School
plan revised; proposed state property tax dropped
07:13
AM CDT on Thursday, April 29, 2004
By
TERRENCE STUTZ / The
The revisions came less than
24 hours after the funding plan was presented to a House committee and followed
a series of meetings among House members that began Tuesday night and continued
through Wednesday.
"Everybody went nuts
when they saw it," one lawmaker, speaking on condition of anonymity,
said of reaction to the plan. The lawmaker said opposition came from several
business and professional groups and a large number of House members.
A new plan circulated in the
House on Wednesday retained a proposed payroll tax and increases in the sales
and motor vehicle taxes – all at higher rates than earlier versions – as well
as an increase in the state cigarette tax and new revenue from legalization
of video gambling machines.
But gone for the time
being is expansion of the state sales tax to numerous services that are now
exempt, including haircuts and legal, accounting and real estate services.
Auto repairs, carwashes and
amusement tickets, however, remain on the list of items that would be newly
subject to sales taxes under the plan.
Also scrapped was a proposed
state property tax of $1 per $100 valuation that would have eliminated "Robin
Hood" sharing of property taxes by high-wealth school districts immediately.
The new plan retains a local
school property tax rate capped at $1.05, with districts allowed to go up
10 cents over the next five years. Because of property-wealth disparities,
at least 20 high-wealth districts would still have to share their tax revenues
with lower-wealth districts under the plan.
In addition, the maximum property
tax rate would be cut 45 cents instead of 50 cents as originally proposed.
That would bring the typical homeowner a reduction of about 30 percent in
school property taxes.
House Speaker Tom Craddick,
R-Midland, said the House Select Committee on Public School Finance would
begin voting on the school finance bill and a companion constitutional amendment
today. The special session on education began April 20.
"I believe the bill provides
significant property tax relief to
'Ultimate Robin Hood'
Rep. Kenny Marchant, R-Coppell, was among the House members who objected
to the state property tax and the expansion of the state sales tax to numerous
services.
"With the other new business
[payroll] tax in the proposal, I felt it was a double whammy for businesses,"
Mr. Marchant said. "It would be too much of
a tax burden."
Rep. Dan Branch, R-Dallas, said a state property tax would
be the "ultimate Robin Hood" system because all residential and
business property taxes for schools would go to the state.
Mr. Branch, whose legislative district includes
Negotiations were continuing
Wednesday evening as committee members sought support from Democrats and Republicans
on the 29-member panel.
Actual new money for schools
would be only about $1.35 billion a year under the proposal. Most of that
is expected to be used to create new financial incentives for schools – including
bonuses for the best teachers in
Highlights of the revised
plan include:
• A half-percent increase
in the state sales tax, raising it from 6.25 percent to 6.75 percent; and a 1.5
percent increase in the motor vehicle sales tax that would boost the rate from
6.25 percent to 7.75 percent.
• A new state payroll tax
would replace the current business franchise tax. All for-profit employers
would be charged 1.25 percent of annual wages or $500 per employee – whichever
is less.
• A $1 increase in the
state cigarette tax, to $1.41 per pack, and a slight increase in the state tax
on smokeless tobacco. The cigarette tax increase would raise about $700 million
a year.
• Legalization of video
gambling machines at seven dog and horse tracks in the state and on three
American Indian reservations. The maximum 40,000 slot machines that would be
authorized could generate revenues of $1.5 billion a year.
Other increases
Other tax and fee increases
include a $1 surcharge on all amusement tickets and expansion of the state
sales tax to Internet access services and on newspapers and magazines.
The new payroll tax on business
would generate about $3.4 billion a year, but the net gain to the state would
be only $1.5 billion after the business franchise tax is abolished. The franchise
tax, which is paid only by about one is six businesses because of loopholes
and exemptions, generates nearly $1.9 billion a year.
A constitutional amendment,
which requires a two-thirds vote of the House and Senate, would be required
for legalization of video gambling machines.
Under a separate funding distribution
plan unveiled last week by House leaders, all school districts would be guaranteed
a minimum funding increase of 2 percent – regardless of their property wealth
– in the 2005-06 school year.
Lawmakers are under pressure
to reform the school finance system, which is under a court challenge from
scores of school districts that contend the system is underfunded
by the state. In addition, hundreds of districts are at or near the $1.50
property tax limit for operating expenses, forcing them to cut programs and
other expenses in recent years.
E-mail tstutz@dallasnews.com