Halfway to Nowhere

Illustration By Doug Potter

By the time the Lege cleared the session's midpoint early last week, the Texas House had already managed to undermine the public school system, fashion a superregressive tax bill, besmirch the state comptroller for dissing the tax bill, and threaten local governments' ability to stay in business.

Well, at least they're getting things done. And that's just the half of it. On Tuesday, lawmakers returned from Easter vacation and plunged headlong into the remaining 60 days of the session – plenty of time to wreak more havoc. On the Senate side, an education committee began eviscerating the House school finance bill and its tax sidekick. In the House, supporters of a troubled appraisal cap bill, which would require a constitutional amendment, took another stab at trying to drum up the 100 votes needed to pass the thing. House Bill 784 (along with the accompanying amendment, House Joint Resolution 35) is supposed to be the answer to what sponsoring Rep. Dwayne Bohac, R-Houston, calls "appraisal creep" – whittling the existing 10% cap to 5% a year. Gov. Rick Perry's strong support notwithstanding, the measure was quietly sidelined last week in the face of opposition creep on the House floor, and mounting pressure from local governments that rely on property taxes to pay for services. Even the Texas Association of Business, one of the baddest anti-tax lobby shops in the state, has found fault with the Bohac proposal, and that in itself has given folks pause on both sides.

Bad for Bidness

The appraisal cap issue has gained so much attention, in fact, that it has stolen most of the limelight from another proposal, scheduled to hit the floor any day, which would pose an even greater threat to local governments. Rep. Carl Isett, R-Lubbock, is selling HB 1006 as a fed-up taxpayer's dream – one that would force an automatic rollback election each time a local taxing entity raises taxes by more than 3%, effectively capping not just appraisals but local revenues at that rate. Existing law allows local governments to go as high as 8% without voter approval. The bill is not without radioactive tarnish; it was banished from its original place in HB 3 (the evil tax twin of school finance) after GOP lawmakers realized the "Truth in Taxation" amendment was in truth a liability that threatened the entire package. So Isett pulled his amendment and filed it as a separate bill – with Speaker Tom Craddick's blessing.

Or was it a curse? One of the state's leading economists, Dr. Ray Perryman, has provided some high-octane data for the Association of Counties, the Texas Municipal League, and the Texas Conference of Urban Counties, to help drive home their opposition to both sets of proposed caps. In his March 16 testimony before the House Ways and Means Committee, Perryman cited several studies that detail the adverse consequences of putting local government in a "straight jacket." He described California, New Jersey, and Massachusetts as examples of just how badly the private sector suffers when local governments are forced to cut back services. That's one reason the TAB is taking a rare swipe at these bills. As Perryman's report points out, "The situation in Texas is likely to be far more acute unless there is a massive allocation of state aid to compensate for the inevitable shortfalls." Of course, "state aid" would be the last thing cities and counties would expect from the Lege.

Travis Co. auditor Susan Spataro, who does not mince words, believes the Isett proposal is one of the worst anti-government bills she has seen in her 15 years at the county. "Appraisal caps – now, that's just bad policy; but revenue caps would kill us," she says. "If they pass a revenue cap, they will have a crisis before they come back in town. Counties aren't broken, but [the Legislature] can break them with this bill." Spataro was only slightly more diplomatic when she addressed the House Ways and Means Committee with these same concerns. Committee members thanked her for her comments and moved directly to the next speaker, but other legislators outside the committee have independently solicited additional data and feedback from Spataro's office.

Costs Pushed Downhill

It's no coincidence that both the appraisal cap and revenue cap bills were assigned to Ways and Means. Bills like these typically end up in Local Ways and Means, but because Chairman Fred Hill, R-Richardson, has since changed his pro-cap stance to side with local governments, both measures were instead shuttled through the more powerful and cap-friendlier group chaired by HB 3 author and Eastland Republican Jim Keffer. The bills easily passed out of committee on 5-2 votes. But that's not stopping Hill and others from doing what they can to stick a collective fork in the proposals. Locally, opponents of the bills were counting Travis County's Democratic delegates, along with GOP Rep. Terry Keel, as fairly certain "no" votes. They didn't see much point in trying to convince Republican Rep. Todd Baxter to vote "no," given his consistent anti-tax votes on the Commissioners Court.

As Spataro sees it, the proposed revenue cap would spell far greater trouble for the county than for the city of Austin, which also relies on sales taxes and other revenue sources to keep the doors open. But property taxes are the lifeblood of counties and, in fact, accounted for 67% of Travis County's 2004 revenue, according to county records. These property taxes pay for the county's three main responsibilities – courts, jails, and roads. "The services we provide are the ones that we can't control demand – if somebody shows up at your doorstep [i.e., the county jail], you can't just turn them away." Similarly, the Legislature's devastating cuts to social services took huge tolls at the local level. "When they cut [children's health insurance] those children came to our clinics and our emergency rooms. Every time [the Legislature] does these things, we absorb the costs. This community feels an obligation to do that." That obligation would no longer be an option with revenue caps, Spataro says. "If they pass this bill, I believe it would drive a stake through the hearts of counties all across the state."