March 17, 2004
Select Committee report

The Select Committee on School Finance has issued its final report (PDF) for your perusal. Individual pages load really really slowly for me, so I haven't given it more than a quick glance as yet. I will note, as the Quorum Report did, that none of the Democrats on the committee, not even Ron Wilson, signed the thing. More on that in a bit.

There's some news coverage of the report now. First, from the Star Telegram.

A joint committee of House and Senate members worked on the report for more than six months. But Sen. Eddie Lucio of Brownsville, one of four Democratic lawmakers on the panel, said the report still leaves too many questions unanswered. "In terms of eliminating Robin Hood -- we are concerned about what system is going to take its place," Lucio said. "Will we have as much or more equity as what we have now? The direction we're going is vague. It has not given me enough information."

Committee co-chairwoman Rep. Florence Shapiro, R-Plano, said the report represents a road map -- not a final destination. Over the months, she said, panel members managed to eliminate some taxing options while focusing attention on others.

"I would have liked for us to be much more specific in our proposals, but I think we needed to be general," she said. "I think the specificity needs to come from the Legislature itself when we create the new system."

In other words, the report is basically another recapitulation of the problem and some general hand-waving at solutions, but no actual policy recommendations. We're still a long way off from anything resembling consensus, let alone legislation.

The report by the Joint Select Committee on Public School Finance calls for a reduction in local property taxes and an end to the share-the-wealth school finance system that redistributes tax revenue from property-wealthy districts to property-poor ones.

It said that the state should increase its share of funding for education and that lawmakers should consider cutting local property taxes in half. Such a move would require the state to find another $7 billion in annual revenue, Shapiro said.

The report does not state how to accomplish those goals, but it restates various funding options that have been considered for months.

Among them: increasing the sales tax, expanding the sales tax to include various services, creating a statewide property tax, creating separate tax rates for individuals and businesses, increasing taxes on cigarettes, and allowing video lottery terminals at horse and dog tracks.

None of that is anything like new information.

More reasons why the Democrats demurred in the DMN:

Sen. Leticia Van de Putte, D-San Antonio, said the report very forcefully called for elimination of "Robin Hood" provisions in the current finance law but was less specific on what will be used to preserve equity once Robin Hood is gone.

"I have problems with making Robin Hood the villain when more than 80 percent of our students in the state benefit from that requirement," she said. "The committee should have outlined an equity standard in its goals."

The senator also said she had concerns about proposed relaxation of class-size limits in elementary schools and the possibility that one recommendation could be used to justify a new voucher program for private schools.

Rep. Vilma Luna, D-Corpus Christi, said she was unhappy with a funding adequacy study done for the committee that was based on a standard of 55 percent of students passing the state achievement test.

"One of the things we need to do is boost student performance across the board," she said. "We need to look at the full spectrum of students."

The DMN also gives some numbers:

Of the various revenue options, there has been widespread support for raising the state cigarette tax now 41 cents a pack and authorizing video gaming at racetracks. A $1 increase in the cigarette tax would raise an additional $1 billion a year, and the new gambling option would raise another $600 million.

Those two revenue-raising proposals were the only ones listed in the report as sources of new funding for schools. The others, such as higher sales taxes, would be used to replace revenue lost through a reduction in school property taxes of up to 50 percent.

A spokesman for low-wealth school districts questioned whether the $1.6 billion in new money would be enough.

"It will not generate enough money to do what needs to be done," said Wayne Pierce of the Equity Center, which represents hundreds of low and medium-wealth districts.

I've said it before and I'll say it again: Cigarette taxes and gambling are just too volatile to be dependable annual revenue sources. Haven't we learned anything from the history of our state Lottery?

The Longview Journal has some more specifics on the numbers, while the Tyler Morning Telegraph has an interview with Sen. Todd Staples on the report. Check out the Telegraph's headline, which really doesn't fit the story they actually print at all.

Getting back to QR, it also has this interesting nugget:

Last week, Governor Rick Perry laid a proposal on the table capping local property tax appraisals at 3% a year. The cap barely covers the historical rate of inflation.

We asked Stuart Greenfield, Ph. D. to comment on the current effort to address the various proposals facing a likely special session of the Legislature. Greenfield brings excellent credentials to the table. He was the Chief Revenue and Economic Forecaster for the Comptroller's office from 1977-1986. He returned to the Comptroller's office in the 1990's to work on the Texas Performance Reviews.

Two of Greenfield's more startling conclusions are that property tax cuts could actually result in higher taxes for most homeowners and rather than the rich subsidizing the poor, most of the proposals currently on the table would have the middle class subsidizing the rich.

I presume that it's a combination of a reduced property tax, which necessarily means a smaller federal income tax deduction, plus an increased and/or expanded sales tax, which generates the higher tax burden overall. I'm a little too lazy to work through the math on the effect of just the property tax reduction, but I have a hard time believing that the concurrent increase in one's income taxes would completely offset it.

And before anyone asks, the reason the rich make out better in these proposed schemes is simple: They spend less of their money percentage-wise on items that fall under the sales tax than the rest of us do. Combine that with a proportionally bigger break on property taxes, and voila.

Thanks again to Brandy for the heads-up on the report.

Posted by Charles Kuffner on March 17, 2004 to Budget ballyhoo | TrackBack

School funding is always a fun topic here in Ohio. The state joined the MegaMillions lottery last year. I don't think that it has helped much. Our state supreme court has ruled that the current property tax funding scheme is unconstitutional. Yet this year we saw a large increase in tax assessments, and therefore larger tax payments. Schools are still asking for more money via district-wide issues. It's a never ending circle and kids are still innocent victims.

Posted by: sean on March 17, 2004 2:02 PM

The bigges problem is that the government (at all levels) is afraid to tax everyone evenly and fairly, and instead keep choosing these schemes that make some people pay more than others despite similar levels of income and worth.

The states have made a habit out of finding some minority group to tax the hell out of, in order to tell a majority that they didn't raise *their* taxes.

It totally stinks.

Posted by: Tim on March 17, 2004 6:54 PM

At this point in Texas, property taxes are so exorbitant that some older lower-middle and middle income homeowners are selling and renting back in order to invest the money in a growth fund to put back into real estate when it becomes more affordable or never reinvest in real estate at all! Whatever tax benefits there were have all but disappeared (the deduction never recoups the amount paid into local real estate taxes and only minimally offsets the federal income tax). As the pool grows smaller, will the impact become greater on those who do continue to pay into the coffers? And how will Robin Hood affect districts when the amount collected becomes even more of a burden to the homeowner. I've just read the final report, and truly it makes no advances in changing the funding distribution in does a fairly adequate rehash of the issues, however. I read it as having the Federal programs such as IDEA driving the way we do the education business here at home. It's a good IDEA but it's already bureaucratized.

Posted by: Donna on December 23, 2004 10:00 AM