January 10, 2006
TTRC update

How much less should you be paying in property taxes? John Sharp says thirty-three percent less, but there's a catch.

Sharp said it would be a mistake for the Legislature to impose a permanent, lower cap on school taxes because it could soon land the state back in court over school funding.


Sharp predicted the high court ruling will finally motivate lawmakers to agree on a new, broad-based business tax as a major revenue source. Disagreement over a business tax was a major stumbling block against efforts to change the school funding system during three sessions last year.

"The devil is always in the details. ... But I think that, in order for this to work, you cannot have a situation where only one in every 15 or 16 businesses in the state of Texas pay anything at all into a business tax. It's going to have to be something that everyone participates in," Sharp said.

"I think the Supreme Court deadline goes a long way and maybe is the crucial link in getting this to pass," he added. "The worst that could happen in this situation is that all of a sudden you wind up with schools shut down, and I think that's going to be an impetus in making it work."


Sharp said he hopes the commission will recommend enough funding to the Legislature to cut school maintenance taxes to $1 per $100. Paying for those cuts would cost the state $5.2 billion to $5.5 billion a year, he said.

But, he added, it would be wrong, based on the Supreme Court's ruling, for the Legislature to impose another arbitrary cap, even a significantly lower one, because eventually it too may limit districts' options.

"If you're going to cap it, you've got to do it in different ways," he said, suggesting the Legislature, instead, could reward districts with more state money for keeping their property taxes low.

"That would put a burden on the state, but then that's kind of what we're talking about anyway, making sure that it (school funding) doesn't go back to where the state is the minority player," he added.

As noted by Eye on Williamson, that last point was reiterated by State Solicitor General Ted Cruz, who argued the West Orange-Cove case for the defense.

Simply lowering the cap won't make the system comply with the Texas Supreme Court's opinion on what would be legal, Cruz said.

The tax cap was intended to be a locally levied tax. But the Texas Supreme Court ruled that school districts no longer have discretion to set their own rates because they are required to fund state and federal education mandates - which eat up much of the property tax revenue - and still not tax above the cap.

The rate has become both a minimum and maximum taxing level, the court ruled. That amounts to a prohibited statewide property tax, which makes the system unconstitutional.

Until districts have discretion to set their own rates, the tax remains illegal, Cruz said.

The question is what the Lege will do when they're forced back together in April or May. If the general idea is to try to pay for a property tax cut by figuring out a business tax that will actually be collected on businesses, and in doing so make the state the main player in school funding, then I think they'll be able to get the job done and come home feeling a sense of accomplishment. If not, well, I hope they remember to pay the air-conditioning bills in the Capitol, because they'll be there for awhile.

As a reminder, the TTRC is still holding meetings across the state. Here's their schedule. If you attend one of these, please let me know how it goes.

Posted by Charles Kuffner on January 10, 2006 to Budget ballyhoo | TrackBack