Business tax plan OK'd by House
Perry's overhaul narrowly approved as part of effort to fix school funding
10:33 AM CDT on Tuesday, April 25, 2006
By TERRENCE STUTZ / The Dallas Morning News
AUSTIN - House members overwhelmingly approved a "get outta Dodge" bill Monday that would temporarily patch the state's unconstitutional school funding system. But the centerpiece of Gov. Rick Perry's more ambitious tax-swap plan - a broad new business tax - faced an uncertain fate.
The quick-fix measure, passed by a vote of 139-5, calls for an 11 percent reduction in local school property tax rates this year - about 17 cents per $100 valuation for districts that are taxing at the current maximum rate, $1.50.
The reduction will be paid for out of the state's current budget surplus. And, in a major change, House members voted to remove a provision that would have given wealthy school districts a break on "Robin Hood" sharing of their property taxes.
The "get outta Dodge" bill - so dubbed by Mr. Perry and others - is intended to meet a June 1 deadline set by the Texas Supreme Court to remedy unconstitutional provisions in the current education funding law.
In its decision last fall, the high court objected to the lack of discretion that school districts have in setting property tax rates.
The debate, coming a week into the 30-day special session on taxes and school finance, marked the first crucial phase of the effort to fix the system. It gauged support for how extensive a tax overhaul the House will accept and opened the door to plans being developed in the Senate, where leaders want a broader bill to raise teacher salaries and enact other education initiatives.
Good for now
Rep. Warren Chisum, sponsor of the bill, said his goal is for the state to comply with the minimum requirements of the Supreme Court order and ensure that schools will open on schedule in August.
Backers of the temporary fix have said if lawmakers cannot agree on a more ambitious school finance plan - such as Mr. Perry's - Mr. Chisum's bill will take care of the problem until legislators can devise a more permanent solution.
"This will reduce property taxes and make sure our schools stay open," said Mr. Chisum, a Pampa Republican, noting that "no school district will lose any money" through the property tax cut because the state will replace the revenue using a portion of the $8.2 billion budget surplus this year.
"This is something where we can say we had a successful session," he said.
Mr. Perry has been critical of those who only want to use the state surplus to lower property taxes and do nothing else. Also favoring more comprehensive legislation are leaders of the Senate and House, Lt. Gov. David Dewhurst and House Speaker Tom Craddick.
But their ambitions were up in the air in the House. Sponsors of the business tax - which would require most medium and large companies to pay a levy on their gross receipts after deducting either the cost of goods or employee compensation - were unsure whether they had secured enough votes to pass the measure as debate began.
The tax is the biggest element of Mr. Perry's plan, drafted by a blue-ribbon commission, to create new state revenue to offset a one-third cut in school property taxes.
Mr. Perry's office and legislative leaders worked all day to keep the bill alive.
On Monday morning, Mr. Perry's staff and sponsors on both sides of the aisle were still polling members who had not committed their votes, a sign that support hadn't been comfortably shored up.
Among those who were noncommittal were some - a few conservative Democrats among them - waiting to see whether Mr. Chisum's bill passed, granting the tax breaks they could use to justify what they worried was a pro-tax vote on the Perry plan.
"We're working the moderates," said Rep. Vilma Luna, D-Corpus Christi, a co-author of the business tax bill.
Also thought to be wavering were some conservative Republicans concerned that they could pay a political price for enacting new taxes when the state has a robust surplus of more than $8 billion.
But supporters of the plan, trying to bring more votes on board, argued that it could have a political benefit. One part of Mr. Chisum's bill instructs the secretary of state's office to pay for an announcement this fall of the coming school property tax cuts.
If the bill passes, Mr. Perry "will run for re-election based on the tax cuts made possible by this bill," said Rep. Mike Krusee, R-Round Rock. "People who vote against making the business tax fair are obstructing property tax cuts."
Another measure approved Monday would earmark all new revenue raised by the package of tax increases for property tax relief.
"We have told our constituents that we are coming into special session to reduce their property taxes," explained Rep. Jim Pitts, R-Waxahachie, author of the legislation.
'Lockbox' of tax relief
Mr. Pitts said new tax revenue will be kept in a "lockbox" that is dedicated only for tax relief and no other purpose. That drew criticism from Democrats, who insisted that some of the money may be needed for other pressing needs, such as school improvements or overcrowded prisons.
"This debate should be about Texas schoolchildren," said Rep. Garnet Coleman, D-Houston. "The new revenue can never fund a dime of school improvement. This essentially starves the public schools into the future. It's not what the public wants. They want tax relief and school improvements."
The "get outta Dodge" bill would allow school districts to raise their tax rates 3 cents this year after the state-funded property tax reduction. Other increases in the future - above $1.36 per $100 valuation - would require voter approval.
A provision in the bill that would have allowed high-wealth school districts to raise their tax rates and keep all additional revenue - with no "Robin Hood" sharing of their funds as mandated under current law - was deleted after spirited debate.
Rep. Charlie Geren, R-Fort Worth, offered the amendment to scuttle the break for wealthy districts.
"We don't need to increase the gap between school districts. We need to have equity in Texas," Mr. Geren said. "This amendment is needed to make sure rich districts don't get exponentially richer."
Rep. Dan Branch, the Dallas Republican whose district includes the wealthy Highland Park school district, countered with another proposal to provide more state funding for poorer schools. But his language was rejected.
"We aren't doing anything about Robin Hood," Mr. Branch said, citing widespread dissatisfaction with the requirement that forces some school districts to share their property tax revenues with other districts.
"This is a system that has run amok," he said, noting that the Dallas school district will join the higher-wealth districts that must share their tax revenues beginning next year.
Mr. Geren's amendment was adopted, 106-40.
Staff writer Karen Brooks contributed to this report.
E-mail tstutz@dallasnews.com