April 13, 2006
More battle lines drawn over the TTRC plan

First things first: Via Aaron Pena, the State House is preparing a bill to implement the recommendations of the Texas Tax Reform Commission.

Republican House Speaker Tom Craddick said Wednesday he expects a version of Gov. Rick Perry's $6 billion tax-swap proposal to be filed as legislation in the House when a special session on the issue starts Monday.

Since Perry presented his plan to the Legislature two weeks ago, House and Senate leaders have been mum on its future in either chamber. The wording of the 92-page proposal is being refined and drafted as legislation, Craddick said.

The plan includes an expanded business tax, a $1-per-pack increase in the cigarette tax, and a portion of the state's budget surplus. The new money would be used to slash school property taxes by a third.

"We expect to have all the ... bills ready to be filed on Monday morning," he said.


Another lawmaker said Wednesday he is working on an alternate property tax relief measure that would depend entirely on the state's budget surplus to reduce property taxes by a lesser amount and satisfy the court ruling. That plan wouldn't tackle reforms to the state's loophole-ridden franchise tax.

Rep. Warren Chisum, a Pampa Republican, said his proposal would use $2.6 billion of the state's estimated $4.3 billion surplus to give homeowners an 11 percent property tax reduction in time to meet the June 1 court deadline.

To maintain the property tax cut, lawmakers would have to revisit tax reform during the next legislative session or hope for continued economic prosperity. Budget policy analysts contend that most of the surplus is unavailable.

Perry has condemned the surplus-only idea as a short-term, "get outta Dodge" plan that will result in a future budget deficit. But Rep. Jim Keffer, an Eastland Republican who leads the House tax-writing committee, said it's a good idea to make the option available.

"I'm just looking at past history. The wheels fall off sometimes, and you've got to be ready," Keffer said. "We have to be successful in answering the Supreme Court's concerns in a special session."

I remain curious on this point: Will the State Supreme Court accept this kind of legislative punt? There's a deadline in place, and the ruling in the West Orange-Cove case clearly indicated that just cutting property taxes was not a sufficient answer. What happens if the Lege passes a surplus-draining tax cut, then the Court grants an injunction barring payments to the school districts because their ruling was not satisfied? Do we want to take that chance? And even if the court agrees to grant an extension for a year, how can school districts reasonably plan what to do if they don't know what's going to happen in 2007? It's not like you can count on there being a surplus, after all.

In the meantime, supporters and detractors of the TTRC plan are lining up and taking action. Eye on Williamson and Capitol Annex sat in on a conference call with the Center for Public Policy Priorities and recapped what was discussed. There's a lot to chew on in their reports, but the bottom line is that the CPPP says the TTRC plan is "not even revenue neutral, really a revenue cut". If so, then the question of adequacy gets raised again. Keep an eye on this as well.

Rick Perry knows how important it is to his reelection chances to pass something that looks like a real reform. That's why he's about to spend six million dollars on radio ads touting the TTRC plan. Naturally, the funding for those ads will come from corporate donations, and as such Chris Bell and Carole Keeton Strayhorn are crying foul.

Both suggested Perry could gain politically in his re-election bid this year from the media campaign, funded by private donations that don't have to be revealed.

Bell said the ad campaign raises ethical questions by accepting donations from companies that may be affected by Perry's plan, which would cut property taxes and create a broad-based business tax to help pay for public schools.

Strayhorn said Perry should "shut it down" or disclose the names of contributors.

Kathy Walt, a Perry spokeswoman, said the Texans for Taxpayer Relief project, set up as a nonprofit group, is legal. She said Perry's plan is a legislative issue, not a political one, heading into the special session.


Strayhorn said tax plan advertisements with Perry's image amount to a political campaign because school finance is a key issue in his bid for re-election. The brains behind the campaign include several of Perry's top political aides.

"This is absolutely wrong and should be stopped in its tracks," Strayhorn said.

Bell said he'll wait to see how the commercials come out, but that Perry has a huge personal stake in the outcome of the school finance session.

"It's basically shaping up to be a reorganization of his campaign in a nonprofit structure," Bell said.

Walt said there's no politics to it, just state policy in a special session called to meet a court-ordered June 1 deadline. Corporations can spend money on that, Walt said.

"This is a legislative issue addressing significant property tax reduction," Walt said.

I'm sure the law is on Rick Perry's side - not that the toothless Texas Ethics Commission would do anything about it otherwise - but c'mon. Of course this is political. Perry needs the support of the Legislature, and after this raucus primary season, with Carolyn Boyle and the Texas Parent PAC the newest kingmakers in town, he needs to demonstrate to any waverers that this plan is what the people want. He's not strong enough to twist arms, so he needs to make a sale to the public. That's what this is, plain and simple.

Having said that, the ads could simply point people to the TTRC website, or be otherwise reasonably about information rather than advocacy. Perry doesn't deserve any benefit of the doubt, but the content of the ads does matter. You never know. Bell and Strayhorn are right to point this out now, and this needs to be revisited once the ads are playing.

Meanwhile, one business group has endorsed the TTRC plan, while another is planning its own radio assault against it. The infamour Texas Association of Business is on board with the Perry Plan.

The group, which consists of a broad representation of small and large businesses across the state, called the plan "the best proposal to provide fair and equitable distribution of the tax burden while providing $6 billion in property tax relief for Texas employers and employees."


"Employers in Texas are more than willing to do their part to fund education," TAB President Bill Hammond says. "To ensure that every business does their part, the current proposal offers a low tax rate spread amongst all sectors of business."

I always have the urge to count my change whenever Bill Hammond speaks. If he's in favor of this, let's go reread the fine print.

On the other side of the coin is a group called Texans for Limited Government (TLG). The Quorum Report says:

Texans for Limited Government (TLG) today announced the launching of a statewide radio campaign to fight the business tax as proposed by the Texas Tax Reform Commission. "As a businessman, I understand that Texas businesses form the backbone of our state economy," said TLG Founder Gary Gates, "our radio ads are urging Texans to take action against the proposal before Austin slams businesses with an entirely new tax." Gates observed that the proposed school finance solution shifts much of the tax burden from property owners to businesses, but stated, "Not only are Texas businesses overtaxed, but eventually all taxes levied on businesses are passed down to the final consumer in the form of higher prices." Gates continued, "Instead of creating an entirely new stream of revenue for government, the Texas Legislature must rein in out of control government spending."

I'm guessing that's the same Gary Gates who lost the GOP primary for SD18 last March. I find his arguments shopworn and unpersuasive - if your problem is passing the tax burden onto consumers, you ought to maybe say a few words about the sales tax, methinks - but it's another voice in the mix. Stay tuned.

Posted by Charles Kuffner on April 13, 2006 to Budget ballyhoo | TrackBack

You asked: Will the State Supreme Court accept this kind of legislative punt?

On the CPPP conference call yesterday, those guys all said that no - they very well may not. If we use a surplus-filled, "Get out of Dodge" plan, then they'd expect an injunction to be filed and the June 1 deadline may very well still go into effect.

That's their opinion, anyways. Whether 9 Republican justices will shut down schools on Rick Perry will, of course, remain to be seen...

Posted by: Phillip Martin on April 13, 2006 11:49 AM