April, 2004:

As noted yesterday by the Yellow Dog Blog, this special session has essentially ceased to be about school finance reform and is instead focusing first on property taxes, with maybe some school stuff thrown in if they can. In particular, that means if the gambling expansion goes through. No gambling, no extra school money. That’s the kind of leadership we have.

Here are the “highlights”, such as they are. I note that there’s now a school finance blog, which has some of the actual legislative info, so check it out (via BOR).

House Panel to vote Saturday

Rep. Kent Grusendorf, R-Arlington, said he hopes to have a version for action by the House Select Committee on Public School Finance on Saturday that the 150-member House can debate next week.

“I don’t think we want the school community up in arms,” committee Chairman Grusendorf said during a 15-minute meeting billed earlier as the panel’s chance to approve the plan.

A factor in the delay could be a South Texas legislator’s concern over a computer analysis suggesting Rio Grande Valley districts will get less aid under the plan than they would if lawmakers kept the “Robin Hood” system, which this year required property-rich districts to share $1.2 billion with others.

Rep. Rene Oliveira, D-Brownsville, awaiting an explanation from GOP leaders, said: “If there is a defect in this model, it’s better for us to find out now and address it. This is probably the most important legislation most of my colleagues will ever vote on. We need to slow this thing down and make sure we’re doing the right things.”

Panel expects to pass plan

The legislation and a companion constitutional amendment that would legalize video gambling machines are expected to be voted on Saturday by the House Select Committee on Public Education.

The measures could then be considered by the full House next week at the halfway point of the 30-day special session.

Committee Chairman Kent Grusendorf, R-Arlington, said he expects the 29-member panel to approve the two measures Saturday.

“I think we have consensus,” he said, referring to latest version of the 400-page bill that would overhaul the school funding system and reduce property taxes by about 30 percent.

The Republican lawmaker cautioned that additional funding for schools is probably contingent on the Legislature agreeing to legalize video gambling machines at seven dog and horse tracks and three American Indian reservations in the state.

No gambling, no help for schools

“Right now we don’t have a backup plan,” said Rep. Talmadge Heflin, R-Houston, House Appropriations Committee chairman. “My guess is if the VLT (video lottery terminals) didn’t go, then there’d probably be some reduction in spending money.”

Rep. Kent Grusendorf, chairman of the House Select Committee on Public School Finance, said he thinks most lawmakers’ top priority is reducing property taxes. Supporters of increased school spending expressed dismay that funding education has become linked to gambling. Dick Lavine, a fiscal analyst for the Center for Public Policy Priorities, which advocates for fairness in taxation and education funding, said lawmakers have their priorities “upside down.”

Opposition to gambling mounting

“I think the leadership recognizes there is a growing group of people who are opposed to this,” said state Rep. Linda Harper-Brown, R-Irving, who claims to have some 25 signatures of House members firmly opposed, so far.

She would need 51 “no” votes to be absolutely certain of blocking it: A constitutional amendment legalizing slot machines requires 100 votes in the 150-member House, where Republicans hold an 88-62 advantage over Democrats. Two-thirds of the state Senate and a majority of Texas voters would also have to approve it.

With such high stakes, state lawmakers are already making contingency plans in case opponents marshal enough support to stop the slot machines, technically known as video lottery terminals, or VLTs.

Failure to add them as a new source of state revenue will blow an estimated $1.5 billion hole in the latest House school finance package — about the same amount of new education money the bill envisions for the 2006-07 budget cycle.

The bill is tentatively scheduled for a vote in a House committee this weekend.

“If VLTs go down, that’s a huge part of this. Where do you go then?” said Bob Richter, a spokesman for House Speaker Tom Craddick, R-Midland. “I think they are concerned about that and what to do it if goes down.”

Bipartisan opposition to gambling

Rep. Rene Oliveira, D-Brownsville, said some of his party members are willing to vote against constitutional amendments that include video lottery terminals and other revenue-raising measures if Republicans don’t budge on a sales tax increase.

“The Democrats’ position is that the sales tax unfairly shifts the burden to the middle class, poor and fixed-income individuals,” Oliveira said.

Much business whining

“We’re getting too much of the load,” said Wade Sullivan, a Ford dealer in Crockett.

Under the plan, sales taxes on cars would jump, from 6.25 percent to 7.75 percent. For the buyer of a $20,000 car, the sales tax would rise $300, to $1,550.

Car dealers also would have to charge a 6.75 percent sales tax on mechanics’ labor, not just on repair parts. And they would have to foot a new payroll tax.

“There’s no doubt they want to punish people who drive,” said Tom Blanton, vice president for legislative affairs at the Texas Automobile Dealers Association.

Many businesses were furious that the House on Wednesday did an about-face and scrapped a day-old proposal to expand the sales tax to services by lawyers, accountants, Realtors, architects, engineers, interior designers, barbers and beauticians.

“Obviously, haircuts are more important to these people than the ability to get around,” said Mr. Blanton, who represents 1,400 car dealers. He said the payroll tax is “the job-killer tax, probably the most insidious of all.”

No new booze taxes – yet

“In the beginning, everything was on the table,” said Robert Black, a spokesman for Mr. Perry. “But after weeding things out, that simply didn’t make it into the plan.”

The liquor lobby has long been among the most powerful and influential in Austin. According to the Institute on Money in State Politics, about $1.5 million was given to Texas candidates in 2002 by beer, wine and liquor interests.

Despite the fierce efforts of lobbyists, some lawmakers are angling to tack a beer and liquor measure as a school-finance plan reaches the House floor. On Thursday, Rep. Charlie Howard, R-Sugar Land, filed a bill that seeks an additional 1 percent sales tax on ale, beer, wine and malt liquor, among other drinks.

Legislators and lobbyists have disappeared into the back halls of the Capitol to hammer out a deal, with some looking to replace funding options they don’t like by tossing others into the pot.

Some House members, like Richardson Republican Fred Hill, want the liquor industry to share more of the burden.

“I would think it’s [tax increase on beer] gaining momentum,” said Mr. Hill, who is expected to introduce an amendment raising the taxes on alcohol.

Officials from the Texas beer industry say they already pay high taxes and fees.

Mike McKinney, a lobbyist for the Wholesale Beer Distributors of Texas, said the Texas beer industry bears the eighth-highest tax burden per capita in the nation – $26.90 annually, including state and federal excise taxes on barrels of beer and sales taxes.

“We are taxed a good deal higher than the national average,” Mr. McKinney told the House committee studying school finance. “We’re also quite a bit higher than our neighbors.”

The Texas per capita rate is double that in Louisiana and $7 more than the industry is taxed in Oklahoma, according to industry figures.

“We’re always concerned about letting the neighboring states capture part of our market because we get beyond them,” said Dennis Bonnen, R-Angleton. “I see two states immediately where we’re [taxed] better than twice what they are.”

Mr. Hill, though, said the overall per capita tax numbers could be misleading because they don’t factor the massive quantities of beer consumed in the Lone Star state.

Mr. McKinney conceded that point: “We do drink a lot more beer in Texas than they do in Arkansas.”

If they limited this one to only taxing wimpy downstream brands like Bud and Miller, I’d support it. It’d practically be a public service.

Remember those halcyon days of, um, yesterday, when Tom Craddick could say things like this?

The expansion of the sales tax is designed to tap into the growth in the service sector of the Texas economy.

“The idea of broadening it, that’s where the growth in the economy is,” said Craddick. “If you broaden it, you pick up that growth.”

Yeah, well, it was all a load of crap. The corporate overlords have spoken, and there will be no expansion of the sales tax into the service economy, with the minor exception of auto repair and car washes. As there’s not much variation in today’s coverage, I’ll just point to the stories: Chron, Morning News, Express News, Statesman, Star Telegram. Here’s a brief summary of the changes, from the Statesman:

* Providing a larger payroll tax: For-profit businesses would pay 1.25 percent of their wage base or $125 per full-time employee each quarter, whichever is less, compared with 1 percent or $100 per employee under the original proposal.

* Keeping the residential and business property tax collections at the local level instead of creating a statewide property tax.

* Raising the general sales tax rate even higher, from its current 6.25 percent to 6.75 percent. Heflin’s plan had proposed a 6.5 percent rate.

* Eliminating the proposed sales tax on all but two of 19 services. Auto maintenance and repairs and car washes would still be taxed.

* Increasing the motor vehicle sales tax from the current 6.25 percent to 7.75 percent — compared with 7.5 percent under Heflin’s proposal.

The new version still calls for legalizing video lottery terminals, adding a $1-per-pack tax to cigarettes and charging sales tax on items currently exempt, such as newspapers, magazine subscriptions and coin-operated services.

In addition, the state would put a $1 surcharge on amusement tickets, including those to movie theaters and professional sporting events.

One committee member said the committee is considering lowering the school property tax rate from $1.50 per $100 of value to $1.05 per $100 — 5 cents higher than what was originally proposed.

I’ll get to some of the implications in a minute, but first, one piece mentioned only in the Express News:

Creating a new tax on cigars that would generate almost $6 million a year.

So we’ve got increases in the cigarette tax and smokeless tobacco tax, plus a new tax on cigars. I had no idea we had such a powerful pipe-smoking lobby in this state. How else to explain how they and only they got off tax-free?

Points to ponder:

1. Leaving property tax collection at the local level may mean no need for a Constitutional amendment. I’m guessing the Attorney General will have to rule on this, but if so, it means that the proposed property tax reductions can be passed by a simple majority in each chamber, so Democrats could not block it so easily. The 2/3 rule in the Senate could still come into play, but as David Dewhurst has already indicated that he’s not bound by tradition, I wouldn’t bet the farm on it.

2. Whatever increase or expansion of the sales tax goes through, the expectation of revenue from gambling is what’s allowing there to be more money for the schools (which, remember, was the original reason for this session) in conjunction with property tax reductions. What happens if the opponents of expanded gambling, such as Sen. Jane Nelson, carry the day? Will the Lege simply go forward with the current tax proposals and not take any action on school funding issues? Surely this wouldn’t be seen by the courts as providing a Robin Hood replacement with sufficient funding equity.

3. I’m sure the Democratic caucuses have some strategy in mind over there on the sidelines. I hope I’m not reading anything about it because they’re biding their time and waiting to see what gets proposed before they start making noise. They’ll need to be clear about why they’re taking whatever obstructive action they may pursue, which is that proper funding for schools takes precedence over giving Highland Park homeowners a tax cut. I’ve said it before and I’ll say it again – thanks to the gerrymandered State House districts, they have little to fear from Republicans at the ballot box.

One last item, from the Chron:

The governor visited a home in Pflugerville, in suburban Austin, to renew his call for the Legislature to cut and limit future growth in local property taxes. His proposal includes a 3 percent cap on the annual growth of property tax appraisals.

David and Tammy Odom were recently notified that the appraised value of their house, which they purchased about 18 months ago for $165,000, had jumped $8,000 during the past year, meaning their tax bill this year could increase by $240 or more.

Perry said his proposal, if enacted by the Legislature, would cut the Odoms’ potential tax increase almost in half.

Raise your hand if you think the retail sales price of the Odoms’ house didn’t increase by at least as much in the last 18 months as well. So why should I care about the increase in their appraisal? Cap or no cap, when they sell that house the new owner will be taxed on the market value of the house. Why should they be treated any differently?

UPDATE: Sadly, the answer to point #2 appears to be as I feared: no new money for schools. You’re damn right I expect the Democrats to vote that down.

The state House has released a new plan to overhaul state tax collections as part of school finance reform, and to say the least, it’s not timid. It’s also not likely to survive in its present form. I think the Statesman summed up reaction to it pretty well:

The initial reviews: reserved kudos from the Senate, studied neutrality from the governor and a scramble by lobbyists to divine the plan’s ramifications.

Here’s a basic outline of the plan, as reported in the Morning News.

• A slight increase in the state sales tax rate, raising it from 6.25 percent to 6.5 percent. In Dallas, the rate would be 8.5 percent including the local levy. Also, a larger increase in the motor vehicle sales tax would boost the rate from 6.25 percent to 7.5 percent.

• Expansion of the sales tax to include a host of services and items. That would include auto repairs, barber and beauty services, residential repairs, legal and accounting services, real estate services and financial services.

• A state payroll tax that would replace the business franchise tax. All for-profit employers would be charged either $400 or 1 percent of annual wages per employee – whichever is less. A similar proposal with a 2.5 percent rate is also under consideration.

• A $1 increase in the state cigarette tax to $1.41 per pack and a slight increase in the state tax on smokeless tobacco. The cigarette tax increase would raise about $700 million a year.

• Legalization of video gambling machines at seven dog and horse tracks and on three American Indian reservations. The maximum 40,000 slot machines that would be authorized would generate $1.5 billion a year.

Other tax and fee increases include a $1 surcharge on all amusement tickets and expansion of the state sales tax to include Internet access services and newspapers and magazines.

Most of the new revenue – $5.2 billion – would be used to offset the property tax reduction of 50 cents per $100 of value. The remainder would provide $1 billion in new money for schools and $750 million to equalize the 10 cent levy that school districts could collect for enrichment.

The payroll tax would generate about $2.4 billion a year, but the net gain to the state would be $600 million after the business franchise tax is abolished. The franchise tax, paid by about one in six businesses because of loopholes and exemptions, generates about $1.8 billion a year.

A constitutional amendment would be required for the state property tax and the legalization of video gambling. A constitutional amendment requires a two-thirds vote of the House and Senate as well as voter approval.

Not explicitly mentioned there but noted by the Star Telegram is that this plan does not include the infamous stripper tax. That $1 surcharge on amusement tickets apparently includes movie tickets, though. The Chron has some more details on the new tax proposals:

The plan introduced by Rep. Talmadge Heflin, R-Houston, also eliminates the corporate franchise tax and imposes a new business tax based on payroll. Businesses would pay 1 percent of their payroll or $400 per employee, whichever is lower.

Heflin’s proposal also includes higher sales taxes on motor vehicle and boat sales, a $1 cigarette tax hike, and video lottery machines at racetracks. Among the services that would be taxed are home remodeling, barber and beauty, legal, accounting, architectural, public relations, testing labs, financial, real estate brokerage, veterinary, and automotive maintenance and repair.

[…]

Heflin, chairman of the House Appropriations Committee, said the proposal tried to reach a balance between business and consumer taxes.

“We tried to be sensitive to the business community when they said, `We don’t mind paying our share if it’s fair and uniform,’ ” Heflin said.

Businesses would pay some of the new sales taxes on services such as management consulting, research and development, and computer programming. But other new sales taxes, including on coin-operated laundry machines and car washes, will fall heavily on consumers.

The plan also includes a state property tax set at $1 per $100 assessed valuation to replace local school property taxes now capped at $1.50. However, Heflin said he is considering allowing the $1 tax to remain at the local level, a priority of school districts.

[…]

Craddick said he thinks the business community may accept the new taxes because of the reduction in property taxes and elimination of the franchise tax.

“The franchise tax is in decline anyway; more and more companies are converting out of it. You’re having fewer and fewer businesses pay,” said Craddick. “You need to look at a base where everybody pays on an equal basis.”

The expansion of the sales tax is designed to tap into the growth in the service sector of the Texas economy.

“The idea of broadening it, that’s where the growth in the economy is,” said Craddick. “If you broaden it, you pick up that growth.”

[…]

The House committee also heard about a separate plan for a 2.5 percent payroll tax offered by Rep. Dan Branch, R-Dallas. Branch said his plan would replace most of the franchise tax and would raise $5 billion, enough for a 33 percent property tax cut.

In addition, Rep. Fred Hill, R-Richardson, offered an amendment capping property appraisal growth at 5 percent.

There’s a lot to digest here, and it’s probably a fool’s errand to pick out any aspect for detailed inspection. For one thing, as the Statesman notes, there’s something in there for pretty much everyone to love and to hate.

Sen. John Whitmire, D-Houston, said almost any omnibus proposal, though it may have bits and pieces included to appeal to various lawmakers, will inevitably include over-my-dead-body elements for other legislators.

Sen. Jane Nelson, R-Lewisville, said she is implacably opposed to any gambling elements. Tuesday, she was already talking about a filibuster and pondering medical procedures to allow her to spend hours on the Senate floor without going to the restroom.

If a video lottery bill reaches the Senate floor, Nelson said, “I plan to call a doctor down and be catheterized.”

I believe that’s my Too Much Information nominee for the session, but it does demonstrate the degree of opposition that certain aspects will face. Another part that will be fought tooth and nail is the proposed change of the property tax to be collected statewide, as noted in the Express News.

[S]chool groups have long opposed replacing local school taxes with a statewide levy, contending such a move would diminish the connection between taxpayers and local schools while giving legislators the green light to meddle more in how schools are managed.

The Texas Association of School Administrators asked its members this week to contact House members and urge a “no” vote on the expected $1 per $100 valuation state property tax.

“It is advantageous to public schools to maintain a strong and direct connection between the local taxpayer and the public schools that benefit from their taxes,” its Monday alert states.

Bill Ratliff, who proposed a statewide property tax as an education funding source while serving as an East Texas senator, newly lobbies for the Texas Association of School Boards.

Ratliff said today: “The fear all along was that if there is no significant local (school) tax, you know the old saying: ‘He that has the gold makes the rules.’ If all the money is coming from the state, the Legislature will not be able to resist calling all the shots. Schools will have less local control.”

Ratliff said he has been told there are more than 50 pending amendments that amount to legislative efforts to dictate how school districts operate—ranging from directives affecting teacher contracts to one setting school board election dates.

To school districts, Ratliff said, “that’s usurpation of local control—and they don’t even have any extra money yet.”

All along, I’ve been trying to figure out the political implications of this change or that, and I suspect the reason that reaction outside the House, especially from Rick Perry, has been so muted is that right now everyone else is making the same calculations. The House plan as it is right now would be a victory for Perry for property tax reductions (whether or not a separate appraisal cap is included, though to not have a cap would be a loss for him), but such broad expansions and increases in other taxes might be hard for him to swallow, and if the gambling proposals go down in flames, thus eliminating a potentially big source of extra revenue for the schools, then all bets are off (sorry about that).

I must say, I continue to remain puzzled about the whole property tax versus other tax issues. I’m a homeowner, and I know fully well that I pay a lot of property tax, but I also know that I get a decent sized piece of that back in April when I file my federal tax return. I just can’t quite understand the appeal or logic of using an increase in a non-deductible tax to subsidize a cut in one you can write off. I can only presume that it’s analogous to security by obscurity – everyone knows what their property taxes are, but no one has a clear handle on how much they shell out in sales tax, so cutting the former is always appealing even if the corresponding rise in the latter overcompensates for it in the long run.

Finally, whether slot machines are in our future or not, the House heard testimony yesterday that its current plan to license the machines is too generous to the licensees.

Jeff Hooke, an investment banker and consultant from Maryland, said a plan being considered by a House committee would charge racetracks only a “nominal fee” for licenses worth many millions of dollars.

“The governor and the Texas Legislature have a fiduciary obligation to get the taxpayers a fair deal,” Hooke said in testimony prepared for the Senate Finance Committee.

[…]

Hooke, whose travel expenses to Texas were paid by the Baptist General Convention of Texas, which opposes gambling, said that making track owners bid against competitors for the licenses could generate almost $4 billion in licensing fees alone for the state.

Hooke said the state could auction the licenses for cash to the highest qualified bidders or auction licenses to bidders offering to take the lowest percentage of revenue from the machines.

He said the state of Illinois auctioned a casino license in suburban Chicago last month for $518 million. He said a video lottery terminal license is comparable in value to a casino license because slot machines provide 75 percent of casino profits.

Hooke said an Indian tribe in Michigan paid $265 million for a 40 percent interest in a Detroit casino license in 2000, indicating a total license value of $663 million.

As with yesterday’s stuff, this evidence is not coming from a disinterested party, so take it with whatever level of skepticism you feel is warranted. As a matter of theory, though, I like the idea of making potential slot machine sites bid for their licenses. They know how much they think the licenses are worth to them, and it’s in the state’s interest to adjust their fees accordingly.

Slot machines at horse racing tracks are all the rage today.

Seven Texas racetracks, including Grand Prairie’s Lone Star Park, could function as around-the-clock gambling casinos open 365 days a year under a multibillion-dollar proposal presented to a legislative panel Monday.

State Rep. Jim Pitts, a Waxahachie Republican, made the presentation to be included in a far-reaching package of legislation that would overhaul the way Texas pays for public education.

Under Pitts’ proposal to the House Select Committee on Public School Finance, Lone Star Park and six other racing facilities, along with three Indian reservations, could operate as many as 40,000 video slot machine-style lottery terminals where patrons play for cash prizes.

Pitts and lawyers representing the Texas Lottery Commission and the state attorney general’s office said the machines would generate more than $2.6 billion a year, with the state receiving $1.57 billion.

Officials project that Lone Star Park, the 8-year-old racetrack just north of Interstate 30 between Dallas and Arlington, would produce $1.7 billion in annual revenues and pump $701.7 million into the state treasury. That’s more than Las Vegas hotels and casinos generate for the state of Nevada, the select committee was told.

“That blows my mind,” said state Rep. Kent Grusendorf, R-Arlington, the panel’s chairman.

I do not believe these figures. I believe they are pumped up, overly optimistic, and based on flawed assumptions. I believe this is a new version of the bill of goods we were sold on the lottery a decade ago. I need to see some numbers from a truly disinterested party before I’m willing to accept any data as accurate.

The rate of return was based on the provision in the measure that calls for the state to collect 60 cents on every dollar earned by each video slot machine. But the former chairman of Lone Star Park warned that the state’s desire to maximize its revenue could sabotage the venture before it is launched.

“You won’t be able to develop the facility if the tax rate and all costs on the track are as high as that,” said Robert Kaminski, who is now a consultant to Lone Star Park’s parent company, Magna Entertainment Corp. “You can’t tax it so high on the front end that it reduces the incentive to put the investment in to generate the revenue that the state wants.”

There’s your first danger sign. We can talk all we want about how slot machine money will be earmarked for education, but once they’re a reality there will be a ton of pressure to look out for the interests of the race tracks who own them. I guarantee you that when that happens, those interests will be put ahead of everyone else’s. If we want more gambling in Texas, we should be honest about it and drop the fig leaf that it’s all about generating money for schools.

I already know the real answer to this question, but is anyone else wondering why there’s so much official concern for the well being of race track owners?

During testimony about video lottery terminals, Texas Agriculture Commissioner Susan Combs told the committee that having the terminals would help the state’s equine industry. She said money the racetracks would get from the terminals would help fatten their purses, luring owners with better breeds of racehorses to the state.

“If you go to race, and the maximum prize you can get is $5,000 versus $500,000, where are you going to go?” Combs said after her testimony. “You’re going to go to the $500,000.”

The level of concern for the historically oppressed horse racing industry is touching, isn’t it? But why stop there? Why not bring the same joy to other industries? How about slot machines at the gas pump? If you go to fill up your tank and the maximum you can get is a full tank of gas versus a full tank plus a shot at $500,000, where are you going to go?

By the way, why is the Ag Commissioner testifying on this subject?

“I look at it from the aspect of rural economic development,” Combs testified before a House committee as legislators entered their second week of a special session.

Oooo-kay, let’s move on. Let’s go back to the numbers for a second.

Seven horse and dog tracks in Texas, including Lone Star Park at Grand Prairie, would average 4,000 video slot machines. The rest would be on three American Indian reservations.

To put the figures into context: Caesar’s Palace on the Las Vegas strip has about 2,000 slot machines. The state of Louisiana has just over 14,000 video slot machines. West Virginia has 10,500.

Nevada has about 210,000 slot and gaming machines, according to the 2003 annual report of International Game Technology, the country’s largest manufacturer of slots and gaming devices.

That’s a lot of slot machines, which would make for a significant expansion of gambling in Texas, right?

Some state leaders, including Gov. Rick Perry, have said the slot machines wouldn’t amount to expansion of gambling in the state because they would be confined to locations where other forms of gambling already are allowed.

“The proposal allows the Texas Lottery Commission to operate a video lottery system consistent with the public policy that strictly limits the expansion of gambling in Texas,” Mr. Pitts said. “This amendment will continue to control the proliferation of gambling by only allowing … [gaming] at horse and dog tracks in Texas and certain Indian lands.”

Yeah, that’s what I thought.

This all may be an academic exercise, as there exists some strong opposition in the Lege to expanded gambling.

Republican House members Linda Harper-Brown of Irving and Jodie Laubenberg of Parker say they can’t support the use gambling to finance education.

Ms. Laubenberg heard about the Pitts proposal from a reporter late Monday.

“Is he serious?” she said. “My position hasn’t changed.”

Ms. Laubenberg said her opposition to the slot machine idea is “nothing against the governor.”

“But this is just one component of the plan I cannot support,” she said.

Ms. Harper-Brown said lawmakers who oppose gambling will prevail.

“This does nothing to damage our resolve,” she said of the Pitts proposal.

And not just in the House, either.

Sen. Steve Ogden, R-Bryan, chairman of the Senate Finance Committee, said senators waiting for House action will consider slot machines, adding, “My preference is to not do it.”

“I’ve never been a supporter of state-sanctioned gambling,” he said.

It’s important to remember, though, that the real agenda here isn’t gambling, and for that matter isn’t really school finance reform. It’s an antitax agenda, and the potential consequences aren’t getting nearly the public hearing that slot machines are.

[Rep. Kent] Grusendorf, referring to moves to change Perry’s proposed restrictions on local governments’ ability to raise taxes, said, “It’d be nice to get one hot-button issue off the table.”

Advocates for cities and counties, who question the fairness of lawmakers directing local tax decisions, said they are reviewing language reached this weekend by Perry, House Speaker Tom Craddick, R-Midland, and Rep. Fred Hill, R-Richardson. Perry’s office said the governor remains committed to his original proposals “at this time.”

“We’ve come as close as we can possibly get to agreement on it,” Hill said.

Under the changes, voters would be asked to cap at 5 percent how much a single-family home’s valuation can annually increase for tax purposes. Perry has proposed a 3 percent cap.

Perry has sought to require local governments to seek voter approval of tax increases that outpace population growth and inflation. The new language would permit voters to petition for a tax rollback if local governments increase taxes 5 percent or more, not counting tax breaks for economic development.

Currently, voters can petition for a rollback if a local agency raises taxes more than 8 percent above the rate needed to raise what it spends on day-to-day operations. School boards are required to hold ratification elections rather than awaiting a petition.

Voters would be asked to approve or reject such tax increases once 5 percent of voters who cast ballots in the previous presidential election sign a rollback petition — easier than the existing requirement that 10 percent of registered voters in a local jurisdiction sign a petition.

Hill said the proposal also would include a proposed constitutional amendment barring future Legislatures from handing down “unfunded mandates” to local agencies, with the attorney general advising whether laws breach the ban.

This is the ball that you really need to keep your eye on. Everything else is just bells and whistles.

UPDATE: Missed this op-ed by Perry himself.

My plan may not be perfect, but it is the best plan I know of to achieve four basic goals: improving funding for education, lowering the school property tax burden, replacing Robin Hood with a more equitable system and sustaining and enhancing the job climate in Texas.

Those who criticize my plan have an obligation to do more than criticize. They need to offer Texans their constructive solutions, too. Let’s have a positive debate about ensuring long-term prosperity and opportunity for the people of Texas. If lawmakers and other leaders stay focused on tax relief and better schools, we will succeed. And Texas will be better off for it.

I mostly agree with that last paragraph, though of course I’m way more interested in staying focused on better schools and a more workable tax system. This session is supposed to be about the schools, right? As to “tax relief”, I forget where I saw this, but someone recently observed that it’s funny how we’re a low-tax state when we’re trying to lure businesses here, but we’re in dire need of tax relief when the Lege is in session. Link via Hope.

And Carlos Guerra reminds us that we’ve seen this trick before.

This is hardly a new idea. Texas’ parimutuel entrepreneurs have pushed for video lottery terminals for years, and not only to benefit Texas schoolchildren.

It began in 1987, after parimutuel tracks won voter approval following a multimillion-dollar ad campaign promised that the “sport of kings” would pump billions into the state treasury, create thousands of new jobs and help Texas dog and horse breeders.

In 1993, after the rosy predictions failed to materialize and several new tracks resorted to bankruptcy protection, the Legislature authorized simulcast betting — wagers on out-of-state races — to help the struggling ventures survive.

In 1995, $521 million was bet on Texas tracks, with more than half — $262 million — on live races and the remainder on simulcast contests. But by 2003, these tracks’ wagers had grown only $36 million to $557 million, and bets on live races had dropped to $114 million.

And during that time, all the tracks’ state taxes on bets dropped from $7,386,299 to $4,676,860.

The tracks’ total attendance between 1995 and 2003 dropped from 3,534,208 to 2,862,501.

Now, remind me again: Whom exactly are these slots going to help?

I feel even more certain about my initial skepticism. Via Lasso.

Here’s an interesting perspective on why Governor Perry proposed the school finance reform solution that he did.

The 134 school districts that lose money under the Robin Hood school finance system serve 12 percent of the state’s students. Voters in these districts cast 17.5 percent of the 2002 GOP primary vote, according to Texas Legislative Council records. But Campaigns for People found 27 percent of all campaign contributions made in 2002 came from people living in these districts.

Perry’s staff crafted a school finance plan designed to appeal to Houston Republicans who want to cap property tax appraisals and to Dallas Republicans who want to eliminate the share-the-wealth Robin Hood school finance system. To pay for it, they avoided across-the-board tax increases, instead focusing on “sin” taxes and expansion of gambling to video lottery terminals at horse racing tracks.

Perry’s aides then did polling to make certain his plan would be popularly received even if not legislatively viable.

“I’m sure he will say it’s the best plan available, but a lot of people have speculated that it’s because he’s worried about somebody running against him,” said Mike Boone, a prominent Republican lawyer from Dallas who is pushing for a broad business tax to replace the current school finance system. “He can claim he had a plan and if it failed, it failed, but at least he took action.”

I’m not sure what to make of that. I don’t expect an actual Perry person to confirm that this was their plan, but I’d like to see a quote from more than one person, especially someone who already disagrees with Perry’s plan, before I accept this as conventional wisdom.

I’m also not sure how good a strategy this would be even if it’s true. 17.5% is a decent sized bloc, but it’s nowhere near a majority. Surely Perry sees his base as being a bit larger than the Houston and Dallas suburbs, right? I know primaries are decided by a small slice of the electorate, but betting one’s reelection on one-sixth of those who voted last time seems awfully risky to me.

Finally, even if he is just hoping to get credit for trying, what happens if Craddick and Dewhurst team up to pass sweeping legislation that caps property taxes but also expands and increases the sales tax while overhauling the useless corporate franchise tax? Does Perry have the sand to veto such a bill and piss most people off, or does he turn his back on that 17.5%, who might reasonably have expected him to push his poll-tested plan a bit harder? Actually, if this did happen he’d probably point at the property tax cap and declare victory anyway. Whether he’d be allowed to claim credit or not is another question.

We’re now one week into the special session on school finance reform, and the one thing we know for sure is that the Perry Plan is toast. Neither Tom Craddick nor David Dewhurst has supported it, there’s already an alternate plan in the works, and of course on the sidelines we have Carole “No Strippers!” Strayhorn throwing spitballs.

It’s been my belief that if the sessions implode with no major action taken, Perry will suffer some blowback. However, as this AP story notes, he may come out all right anyway.

No matter which school finance plan emerges, Perry appears to be hoping Texas voters in 2006 give him credit for pushing lawmakers to address the vexing subject.

Even George W. Bush wasn’t successful when he tried to pass a school funding plan as governor in 1997, Perry has pointed out.

Republican political consultant Ray Sullivan, who has close ties to Perry and Bush, said polls showed then that voters supported Bush’s efforts.

“School finance is a monstrously difficult issue for any governor or Legislature to address,” Sullivan said. “Texas governors have not always been successful at dealing with school finance in the past. But they generally get credit for trying.”

There is something to that, and for sure even an incremental change which includes some kind of property tax cap will be seen as a victory for Perry. I still see this spinning out of his control, and other players in the 2006 game claiming more credit than him. We’ll see.

I will say this: Strayhorn is on the verge of turning into a self-parody. (Not that she really had all that far to go, in my opinion – all that “tough grandma” baloney always made me gag.) Sooner or later, people are going to say to her “OK, smartypants, what’s your plan?” Closing down strip clubs isn’t going to sound any more like a bright idea than taxing them is. Look at this editorial from the Lufkin Daily News (via Byron). If you’ve lost Lufkin, you’ve lost the Common Person Common Sense mantle.

Continuing its great job of political coverage from the redistricting sessions, the Austin Chronicle has a fine overview of this session and what may happen. Check it out.