April 27, 2006
Another day, another roundup on HB3

While we wait for the Senate Finance Committee to start work tomorrow, here's a roundup of what's being said about the current state of things.

Chron: Perry sure, Dewhurst not so much

Gov. Rick Perry said Wednesday he is confident the Legislature will reduce local school operating taxes by about one-third, despite Lt. Gov. David Dewhurst's reservations about digging too deeply into the state budgetary surplus to help pay for the cuts.

"I'm very comfortable that the Senate and the House will get to that appropriate level," Perry said, challenging the Senate to approve a new, expanded business tax and related legislation approved by the House.

"I'm quite comfortable that these projections (for continued revenue growth) will hold up," he added.


Most of the lost revenue would be covered by the new business tax, which the House approved on Monday, and a $1-per-pack increase in the cigarette tax, which the House will debate today. The governor also would use as much as $2 billion of an $8.2 billion budgetary surplus to meet his property tax-cut goal.

But Dewhurst said much of the surplus is needed for other things, including hurricane relief, health care, a teacher pay raise of at least $2,000 a year and other school improvements. He said Perry's tax proposal would raise about $4.3 billion a year, enough to cut school property taxes by only 33 cents to 35 cents per $100 valuation, not the 50 cents the governor is seeking.

He said the Senate will have to decide whether to cut school taxes less, take longer to phase in the tax reductions or raise additional revenue.

Looks like another chance for Dewhurst to go toe-to-toe with House Speaker Tom Craddick. We've all seen that movie before. Remember, kids: the reason one bangs one's head against a wall is because it feels so good when you finally stop.

Statesman: Larry the Cable Guy and a bunch of bidness interest lobbyists. If that's not Rick Perry in a nutshell, I don't know what is. One side point to highlight:

Sen. Florence Shapiro, R-Plano, poised to insert a teacher pay raise into the House-approved package, said lawmakers could finish work well before the special session's 30 days expire May 16.

The Texas Supreme Court has set a June 1 deadline for fixing a school finance system overly dependent on property taxes that districts have little discretion in setting.

"It's a lovefest," said Shapiro, crediting widespread business support for the tax plan and close communication between senators and House members as well as Lt. Gov. David Dewhurst, who presides over the Senate, and House Speaker Tom Craddick, R-Midland. "I hope what it is is good public policy."

Hey, maybe this time really will be different than every single other time. All I know is, it's always Dewhurst or a Senate proxy for him that gets quoted in this fashion whenever these stories are written. If Craddick gets asked, his spokeswoman replies with a non sequitur. There's a reason I remain skeptical.

Express News: Risks and rewards for Perry

Houston radio show host Dan Patrick, a GOP state Senate nominee, said he tried to persuade Perry to abandon the plan.

"I shared with him I understood the dilemma he was in - that no matter what decision he made, his opponents would find a reason to criticize him - but that if he used the surplus and increased taxes on business, not only would they criticize him, but he would risk losing his base," Patrick said.

"For him to win in November in a four-person race, he must keep the base," said Patrick, who still plans to support Perry in November.


GOP consultant Royal Masset said Perry's stand for the plan "helps him immensely. He's being kind of his own man.

"The only way Perry can lose is if nothing comes out of this special session," Masset said.

Political scientist Bruce Buchanan of the University of Texas at Austin said, "There will be some unhappy conservatives. But the fact that he could point to a resolution that he could justify in terms of tough choices and necessary compromise is likely to please more people than it irritates.

"A lot of people are going to conclude if this thing passes, Perry is going to be hard to stop," Buchanan said.

But [Texas Eagle Forum President Cathie] Adams said if the Legislature doesn't pass a plan that conservatives can embrace and that provides meaningful property-tax relief, she's worried about the effect on GOP turnout.

"I think conservatives would be frustrated. They're already frustrated with the president because of immigration and government growth. If we don't get a meaningful property-tax reduction, then in November ... what they'll do is not something crazy, like go and vote for the other party," she said. "I do see them sitting at home and folding their hands."

I think Masset and Buchanan are right. Perry may lose some conservative base support if his plan passes, but honestly, where are they going to go? Both Strayhorn and Bell want to spend more on education, and while Friedman has talked about "returning" the surplus, he's also on record supporting gay marriage (however jokingly). I can't see the Cathie Adamses of the world embracing him, given that.

Adams herself, of course, will stand by her man regardless. They make a mighty tasty pitcher of Kool Aid in the Eagle Forum, you know. In the end, that's what I expect to happen among most other base Republicans, so Perry ends up with a net gain. Like it or not, the TTRC plan is a tangible result that Perry can point to. The implementation is screwed up, thanks to HB2, but passing it means no more do-nothing special sessions. That's what Rick Perry needs more than anything.

Star Telegram: Not as much property tax reduction as you might have thought. Okay, there are still some risks for Perry, depending on what your expectations were and what your standards are.

[L]egislation now winding its way through the Texas Legislature would reduce property taxes for school operations by less than 12 percent - and local school districts could still push them back up again. It provides for further cuts in later years, but provides neither the mechanism to do so nor the money to pay for the promised decrease.

“I think it’s troubling,” said Peggy Venable, director of the Americans for Prosperity, which advocates for smaller government. “We want significant tax relief, and we want it to be meaningful and substantial. ... We’ve heard a lot of promises and we have a lot of numbers out there ... but if there are no real taxpayer protections, it’ll end up being a tax increase.”

By "taxpayer protections", I'm sure she means "appraisal caps", which have been a (failed) Perry agenda item for some time. I'll bet Perry starts talking them up again once the TTRC plan has been passed.

DMN: On to other items. This is about how Perry is now "open" to an increase in teacher pay (as if he wants the ParentPAC on his hindquarters this fall), but my favorite bit is at the end, on a different topic:

Meanwhile, some health care providers grumbled that the deal they struck with the governor to support the legislation turned out to be worth less once the House finished with the bill.

The House-passed bill lets physicians, hospitals and other caregivers deduct from their gross receipts the payments they receive from government health insurance programs for the poor. But it doesn't have as big a deduction as Mr. Perry promised.

Several health care lobbyists said the Texas Medical Association erred by negotiating with the governor, not legislative leaders.

All together now:

D-Day: Hey, quit your blubberin'. When I get through with this baby you won't even recognize it.
Otter: Flounder, you can't spend your whole life worrying about your mistakes! You f'ed up - you trusted us! Hey, make the best of it! Maybe we can help.
Flounder: [crying] That's easy for you to say! What am I going to tell Fred?
Otter: I'll tell you what. We'll tell Fred you were doing a great job taking care of his car, but you parked it out back last night and in the morning, it was gone. We report it to the police, D-Day takes care of the wreck, the insurance company buys your brother a new car.
Flounder: Will that work?
Otter: Hey, it's gotta work better than the truth.
Bluto: [thrusting six-pack into Flounder's hands] My advice to you is to start drinking heavily.
Otter: Better listen to him, Flounder, he's in pre-med.
D-Day: [firing up blow-torch] There you go now, just leave everything to me.

Let that be a lesson to you, TMA.

Finally, some feedback from a couple of candidates. First, from Dot Nelson-Turnier, as quoted by Stace:

I don’t think using a one time surplus for a tax cut is a good idea. It’s like quitting your job and using your savings to pay the rent. What do you do when your savings run out? It’s not a permanent solution. It’s just not fiscally sound.

There's more, I just clipped the end. Next is from Diane Trautman:

Yesterday, the House passed a series of legislative proposals known as House Bills 1, 2, 3 and 4. Here’s a rundown of what Members considered and how each bill turned out:
  • House Bill 1: Spends $2.4 billion of the $9.3 billion state surplus. Money is spent on lowering the statewide property tax rate to 88.7% of current local property tax rate -- local rates vary to school district to school district, but this cut is roughly 17 cents/$100 property valuation for most property tax payers.

  • House Bill 2: Created a Property Tax Relief Fund, to which all proceeds from the new business tax, used car sales tax and cigarette tax are dedicated permanently. Under HB 2, the state revenue from these new taxes can never be used to pay for a teacher pay raise, new textbooks, etc.

  • House Bill 3: Replaces the current state franchise tax system with a new “margins tax” on business’ gross receipts. The tax is 1% for most businesses and .5% for wholesalers and retailers. Businesses can deduct employee compensation such as salary, health care and retirement. The plan is full of loopholes – under the current system 1 of 16 businesses pay the franchise tax. Under the new system, this number rises to only 2 in 16. Oil companies, insurance companies and big businesses that own lots of property will now pay less than their fair share, while small and medium businesses will see their taxes increase dramatically. Further, HB 3, coupled with 1 and 2 is an $11.4 billion hot-check over 5 years. The new taxes in HB 3 will never be enough to make up for the taxes cut in HB 1. Additionally, with the passage of HB 2, the funds generated in HB 3 can never be used to pay for teacher pay, new textbooks, etc.

  • House Bill 4: A new tax on used car sales. Buyers must pay sales tax based on the at least 20% of the “blue-book” value of the car, and not the sale price.

  • House Bill 5: A new $1/pack tax on cigarettes. Consideration of this bill has been postponed due to a technical error in the bill. The bill does not include an immediate $1 tax. Instead the tax is phased-in: 50 cents, then 25, then 25 again. Studies have shown that this method does not actually reduce smoking. For this reason, most anti-smoking groups oppose the bill in its current form.

Next week it's the Senate's turn. Stay tuned.

Posted by Charles Kuffner on April 27, 2006 to Budget ballyhoo | TrackBack