March 24, 2006
Craddick speaks on school funding

I have to say, this does not sound like the Tom Craddick I'm used to hearing.

Speaking to an audience of business and school leaders, Craddick said he thinks the state will end up paying for 60 percent to 65 percent of the $33 billion public school system, compared with the 35 percent that the state now picks up.

"There is a mode to shift back from the local property taxes, back to the state paying the larger share," he said.

"I think you'll see that done."

Craddick, who has been meeting with House members in small groups this week, said he is waiting to see the final details of a business tax plan being devised by a commission appointed by Gov. Rick Perry.

"The proof's in the pudding, at least it generally is in the Legislature," said Craddick, adding that the state comptroller must sign off that the tax plan will raise sufficient revenue to pay for a cut in property taxes.


On the subject of teacher pay, Craddick said he would like to see money targeted at teachers who work in at-risk schools or take hard-to-fill jobs. But he said an across-the-board raise might be considered.

I don't have the time right now to do the research, but this talk about the state picking up 60% of school funding sounds like a shift in rhetoric to me. Maybe I'm wrong, I don't know. I'll have to look at it more closely. Just color me surprised for now.

As for the subject of teacher pay, all I'll say for now is that as long as Kent Grusendorf continues to be Craddick's point man on school finance, I'll have my doubts about the Speaker's willingness to consider an across-the-board pay raise.

Rep. Kent Grusendorf, R-Arlington, chairman of the House Public Education Committee, sniffed politics in the pay proposals.

Grusendorf, who lost his re-election bid last month to Diane Patrick, a GOP challenger backed by teacher groups, said of the proposers: "They're in a bidding war for the teacher vote." He said: "Aw, let's give them $10,000. It's not my money anyway, what do I care?"

'Nuff said.

Meanwhile, Rick Casey talks to Glen Rosenbaum, the point man for law firms' opposition to the new business tax proposal by the Texas Tax Reform Commission (TTRC), and distills the reasons for their resistance.

Here are the main points he made.

  • The big firms are not against paying business taxes. They have been on record in committee testimony since 1997 as supporting some forms of taxation that would include them.

    "We are not trying to kill or scuttle the Sharp Commission proposal," he said. "We are simply trying to get a compromise when the bill is filed in the Legislature."

  • Rosenbaum's coalition has offered three compromises. The simplest one is to apply the tax to compensation over $500,000 or $550,000 rather than $300,000.

    That would amount to an annual savings of $2,000 or $2,500 per partner.

  • The primary objection is that the plan amounts to an income tax on partners in law firms, accounting firms, architectural firms and other professional partnerships. The partners are the ones who have to pay, unlike corporations, where the CEO may make well over $300,000 but the tax is levied on stockholders.

    The difference is that the partners are not only workers, but owners as well.

    Others argue that it is not an income tax. I would not bet a paycheck on how the courts would decide that question.

  • Rosenbaum argues that the way the plan is structured, it would tax lawyers and other professional partnership at a higher rate than the current franchise tax. I don't know if that's true. He admits lawyers have escaped the franchise tax, but says it is not good policy to try to overcharge a group because it has been undercharged in the past.

  • While 1 percent seems like a pittance, the firms are concerned that the Legislature would soon be under pressure to raise the rate.

    "With the business tax, a 1 percent raise would bring in $6 billion," he said. "A 1 percent raise in the sales tax is $2.5 or $2.6 billion. So if you need to raise a billion dollars, you raise the business tax 0.2 percent."

This, I suspect, is the real issue.

I would not want to bet on the outcome of the lawsuit that alleges the new business tax is in part at least inherently a personal income tax, either. Steph brought that up in the comments to that earlier post, too. I hope they at least run this past AG Greg Abbott to make sure they've dotted their I's and crossed their T's.

Of course, I could point out that if Rosenbaum et al drop their opposition if the tax threshhold is raised to $550K as they suggest, then the issue of this being an income tax isn't really a matter of principle for them but of leverage. But that would be cynical of me.

Posted by Charles Kuffner on March 24, 2006 to Budget ballyhoo | TrackBack