Deal needed today to avoid 3rd session

07:34 AM CDT on Monday, July 18, 2005

By ROBERT T. GARRETT and TERRENCE STUTZ / The Dallas Morning News

AUSTIN - With little time left to make a deal, lawmakers struggled Sunday to resolve differences on a scaled-back school finance and tax swap package.

House and Senate rivalries and lingering disagreements over sales and property taxes threatened to bring a special legislative session to an end without any significant legislation being passed.

The session can run until Wednesday, but because of legislative rules and the threat of a filibuster, lawmakers needed to strike a deal Sunday or today to have time to pass legislation.

Sen. Jim Keffer, R-Eastland (left) and Sen. Steve Ogden, R-Bryan, are helping to negotiate the packages.
Plus, any deal would provide property-tax relief far short of the ambitious plans lawmakers have touted all year – and give Texas school districts a small amount of new state money, educators say.

"This airplane's flying on empty right now," said Sen. Steve Ogden, R-Bryan, the Senate's lead negotiator on the legislation that would trade school property tax cuts for higher state sales, cigarette and business taxes.

On Sunday evening, House negotiators offered a sales tax increase of three-quarters of a cent – to 7 percent – to help offset a 17 percent cut in the maximum school property tax rate this fall.

That is down a quarter of a cent from the previous House proposal, but it would leave Texas tied with three other states for the highest state sales tax in the country. The Senate's latest plan calls for a boost to 6.95 percent.

"We feel this is what we can pass in the House," said Rep. Jim Keffer, R-Eastland, the chamber's top negotiator. "We've got a one-vote margin in the House, and if you keep on messing with something, you're going to cause problems."

The House tax negotiators had their offer printed as a bill and said they planned to sign it and send it to the Senate. But Mr. Ogden protested that that amounted to "sending ultimatums back and forth." He confronted Mr. Keffer on the House floor and asked that the two sides present their tax plans in a public meeting this morning.

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"The House needs to explain their proposal and try to do this in a more professional manner," Mr. Ogden said. "I don't think you should be passing tax bills by just having bills fly back and forth by carrier pigeon."

Mr. Keffer said he had hoped to conclude a deal Sunday but "didn't give an ultimatum." He agreed to meet today.

Negotiators for both chambers indicated they would back an increase in the minimum homestead exemption on school property taxes from $15,000 to $22,500, an increase of $7,500. That would take a constitutional amendment approved by two-thirds of each house and voters in a statewide election.

Both would put about $2.4 billion in new money into schools over the next two years – an increase of 3.5 percent. Both are also close to agreeing on a cut in the top property tax rate, from $1.50 per $100 valuation to $1.25 this fall.

Disputes remained on some consumption taxes, such as the Senate's proposed 10 percent increase in state taxes on alcoholic beverages. Also contentious were proposed limits on "Robin Hood" sharing by property-rich districts.

Also complicating the negotiations were long-standing frictions between Lt. Gov. David Dewhurst, the Senate's presiding officer, and House Speaker Tom Craddick, R-Midland. The pair, who have squabbled over legislation in several sessions since both took over their chambers in 2003, have leveled criticism at each other's chambers over their negotiating tactics.

August session feared

While few lawmakers wanted to have the special session, many fear that Gov. Rick Perry will immediately order another if they don't pass the two bills by Wednesday.

"We really don't want to be here during the month of August," said House education committee Chairman Kent Grusendorf, R-Arlington.

Asked if Mr. Perry will call another session if this one fails, Mr. Craddick said: "I have no idea what he'll do."

Mr. Dewhurst was expected to use the threat of a prolonged stay in Austin to try to persuade Democratic senators not to filibuster any compromise. But Sen. Gonzalo Barrientos, D-Austin, warned that he and three colleagues stand ready to try to talk the tax bill to death because, they say, it would benefit only the rich.

Nonpartisan legislative analysts have found that proposals to cut property taxes and raise sales and business taxes generally would reduce the tax burden only for Texans making about $140,000 or more. The rest would generally pay more.

On the school finance bill, the main hang-up was how to limit the amount of property tax revenue that wealthy districts must share with lower wealth districts – the system commonly known as Robin Hood.

Rep. Dan Branch, R-Dallas, one of the House negotiators, noted that the Highland Park school district, which he represents, gives up more than 70 percent of its property tax revenue to other districts.

"This was supposed to be a Band-Aid solution when it was passed 12 years ago," he said. "No one thought it would last this long."

The House proposed capping tax revenue sharing at 35 percent, but Senate leaders have resisted that as unfair to most districts. The bulk of Texas districts benefit from the wealth-sharing.

Franchise tax fight

Rep. Warren Chisum, R-Pampa, one of House tax negotiators, complained that senators were proposing measures that would cut in half the revenue generated by closing loopholes in the state's main business tax, the franchise tax.

Mr. Ogden said the House version needs to be scaled back because it would penalize Texas manufacturers by taxing them on business outside the state.

Both men said the Senate has balked at applying the sales tax to car repairs, which the House wants, while the House rejects the Senate's proposed increase in alcohol taxes.

The school finance and tax legislation would allow local voters to approve as much as a 15-cent increase in property taxes for local school programs over six years. So, some lawmakers fear there won't be much tax relief in the end.

Rep. Dennis Bonnen, R-Angleton, said petrochemical industries in his district fear a net increase. Some are in school districts that are well below the $1.50 cap on school property taxes, so they wouldn't see much in cuts.

"They actually could end up with a tax increase," he said.

Staff writer Christy Hoppe contributed to this report.

E-mail rtgarrett@dallasnews.com and tstutz@dallasnews.com