things are moving along fine," Mr. Perry said last week. "There's plenty of time. I see absolutely no reason why we should be here on the 1st of June – or the 31st of May."

Some lawmakers are optimistic that the political landscape may yet yield a solution because the officeholders won't want such a major distraction from preparations for next spring's primary elections.

"We've got major elections on the horizon, and folks who want to get out and run," said Sen. Eliot Shapleigh, D-El Paso. "I'm not sure they want to spend the summer in Austin."

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