On the Lege

More school finance madness

One special session down, another one to go. Such is the perpetual state of a school finance plan, which was literally half-baked when the session ended Wednesday. Gov. Rick Perry promised to call for another round as soon as today (Thursday), insisting that lawmakers send him a bill before they break for what's left of the summer. At press time, the House and Senate were prepared to vote on the spending portion of the plan, while negotiators continued haggling over a separate tax-swap component. You can't have one without the other.

At this point, Democrats, teachers groups, and some Republicans would prefer neither, thank you. As finalized and distributed Tuesday, the compromise spending plan (HB 2) offers a small pay raise for teachers, adds about $2.4 billion to school funding, and caps the amount of money that wealthy school districts would send to property-poor districts. The Texas Federation of Teachers offered this assessment of HB 2: "The final version seems to take just about all the worst features of both the House and Senate versions and roll them together." (See box for more HB 2 details.)

The property tax twin has proved the toughest challenge as House and Senate leaders stood miles apart when they started negotiations last Thursday. The week started pretty much the way last week ended – with Democrats threatening to filibuster the bill to death, Gov. Rick Perry threatening another special session, and key lawmakers continuing to hash and rehash the troubled tax bill, on the off chance of reaching a compromise.

As such, the 30-day session closely resembled Einstein's definition of insanity – doing the same thing over and over again and expecting different results. Lawmakers stumbled across a slight variation of that theme late Monday afternoon with negotiators striking a deal on HB 2. The HB 3 tax component, meanwhile, continued causing all sorts of heartburn because conferees couldn't agree on who should pay for the property tax relief that Perry promised voters. It was the same disagreement that foiled progress on school finance in the regular session.

Though Republicans dominate both chambers, the two shops differ widely on who should shoulder the lion's share of taxes to pay for schools. The Senate already lost once on that battlefront, scrapping a plan to overhaul a system that allows many companies to avoid paying their fair share of taxes. Such reforms would never have cleared the business-friendly House anyway.

But Senators vowed to stand their ground on the sticky sales tax issue and, as of Tuesday morning, were still refusing to budge on a tax increase of more than half a cent. On this, two members of the ruling triumvirate – Perry and House Speaker Tom Craddick – reached a compromise that Lt. Gov. David Dewhurst had little choice but to reject, in deference to the Senate mantra. Perry and Craddick settled on a three-fourth cent increase, which would bump the sales tax to 7% from the current 6.25%. (The latest compromise brought the sales tax down a notch to 6.95%.) Democratic Sens. Gonzalo Barrientos of Austin and Eliot Shapleigh of El Paso had made clear their intentions to talk the bill to death if the measure returned to the Senate with an increase above the half-cent mark. A state analysis of the House's originally proposed one-cent hike bears out the opposition's argument, though the projected impact might be softened somewhat by the compromise. Still, the findings of the analysis were pretty grim. They showed that middle-to-low-income Texans would bear the brunt of the tax increase – broadened to include bottled water, auto repairs, and computer maintenance – while wealthier folks would reap the benefits of a property tax cut.

The Senate did score a watered-down victory with the House agreeing to a $7,500 increase to the homestead exemption, boosting the amount to $22,500, up from $15,000. Perry proposed a $7,500 increase to the homestead exemption at the start of the session, which the House all but ignored and the Senate tried to go one better with a $15,000 boost. The Senate passed the larger amount overwhelmingly last weekend, but the measure died automatically when senators voted to deep-six their business tax reforms. On Monday, when the $7,500 figure came up for Senate approval, Barrientos made a last-ditch effort to replace it with his more generous $15,000 increase, but the amendment failed. As a consolation prize, the Senate point man on the tax bill – Sen. Steve Ogden, R-Bryan – paid Barrientos a rare public compliment. "You were the first on this floor to [propose] the homestead exemption," he said, "and this [$7,500] amendment is a reflection of your earlier efforts."

In a statement following the HB 2 accord, House Speaker Tom Craddick said, "We have worked tirelessly to finalize these two bills, and we have been responsive to the Senate's needs. I am still committed to finding a solution that members of both House and Senate will feel confident taking back to their constituents."

But skepticism continued unabated among many lawmakers, along with a healthy concern that both chambers would pass the school finance plan – for the sake of passing a school finance plan.

"Nobody believes that this will solve the court case," said Rep. Garnet Coleman, D-Houston, referring to the state's pending appeal before the Texas Supreme Court. The state is challenging a trial court's directive to overhaul the school finance system on grounds that the current system is unconstitutional. Coleman, like all but a few Democrats on the Senate side, was shut out of the negotiating process on HB 2 and 3. No Democratic House members sit on either of the two conference teams that Craddick appointed. Coleman recalled the 1997 session in which a major tax overhaul bill – a priority of then-Gov. George W. Bush – fizzled out in the final hours. Back then, it was the GOP-controlled Senate that refused to stick businesses with a greater share of the tax burden, which the Democratic House, and even Bush, favored. In that impasse, former House Speaker Pete Laney appointed two key Republicans to aid in negotiations – Craddick of Midland and Rep.-turned-Sen. Ken Brimer of Fort Worth. On the Senate side, Democratic conferees included Ken Armbrister, a conservative from Victoria, who was also among this session's tax negotiators, and former Sen. Gregory Luna of San Antonio. "Then you had a three-two party split on all conference committees," Coleman said. "Now, Democrats are all out of the picture."

HB 2 Compromises

Robin Hood: A 38% cap on the amount wealthy districts share with property-poor districts

New funding: $2.4 billion; AISD would see 7.6% boost.

Teacher pay raise: Peanuts. $1,000 (replacing what teachers lost in 2003) and possibly an additional $500.

Start date: Classes start after Labor Day, effective 2006.

HB 3 (on again, off again) Compromises

Property tax cut: $2.5 billion this year, $3.1 billion in 2006

Who pays? We the people

How? Raising sales tax to 6.95%, up from current 6.25%

Cigarette tax hike: $1

Franchise tax: Still no deal on closing business loopholes

  • More of the Story

  • Lege Notes

    Odds and ends – mostly odds – from beneath the pink granite dome

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Texas Legislature, Tom Craddick, Steve Ogden, Rick Perry, David Dewhurst, Garnet Coleman, Texas Supreme Court, George W. Bush, Ken Brimer, Ken Armbrister, Gregory Luna, Gonzalo Barrientos

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