Tuesday, July 19, 2005

Senate leaves Capitol without tax bill

Tuesday, July 19, 2005

Upper chamber won't budge on sales tax; it doesn't appear a deal can be made by session's end.


Lt. Gov. David Dewhurst and state senators abruptly left the Capitol on Monday night without a deal on overhauling the state's school finance system, fueling speculation that Gov. Rick Perry will call another special session if a deal is not reached before midnight Wednesday.

The senators' decision came about an hour after Perry and House Speaker Tom Craddick had reportedly signed off on a plan that would raise the state sales tax to 7 percent, up from 6.25 percent. Senators have repeatedly rejected such a steep increase, saying it would hurt low-income Texans.

Dewhurst was asked Monday night if the Senate would approve such a plan.

"No," he said as he was leaving the Capitol.

"We're leaving tonight. We're going to send them a good bill in the morning, a bill that doesn't raise the sales tax higher than it should be and does not unfairly shift taxes from businesses to consumers."

The special session ends Wednesday night, but internal legislative rules — and a threatened filibuster in the Senate over the sales tax increase — make it difficult for lawmakers to agree to and approve any final plan today or Wednesday.

The 10 p.m. blowup overshadowed a deal that Dewhurst, Perry and Craddick had reached earlier in the night on the other half of school finance reform: education spending.

That plan called for boosting spending on public schools by more than $2 billion over two years, granting across-the-board teacher pay raises and capping the amount of money that property-wealthy districts send to poorer districts.

"The governor is very hopeful that we are in the final stretch of getting passage of a historic piece of legislation," Perry spokeswoman Kathy Walt said.

Perry, Dewhurst and Craddick reached the education spending deal after meeting for three hours Monday to hash out differences over school finance reform.

Sources close to the negotiations said Perry and Craddick had also agreed on the tax swap plan in the meeting and that Dewhurst agreed to review it with senators.

"The ball is in the Senate's court," said a source, who did not want to be identified for fear of disrupting the negotiations.

But senators' responses were swift and severe.

"They've got people trying to box the Senate in, and the Senate is not going to be boxed," said Sen. Ken Armbrister, D-Victoria and a key negotiator. "No one ever got hurt in an election year by killing a tax bill."

Perry has said he will call another 30-day session if this one ends without agreement on school finance.

The state's current system, which sends money from property-wealthy districts to poorer districts, has been ruled unconstitutional by a state judge and is being reviewed by the Texas Supreme Court.

Lawmakers were unsuccessful during the regular legislative session in crafting a new plan, prompting Perry to call them back to Austin for another try last month.

"The governor has said if they don't finish their work, we're coming back," Perry spokesman Robert Black said earlier Monday. "This is the number one issue the Legislature faces, and they must deal with it."

Asked when Perry would call them back, Black said, "One step at a time, but Thursday looks like a good day."

Sources said the compromise version of House Bill 2, the education spending plan, would:

•Push back the first day of school until after Labor Day, beginning with the 2006-07 school year.

•Include money for across-the-board pay raises of $1,500 per teacher this year. It would also give districts enough money to grant teachers additional raises averaging $500 this year and again next year, though the districts would decide for themselves exactly how to distribute that money.

•Cap the amount of money that property-wealthy districts, such as Eanes in Central Texas, sends to the state to be used by other districts as part of the share-the-wealth school finance system. No details were immediately available on what the cap would be or how much extra money Eanes could keep.

A few districts send as much as 70 percent of their local money through "recapture," and a cap would allow those districts to hold onto significantly more money than the rest of the state.

One of the districts that would benefit from the cap is Eanes. Rep. Todd Baxter, an Austin Republican whose district includes Eanes, has pushed for a recapture cap in negotiations with the Senate and said he would not vote for a proposal that does not include one.

"What we need to focus on is creating a system that ties reducing recapture to increasing equity," he said.

The tentative deal on taxes that the Senate plans to reject calls for raising the statewide property tax to 7 percent, and expanding it to car repairs, bottled water, computer repairs and Internet access. It would also raise cigarette taxes by $1 a pack but would not raise alcohol taxes as the Senate had wanted.

The state cap on property tax rates for school maintenance an operations would fall from $1.50 to $1.24 this year and $1.20 next year. In addition, the amount of a residential home's value exempt from property taxes would jump from $15,000 to $22,500. Senators had pushed for the increased exemptions to make sure the owners of less expensive homes would benefit from property tax cuts.

Senate Democrats have repeatedly threatened to filibuster a final tax bill, citing studies by the nonpartisan Legislative Budget Board that say similar proposals cut taxes for households that earn more than $100,000 a year but raise taxes overall for the rest of the state. But the filibuster could be rendered ineffective if negotiators reach a tax deal and if Perry calls a fresh 30-day session.

When Perry called the current session in June, he also vetoed the state's education budget for the next two years in a challenge to lawmakers to come up with a new funding system.

But it is widely expected that if lawmakers do not enact a new system, the budget board will vote to restore the funding that Perry axed, ensuring that school starts on time.

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