79th LEGISLATURE
Tax and school proposals carry significant pressure.
By Jason Embry
AMERICAN-STATESMAN STAFF
Monday, March 07, 2005
Republicans this week will confront two of the largest obstacles — and one of the biggest tests of their ability to govern — to land in front of them since they took control of the Texas House in 2003.
Two major interconnected bills on schools and taxes are scheduled to hit the House floor as soon as Tuesday. The first would redefine how Texas pays for public education and impose new requirements on school districts, including merit pay for teachers and electronic testing.
The second would shift the state tax burden by creating a new levy on payrolls and boosting the state sales tax andother taxes to reduce school property taxes for homes and businesses by a third.
Republicans made tough choices in 2003 when they cut services across the state to close a $10 billion budget shortfall. But shrinking state government, difficult as it was, pleased grass-roots conservatives and fulfilled a promise that many GOP lawmakers made as candidates.
Now lawmakers must decide whether to place a new tax on businesses while facing considerable criticism from education officials who say the House school plan shortchanges students and teachers.
"We may not ask for this issue, but we are now the leadership," said Rep. Frank Corte, R-San Antonio, who said late last week that he was still deciding how to vote on the school and tax plans. "We have to step up."
At least one other influential GOP lawmaker is speaking out against the tax plan.
"If we do this, all we will do is kill jobs in the service economy," said Rep. Terry Keel, R-Austin.
The first measure, House Bill 2, aims to boost education spending by more than $3 billion over two years. Conservative groups have praised the bill, saying it provides tougher penalties for failing schools and makes it easier for taxpayers to see how schools spend their money. The bill also would exempt high-performing schools from state regulation such as limits on class sizes in elementary schools.
Groups representing teachers and school administrators dislike the bill, saying that it does not provide the money that schools need to make up for previous budget cuts and that much of the money it does provide will have to go to mandated expenses. Their opposition is somewhat expected, but the bill has also drawn criticism from board members and parents from property-rich and property-poor districts alike.
"I was amazed when I was serving in the Legislature how many education groups there are," said Sherri Greenberg, a former Democratic House member from Austin who teaches at the University of Texas' Lyndon B. Johnson School of Public Affairs. "When they come together in agreement on something, people tend to pay attention, because so often they're not in agreement."
Still, Greenberg said, House members ultimately have to answer to the residents of their districts, and up until the vote they'll be hearing from superintendents and school board members back home.
"You have to look at the school districts in your own legislative district and what the changes mean financially for the school district," she said.
Democratic leaders made the vote even more difficult for Republicans last week by proposing their own plan for school funding that they said includes $2 billion more over two years than the Republican plan does. They called for a cut in property tax rates that was half the size of the Republicans' but also said they wanted to triple the $15,000 exemption on the taxable value of a home. Businesses would see a smaller cut in property taxes.
A large homestead exemption often allows owners of less expensive homes to see a sharper decrease in their tax bills than a straight rate cut. That allows Democrats to say that they could boost school spending by $2 billion while giving the owner of an average home in most parts of the state a larger property tax cut under their plan.
"We hope to offer this as a complete alternative so members can choose which is better for their district," said Rep. Jim Dunnam, D-Waco, chairman of the House Democratic Caucus.
The Democratic plan, likely to be offered as an amendment on the House floor, would open the door for future challengers to say that some GOP incumbents voted against a larger tax break for homeowners. But Cal Jillson, a political science professor at Southern Methodist University, said he expects the House to approve the GOP-backed proposal.
"I expect them to pass a bill that will put it in the court of the Senate, and they will take a more expansive view," Jillson said. "The Senate will pass a bill that will go back to the House, and that's when the pressure will come to adopt the Senate version, which will provide more funding."
Whether the House school plan will make it into law will depend on the fate of House Bill 3, which focuses on replacing $5.4 billion a year in school property taxes with a series of other taxes. The two most controversial elements of the tax bill are an increase in the state sales tax from 6.25 percent to 7.2 percent and a new 1.1 percent tax on each employee's salary up to $80,000.
Opponents of the tax plan hope other Republicans besides Keel will speak out against the bill.
Will Newton, director of the Texas chapter of the National Federation of Independent Business, said he is encouraging the group's 34,000 members to contact lawmakers and voice opposition to the payroll tax. Peggy Venable of Americans For Prosperity, a 20,000-member group that pushes for smaller government, said her members are pushing lawmakers to add language to the bill that would make it significantly more difficult for cities and counties to raise property taxes without a public vote.
Supporters of the bill also are mobilizing. A group of industry leaders who support House Bill 3 is circulating a letter to House Speaker Tom Craddick touting the property tax cuts and the broad application of the new business tax. Craddick is pushing the bill and could use the letter to calm concerns that businesses do not support the new tax.
"It is a good deal for a lot of Texas businesses," said Ron Dipprey, president of the Texas Chemical Council.
Rep. Warren Chisum, R-Pampa, said he thinks both bills will pass this week. The school bill provides all the money that lawmakers can afford, he said, and the rate of the payroll tax is low enough that it will not hurt business.
"Republicans for the first time ever had to step up and propose a tax bill, not just oppose one," he said. "If the Senate brings a better deal, we stand here open-minded."
House Bill 2
Pros:
•Provides more than $1.5 billion per year for schools.
•Tightens financial and academic accountability.
Cons:
•Does not allocate money to account for inflation or to restore past budget cuts.
•Does not contain an across-the-board teacher pay raise.
House Bill 3
Pros:
•Payroll tax would apply to all businesses.
•School property taxes would drop by one-third.
Cons:
•Levies a tax on jobs.
•Makes state sales tax rate highest in the nation.
http://www.statesman.com/news/content/shared/tx/legislature/stories/03/7session.html
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