July 19, 2005, 12:43PM
But Perry may still have to call a second special session on the bill
By CLAY ROBISON and JANET ELLIOTT
Copyright 2005 Houston Chronicle Austin Bureau
AUSTIN - Gov. Rick Perry and the top House and Senate leaders met for three hours late Monday to try to salvage agreements on school property tax relief and education funding during the closing hours of the special session.
The governor's office announced that an "agreement in principle" had been reached between Speaker Tom Craddick and Lt. Gov. David Dewhurst on an education bill.
But with lawmakers facing an adjournment deadline on Wednesday, expectations nevertheless increased that Perry may call a second special session, beginning as early as Thursday, to achieve his goal of school property tax relief.
Sources close to the private negotiations said the education compromise included teacher pay raises of $1,500 this year and another $2,000 in 2006-07 and a phased-in limit on the amount of local tax money the wealthiest school districts have to share with poor schools.
The latter provision had been a major sticking point in House-Senate negotiations.
The same sources also reported that Perry and Craddick had agreed to a tax package that would include an increase of three-quarters of a cent per dollar in the sales tax and cuts in local school taxes totaling 35 cents per $100 valuation, phased in over the next two years, with an increase in the homestead exemption.
Dewhurst was reportedly taking the package back to Senate conferees for consideration.
But the tax trade-off bill was threatened by the likelihood of a Senate filibuster and heavy lobbying efforts against it by some businesses.
Spokeswoman Kathy Walt said Perry would call another special session, beginning on Thursday, if the tax trade-off is killed by a filibuster.
She said he may also call another session if his goal of property tax cuts fails for any other reason.
"If we don't have an agreement, the governor has told us to expect to be here (for another session)," said Sen. Leticia Van de Putte, D-San Antonio, a negotiator on the education bill.
The only way Perry might not call a special session is if the entire House votes down a tax trade-off bill, two Senate tax negotiators — Sens. Steve Ogden, R-Bryan, and Ken Armbrister, D-Victoria — agreed.
Craddick issued a written statement, saying he was "hopeful" that the House could pass both the education and tax compromises, if Senate negotiators agreed.
But there was widespread speculation that there weren't enough votes in the Republican-dominated House to pass a tax agreement that would give Texas one of the highest sales tax rates in the country — 9 cents per dollar, including local sales taxes in cities such as Houston.
Higher sales tax?
The tax compromise endorsed by Perry and Craddick also would close loopholes in the corporate franchise tax, raise the cigarette tax by $1 per pack and add bottled water, auto repair services, computer repairs and Internet access to the sales tax, according to the informed sources.
Some lobbyists and legislators said they had unconfirmed reports that a strong majority — more than 80 members of the 149 — would vote against the tax bill.
Rep. Jim Keffer, R-Eastland, the chief House tax conferee, said he had "no earthly idea" how many House members would vote for the bill, if given the opportunity.
The House passed a similar bill by only one vote last month, and many Republicans may be reluctant to vote for it again, for fear of drawing opponents in next year's GOP primary if it becomes law.
"They (Republicans) built their party into the dominant party in Texas based on campaigns against taxes," Armbrister noted.
Additionally, lobbying pressure from parts of the business community has stepped up in recent days.
Opposition to bill
Tobacco giant Philip Morris has been running a radio ad campaign against the tax package, which includes a $1 per pack increase in the cigarette tax.
And a number of refineries and oil and gas companies were lobbying against the tax package because — by merely closing loopholes in the franchise tax — it continued to single out corporations rather than broadening the business tax base to most partnerships as well.
One business lobbyist, who didn't want to be identified, even speculated that Craddick could instruct the House conferees to strike a deal on the tax bill and then allow the full House to kill it.
The tax trade-off is similar to a plan initially proposed by Perry. During a special session last year, the House, angry at Perry's threatened veto of a business payroll tax, similarly killed an earlier proposal of the governor.
Sen. Eliot Shapleigh, D-El Paso, said he will filibuster against any tax agreement that includes more than a half-cent per dollar increase in the sales tax, which would have a heavier impact on the poor than on wealthier Texans.
"I think people need to stand up now, now's the time to do it and say, 'Just say no to this proposal,' " Shapleigh said.
"House Bill 3 is a tax increase on nine in 10 Texans, just so one in 10 Texans can have a tax cut," he added.
A proposed constitutional amendment increasing the homestead exemption from $15,000 to $22,500 was passed by the Senate Monday. If the measure is passed by the House, it would go to voters in November.
The homestead exemption increase would be in addition to a cut in the maximum school property tax rate. The amount of that reduction is a key issue.
Armbrister said any bill that isn't ready for floor debate by noon today could be killed by a filibuster, which allows a senator to hold the floor against a bill for as long as he or she can stand and talk. The longest filibuster on record in the Texas Senate is 43 hours on a workers compensation bill in 1977.