April 20, 2004
And so it begins

This is a really long post rounding up news stories about the just-begun special session. I didn't feel like taking up all of the front page, so click on the More link to wade through it all.

Everyone should be up in Austin for that long-awaited and much-dreaded special session on school finance reform. The official proclamation is here (PDF), in case you were curious. Note, however, that no legislation has been filed yet. From that AP story:

[O]n the eve of the session, no lawmaker in either chamber had filed a bill carrying Perry's plan and support seemed scarce for his "constitutionally linked" tax, which divides residential from business property.


House Public Education Chairman Kent Grusendorf has filed several "shell bills," used as placeholders for legislation. But [House Speaker Tom] Craddick said details of the House legislation would be hammered out in committee, which is tentatively expected to gather upon adjournment of Tuesday's session.

Comptroller Strayhorn, naturally, wasted no time in blasting the Governor's proposals yet again.

Comptroller Carole Keeton Strayhorn on Monday delivered a scathing review of Gov. Rick Perry's school finance proposal, saying it would create a $10 billion deficit within five years and provide little property tax relief.

Just one day before lawmakers convene a 30-day special session on school finance, Strayhorn likened the governor's plan to a "balloon payment" that Texas children "will be paying for the rest of their lives."

"This governor's plan replaces Robin Hood with Robbin' Everybody," Strayhorn said in probably her most pointed attack on Perry's policies so far.

Much of the difference between hers and Perry's figures, Strayhorn said, stems from the governor's use of an inflated figure for the average value of a Texas home. She said the actual average appraised value is $97,000. The governor's office, she said, used $167,000, which is based on real estate sales, not all appraisals.

Someone somewhere proposed making it a requirement to disclose the purchase price of a house, presumably to ensure that its property tax appraisal could match it more closely. I don't think it was Perry who proposed that, but to be fair, there's no reason he couldn't endorse such an idea. If so, that would close at least some of that gap.

UPDATE: Kevin says the purchase price disclosure is indeed part of Perry's plan. We'll see if he pushes it.

Strayhorn, the state's official revenue estimator, gave her assessment of Perry's plan in a letter to the governor, lieutenant governor and speaker. She later expanded on her criticisms at a news conference.

Strayhorn said the governor's plan would save the average homeowner $204 a year in property taxes -- less than half of the $418 annual savings projected by Perry -- and increase property taxes for businesses in 203 of the state's 1,000-plus school districts.

Nobody would see property tax relief until December 2005, only a few months before the governor faces GOP voters, she said.

What's more, Strayhorn added, the plan, on average, would increase education spending by $10 per student in 2006 and $53 in 2007, far short of the $375 per student that the governor's office has estimated.

More than 60 percent of school districts -- including the Houston Independent School District and other major, urban districts -- would not get any additional money under Perry's plan, the comptroller said. A handful of wealthy, primarily residential districts -- including Highland Park in Dallas, Alamo Heights in San Antonio and Eanes in Austin -- would see significant funding boosts, she added, perpetuating inequality.

"This plan fails our taxpayers and fails our Texas schoolchildren," Strayhorn said. "This plan does not work financially."

Walt said that Strayhorn's projections have been wrong in the past. Shortly before the 2003 session, she doubled her revenue shortfall estimate from $5 billion to $10 billion.

"Her doomsday projections appear to be based on fuzzy math," Walt said.

It's certainly true that Strayhorn has not always been a shining example of good prognostication. I've swatted her several times for that. Not that I expect the Governor's numbers to bear a close resemblance to reality, mind you. You'll have to decide for yourself who is the smallest prevaricator.

And of course, for those looking ahead two years, there's this.

Strayhorn said she could not resist noting that the "modest property tax relief" promised in Perry's plan would kick in in December 2005.

That, she noted, "is a little less than three months before this governor runs for re-elect, and some of you have even speculated that that might be a contested primary."

Doesn't sound like a potential party-switcher there, but you never know.

And speaking of getting an early start on things.

Legislators are not scheduled to convene on taxes and education until Tuesday, but a shifting group of about a dozen House members has huddled secretively for weeks on how to change the way Texas funds and manages schools or at least how to launch a plan.

"Our spider hole has been discovered," one participant kidded after a reporter peeked in.

Rep. Kent Grusendorf, R-Arlington, who has led the gatherings of Republican leaders and a few Democrats in an office building near the Capitol, called the group "Kent's Kids Brigade."

He said, "A few of us are trying to get a head start" toward reaching common ground bolstering education while cutting school property taxes and dismantling the "Robin Hood" system, which requires property-rich schools to share with others.

Most participants already serve on the 29-member House Select Committee on Public School Finance, which likely will be entrusted with developing the first House draft of a funding plan.

And many also serve on the Joint Select Committee on Public School Finance, scheduled to hear Gov. Rick Perry and others today address Perry's finance proposal.

Grusendorf said he has avoided having more than 14 members in the room to keep the "brigade" from having a quorum of select committee members. If that happened, the meetings would have to be public and posted in advance to comply with open government laws.

Visitors, aside from expert staff, have included Mike Toomey, Perry's chief of staff, and David Thompson, the Houston lawyer representing hundreds of school districts challenging the adequacy of school funding in a lawsuit scheduled for trial in July.

I've had my doubts about any real solution coming out of this session, and I'm not alone. For one thing, pretty much everyone who's been through a special session on education thinks this one is doomed to fail.

[Former Senator Bill] Ratliff ushered through most of the major education bills over the past 15 years and served two years as interim lieutenant governor.

"The last time I counted, of the 180 members of the Legislature, 110 had never been through a school-finance battle," he said.

He said it is the toughest subject debated in the Capitol and that members will vote yes or no based solely on how their school districts fare under a plan, withstanding any amount of political arm-twisting to the contrary.

"There's the expression that all politics is local. Well, there's nothing more local than whether your school district got the shaft," Mr. Ratliff said.

One likely casualty will be all those anti tax pledges that many Republicans took before the 2002 elections.

Signing anti-tax pledges has come as naturally for many Republican legislative candidates in recent years as vowing to get rid of the "Robin Hood" school finance law.

The two priorities, however, were on a collision course from the beginning, and the moment of impact may be just around the corner as lawmakers return to Austin on Tuesday for a special session on education funding.

Even Gov. Rick Perry, who hates the thought of raising taxes so much that he forced cuts last year in health care and other vital services, admits now that some state taxes are going to have to be increased if Robin Hood is to be banished.

Some 30 Republican legislators, including House Speaker Tom Craddick, have signed -- at some point in their careers -- an anti-tax pledge promoted by the Washington-based Americans for Tax Reform, a leading proponent of making government smaller.

They vowed, in writing, to "oppose any and all efforts to increase taxes."

Now several, including Craddick, are hedging. Their top goal, they explain, is to lower local school property taxes -- which now pay for about 60 percent of education costs -- and if that requires a tradeoff of higher state taxes, so be it.

Just as long as the switch is "revenue-neutral," or doesn't raise the overall tax load, they say.

In other words, they're OK with raising some people's taxes. You can guess who those people will be.

Finally, we have yet another advocate for a state income tax.

When Gary Bridges compiled information some months ago for the Economic Development Foundation, the state's taxation system and the state of Texas' roads, bridges and educational attainment weren't exactly balanced.

On one hand, Texas ranked 45th among states for fiscal stability and 46th for tax fairness, according to the Corporation for Economic Development think tank.

That's because the state relies most heavily on property taxes 72.4 percent and sales taxes 22.3 percent for its revenues, with zero personal income taxes and a loophole-ridden franchise tax system instead of a corporate tax on earnings.

On the other hand, 27 percent of Texas roads are in poor or mediocre condition, and 22 percent of its bridges are structurally deficient or obsolete, according to the Federal Highway Administration.

Bridges an assistant dean at UTSA's College of Science with a solid economic development background realized that wasn't a pretty picture. Relocation executives look at taxation balance when they're choosing new sites for their businesses.

"These roads and bridges are our access to markets and supplies," Bridges said. "We need to keep them in good repair and make improvements. But in times of economic duress, the state has few options."

He came to this conclusion when preparing materials for an EDF report titled "What It Takes to Win," commissioned by the foundation to evaluate how San Antonio stands up to other selected cities in competition for business expansions and relocations.

"Is it really a matter of pride to be one of only seven states without a state income tax and one of only four states without a corporate income tax?" he asked rhetorically. "When does that turn into a huge liability?"

Bridges has a point worth considering. If the absence of a state income tax is such a big deal, nearly all business expansions and relocations should be pouring into the seven states, especially Texas.

That isn't happening. Therefore, it probably is not a crucial site-selection factor.

"I never heard Toyota say anything about it," Bridges said.

He should know. Bridges, a certified public accountant, did the economic impact report for the city on the big return on city and state incentives when Toyota announced in February 2003 it would build an assembly plant here.

You all know where I stand on that issue.

Well, the battles are about to be joined. Let's see what the next 30 days brings. If it's anything beyond a call for another 30 days, I'll be surprised.

Posted by Charles Kuffner on April 20, 2004 to Budget ballyhoo | TrackBack

Someone somewhere proposed making it a requirement to disclose the purchase price of a house, presumably to ensure that its property tax appraisal could match it more closely. I don't think it was Perry who proposed that

Bettencourt says it's part of Perry's plan.

Part of the notion is that, yes, appraisals should more closely track purchase price, and people who aren't selling their homes (particularly elderly, retired types) won't be taxed on the capital gains realized by neighbors who sell and move.

Ultimately, all of the coverage seems to be missing what is the most likely component of all this to pass -- appraisal creep relief. Bettencourt's numbers on this seem rock solid.

Posted by: kevin whited on April 20, 2004 9:21 PM