Convergence, or Something Like It

The Texas Senate dropped its state property tax, overhauled its overhaul of business taxes, and approved a school finance bill more in line with what the Texas House approved earlier this year. Big differences remain to be worked out in that package, and also in companion legislation that includes some school finance and some new education law. But the Legislature is closer to a deal on school finance now than it was a day, a week, or a year ago. Upgrade the condition of the patient from impossible to merely improbable. That's an improvement, and previous legislatures have overcome bigger differences.

Trouble spots include a gross receipts tax that was included in the Senate's tax bill, and large but vague differences in the amounts of money raised in the House and Senate versions of the bills. The analysts are still working on the tax and school bills approved by the Senate, and the fiscal effects of the bills will (hopefully) be clearer when they're finished. This is already clear: Lawmakers have about two weeks to reconcile differences in several pieces of interlocking legislation at the same time: the tax bill, the school bill, the budget, the supplemental budget, and a "clean-up" bill that amounts to a bagful of taxes, fees, and accounting tricks that allow the state to spend more money.

Instead of a state property tax to replace local school taxes, the Senate voted to lower the state's cap on school taxes to $1.15 per $100 in valuation from the current $1.50. The next night, on the tax bill's conjoined school bill twin, they voted to lower the rate another nickel, to $1.10. Either way would leave the so-called "Robin Hood" system in place, where school districts with more wealth export local tax money to districts with less. It's unpopular, but it has survived constitutional challenges and it turned out, in the end, to have more Senate votes than the state property tax.

Lt. Gov. David Dewhurst, along with the heads of the Finance and Education committees, Sens. Steve Ogden, R-Bryan, and Florence Shapiro, R-Plano, wanted the state tax. That levy would have squelched persistent legal attacks on the current system in which locally set taxes are subject to state caps. When the state's requirements for schools push districts to raise taxes, the system eventually reaches a point — it's there now, according to the courts — where what is called a local tax is in fact set by the state. That's unconstitutional, and installing a state tax in the constitution would end that particular problem. But the House doesn't like state property taxes, and Dewhurst couldn't get two-thirds of the Senate to go along. It's safe to call it dead.

The Senate's new plan would lower the state cap on local school property taxes to $1.10 next fall. That's a 26.6 percent cut in districts where the tax rate is currently capped out at $1.50. Some districts have lower tax rates, and a few have tax rates below both the current and the proposed caps. And local districts could, over time, increase the rates for "local enrichment," bringing the total up another 15 cents by 2010. (Caveat: We're talking about maintenance and operation taxes here, and many districts have additional school taxes to pay for bonds and facilities and so on.)

To pay for the cuts in local taxes — each dime decrease costs about $1.1 billion at the state level — the Senate installed a "choose your poison" tax for businesses that would replace the current state franchise tax. Right now, Texas only taxes one business in six; lawmakers looking for school money want to lower the rate from 4.5 percent and to expand the franchise tax to include more businesses.

Senators have been talking about variations on a business activity tax, but that finally stalled for a couple of reasons. It included a tax on compensation that, when applied to some partnerships and other businesses, amounted to a potentially unconstitutional personal income tax (one version of the legislation included the tax those partners would pay if the courts said the first tax was illegal). And the alternative on the table — the House's idea of letting each business choose which tax it wants to pay — was more attractive to businesses and to their persistent lobsters.

In the Senate's version of tax choice, businesses will pay the lower of two taxes:

• A 2.5 percent tax on a company's taxable income added to its compensation for employees, with a deduction for the first $30,000 paid to each employee; or

• A 1.75 percent tax on payrolls, not to exceed $1,500 per employee. Companies could apply that rate to half their total payroll, or could subtract the first $30,000 paid to each employee and tax what's left.

The first is similar to the state's current franchise tax, but includes compensation for all employees; the current version only adds back the compensation of a corporation's big dogs.

In either case, the companies would also compute a state minimum tax — one-quarter of one percent of their gross receipts — and would have to pay at least that amount to the state no matter how the computations came out on the "choice" taxes.

The new business taxes would not apply to sole proprietorships or to "passive" real estate, oil & gas, or investment trusts. Companies would get a deduction for providing health benefits to employees. Small businesses — those with gross receipts under $150,000 a year — would be exempt from the tax.

The business lobby has problems with the options and especially with the gross receipts tax. Dewhurst and Sen. Kim Brimer, R-Fort Worth, met with trade groups the morning after the school bill passed to calm people down and gauge reactions. The lobbyists we've talked to say the choices in the Senate version are too much alike; both rely in some measure on payroll. And the gross receipts tax makes them weak. It would apply when companies are losing money. For some businesses, it would compound: They'd have to pay it on transactions with affiliated companies. And it works, in some ways, like a sales tax. It is a levy on a company's sales that is paid by the company instead of by the customer, who'd be paying it if you called it a sales tax. Either way, it adds to the price of a purchase, and Bidness don't like it.

It does, however, fill a hole that was left in the House's tax plan. If companies can choose their tax, they'll go low. No kidding. But the House didn't put in a minimum tax, and Comptroller Carole Keeton Strayhorn said that and other problems left the House plan billions out of balance. One alternative getting some attention would require businesses to pay the lower of two taxes, but not less than an amount equal to half of the higher tax. If Option One was $10,000, and Option Two was $3,000, the taxpayer would pay $5,000, or half of Option One. Keep watching.

Consumer levies remain in the Senate's bill, including a half-cent increase in sales taxes (phased in over two years), a 75-cent per pack tax on cigarettes, and a 25 percent increase in taxes on alcoholic beverages. The House's version includes a full one-cent rise in sales taxes, a $1.01 increase in the tax on a pack of smokes, and no alcohol tax increase. A 3 percent "snack tax" approved by the House was not included in the Senate bill.

• The Senate voted 20-11 on straight party lines to deny passing property tax relief directly to renters. The folks on the winning side of that vote say The Market will take care of renters and that landlords will pass along the savings, or not, depending on what their competitors do.

• They expanded what began as a back-to-school sales tax holiday, killing sales taxes on clothing items priced under $100 during the first full weekends of August and December.

• The 21 votes for the bill: Armbrister, Averitt, Brimer, Carona, Deuell, Duncan, Estes, Fraser, Harris, Hinojosa, Jackson, Mike, Janek, Lindsay, Lucio, Madla, Ogden, Shapiro, Staples, Wentworth, Whitmire, and Zaffirini. And the 10 votes against: Barrientos, Ellis, Rodney, Eltife, Gallegos, Nelson, Seliger, Shapleigh, Van de Putte, West, Royce, and Williams.

Fighting Words: Weighting, Dating, Rating

When the Senate started on the school half of the school finance bill, funding formulas, student testing and the start and stop dates for the school year were among the biggest differences between the House and Senate versions of the bill. When the Senate was done, dates had been taken care of, but the other two obstacles were left to the still-to-be-named conference committee.

The state gives school districts more money for students with special needs, whether those are language problems, physical handicaps, or a number of other things. The Senate wants to keep those "weights" for funding; the House wants to get rid of them.

Where Rep. Kent Grusendorf, R-Arlington, wants to test students as they exit courses of study, Sen. Florence Shapiro, R-Plano, has shown a preference for the TAKS test given now to measure student achievement. They're the leaders of the respective education committees in the House and Senate and the likely heads of the conference committee that will hammer out these differences.

The House and Senate didn't have the same things in mind when it comes to the beginning and ending dates for schools in Texas. Businesses that depend on that timing — from summer camps to amusement parks to the joints that sell t-shirts and wave boards on the Texas Coast — want the school year to start later than it does now (some Texas school districts begin in the first week of August). And they'd like the school districts around the state to sync up, so as to encourage family vacations and such.

Call this one a win (so far) for Shamu: The Senate agreed to order districts to start the school year after Labor Day each year, as the House did earlier. That's unpopular in some districts — we've talked to legislators on both sides who'd like to get their votes back — but the change is in the bills headed for conference committee.

Meanwhile, at the Courthouse

New briefs from the school districts whose successful lawsuits prompted the Legislature's search for a school finance fix.

As you'd expect, they want the Texas Supreme Court to find that the current system is:

1) hitting Texans with an unconstitutional state property tax, since most districts are at or near the state's $1.50 maximum and can't make cuts, given the state's rising education standards;

2) "constitutionally inadequate or unsuitable," since they contend the current system doesn't provide schools with the resources they need to provide the results the state demands; and

3) that the courts should rush in where the Legislature fears to tread, interpreting current statutes against constitutional guarantees instead of leaving the whole mess to the House, the Senate and the Governor.

The new legal briefs and earlier filings from both sides can be found on the Supreme Court's website.

The court will hear oral arguments in the case on July 6 and can rule anytime after that. "Anytime" in this context usually means anything from a few months to many.

Invasion of the Body Snatchers

Proposals and ideas are starting to wither as the session-ending rules begin to kick in. Sort-of. Lawmakers are busy looking for viable legislation that will accommodate non-viable legislation; if a bill dies, there's often a semi-related bill that can be amended to reanimate the dead one.

Publicly funded vouchers for private schools took a huge hit in the Senate, when Sen. Mike Jackson, R-La Porte, promised his colleagues that he would block efforts to add vouchers to the Texas Education Agency's sunset bill. That bill has to pass — it keeps the agency in business after this year — and it's an easy vehicle for vouchers. But before voting it out, Democratic senators peppered Jackson with questions to nail down the Senate's intentions: If the House insists on adding vouchers, the bill won't be approved in the upper chamber.

• The Senate wasn't willing, but the House voted to reconsider the law that requires state universities to show preference in admissions to students who finished in the top 10 percent of their high school classes (in Texas schools). Some of the universities — particularly that big one just to the north of the state Capitol — complain that they're hamstrung by the rule. Some folks in highly rated school districts say the rule is unfair to good students who weren't in the top rank but would have been in a lower quality district (that was a side issue in the school finance lawsuit that's still running through the courts). But proponents say it's producing a more ethnically and racially diverse population of students with better brains, on average, than the classes that went before. The Senate left it be, but the House voted — with a margin of just four votes — to halve the number of 10s the schools admit. Under the House version, only half of a given incoming class would have to be filled solely by top students.

Rep. Harold Dutton, D-Houston, offered an amendment that would have required schools to have the same racial ratios in their incoming classes as on their football teams.

• Rep. Yvonne Davis, D-Dallas, using the old point-of-order gambit, killed House legislation that would have changed retirement requirements for Texas teachers. But that assassination didn't kill a Senate bill that would do many of the same things. Teachers would still be eligible for benefits when their age and years on the job add up to 80 — that's called the Rule of 80, logically enough — but only if they were also at least 60 years old. A 55-year-old teacher with 25 years on the job is eligible for retirement and currently, for full benefits. With the proposed revisions, that educator would be eligible, but would have seen a five percent cut in the retirement annuity for each year short of 60.

• Asbestos legislation that stymied lawmakers for years finally gets through both the Senate and the House. The House quietly went along with a deal worked out on the Senate side between trial lawyers who represent people suffering from asbestos- and silica-related diseases and the companies liable for causing those illnesses. The legislation puts limits who can file suit, and at what stage of their illness. It's been bottled up in negotiations for a couple of legislative sessions, but after tort reformers and trial lawyers worked out a deal in Lt. Gov. David Dewhurst's private conference room, both the Senate and the House signed off on it.

• Slot machines (or, if you prefer, video lottery terminals, or VLTs) finally made it to the full Senate, in the form of an amendment on the tax bill that goes with the school finance package. And they got there in the best possible form for the promoters, when Sen. Mario Gallegos, D-Houston, offered a 90-page bill packaged as an amendment, which needs only a simple majority to pass. But even with the Senate looking for money and only 16 votes needed, the measure fell short. By one vote. Senators did add a gambling amendment — allowing electronic bingo in places where bingo is already legal — but it's not in the House version of the bill and could still come out.

• The House tentatively approved — and then killed, by a teensy margin, and on a recount — a bill by Rep. Joe Nixon, R-Houston, that would have disqualified legislative candidates who have homestead exemptions outside the districts where they're running for office. One veteran lawmaker who ought to know told us that would jeopardize the political futures of dozens of incumbent legislators.

• A controversial parental consent bill was set aside in the House, but the Senate moved forward with a less dramatic set of changes. The Senate's bill would turn the state's current law — which requires minors seeking abortions to notify their parents or, in extraordinary cases, to seek permission from the courts — into a consent law, where parents (or judges) would have to approve before the operations could proceed. Rep. Phil King, R-Weatherford, withdrew his bill from consideration when it came up in the House; Sen. Chris Harris, R-Arlington, has a similar bill moving on the East End of the Pink Building.

Matters of Size

Some numbers couldn't possibly make any difference outside the halls of the Texas Capitol, but they matter much to some of the more self-absorbed politicos in both chambers of the Legislature. To wit: One of the elves in the Pink Building -- one whose sympathies lie with the upper chamber -- compiled numbers showing the Senate is ahead of last session's pace while the House is behind.

Officeholders in both places have filed fewer bills: 3,692 in the House, as against 3,735 two years ago; 1,926 in the Senate, up from 2,007 two years back.

So far, the House has approved 744 bills, including 47 with Senate authors. Two years ago at this point, they'd passed 1,029, including 117 Senate bills.

The Senate so far has passed 779 bills, including 44 House bills. Two years back, the numbers were 746 and 53, respectively.

Toll Roads

The campaign finance agitators at Campaigns for People take on highway contractors in a report showing how the beneficiaries of new highway spending gave financial backing to some of the politicos who have made and continue to make highway spending a state priority.

According to their report, the top five state officials — Gov. Rick Perry, Lt. Gov. David Dewhurst, House Speaker Tom Craddick, Attorney General Greg Abbott, and Comptroller Carole Keeton Strayhorn — got $1.2 million in contributions from the biggest highway builders and from companies bidding to build parts of the Trans-Texas Corridor over the past four years. The legislators on the committees doing the decision-making got $215,000 from those contributors. The report, called Big Money Paves the Way for the Trans Texas Corridor: How Big Money Bought Texans the Nation's Most Expensive Toll Road Project, can be downloaded here.

Perry Is Less Disliked than Ahnold

SurveyUSA, a polling company that does work for several media outlets in Texas and elsewhere (we're not a client), says Gov. Rick Perry ranks 38th among U.S. governors in popularity in his own state. More Texans disapprove than approve of the job he's doing, according to the poll. The pollsters say 38 percent of Texans approve of Perry while 48 percent do not. They based that on a sample of 600 people polled by phone over the past weekend, and put the margin of error at 4.1 percent. Their question was "Do you approve or disapprove of the job Rick Perry is doing as governor?" You can see the full results and cross tabs and such here.

While Perry's numbers were upside down, he hasn't crossed into that dangerous land where more than half the population wants him out. Fourteen of the nation's governors got disapproval ratings over 50 percent, including California's Arnold Schwarzenegger. The most popular governors on the list are from smaller states. In fact, the governors from the biggest states don't make the top 25 in approval ratings. The leader of the pack: John Hoeven of North Dakota, with 71-20 approval-disapproval numbers. The stinker? Ohio's Bob Taft, who gets 19-74 ratings, is the least popular chief executive in the U.S. according to SurveyUSA. Big state governors, with their ranking: Jeb Bush of Florida, 28; Edward Rendell of Pennsylvania, 29; Sonny Perdue of Georgia, 30; Richard Codey of New Jersey, 34; Schwarzenegger, 36; Rod Blagojevich of Illinois, 42; Jennifer Granholm of Michigan, 44; and George Pataki of New York, 45.

Political Notes

Ag Commissioner Susan Combs sets a "statewide leadership team meeting" for May 21 in Austin to talk about her race for comptroller. That's a purse/wallet-safe event; state officeholders can't raise money while the Legislature is still in session. The current comptroller, Carole Keeton Strayhorn, hasn't said for sure that she's leaving office, but she's not making any noise about Combs' recent moves on that spot.

Kinky Friedman, running for Texas governor as an independent, is in the midst of the first trip he's openly calling a campaign foray. It's in Houston, and the capper is his gig as grand marshal of "Everyone's Art Car Parade," an event that proves Austin is not the only weird place in Texas, or even the biggest one.

And Democratic gubernatorial explorer Chris Bell, a former Houston congressman and city council member who's considering a run next year, is holding "house parties" here and elsewhere to raise money and support for his candidacy. He's got two coming up in Texas, one in Chicago, and another in Washington, D.C.

Dead and Alive

You'll remember last week's item about the three bills that passed the Senate even though they weren't on the local calendar. Consider them dead, but the House versions are alive and well and moving through the Senate. Michael Grimes, an aide to Sen. Chris Harris, R-Arlington, says they goofed, thinking the bills were eligible because they had been on previous local calendars but held back. The current plan is to let the Senate bills rest in purgatory and to pass the House versions, which have already passed in the lower chamber and are now in Senate State Affairs. "We weren't trying to do anything nefarious," he said.

We've also learned more about the ethics bills in question. The gift bill would allow lobbyists and others to give food baskets, for instance, to lawmakers as gifts without sitting down to eat with them. The current deal on food is that you can't buy it for a lawmaker unless you're also there to eat it. Meals would still be under the old rule. And supporters of the "late reports" bill say they're just trying to make it easier and less punitive for filers to correct non-material mistakes.

Harris went hat in hand to the full Senate, which met as a caucus to talk about the infraction; he offered to step down as chairman of Senate Administration, but his colleagues let him stay.

Political People and Their Moves

Judicial Spankings: Lewis Wood, a Justice of the Peace in Queen City (northeast Texas) agreed to quit "in lieu of disciplinary action" after the State Commission on Judicial Conduct investigated reports he sexually assaulted a woman in his office. He did not admit guilt in the agreement, but did agree not to sit or serve as a judge in Texas ever again...

State District Judge Faith Johnson of Dallas was Publicly Admonished by the commission after telling her staff she was going to pick up cake and ice cream to celebrate the return of an escaped convict she had sentenced to life in prison. Her staff then decorated her courtroom with balloons and streamers when Billy Wayne Williams returned, and the judge made national headlines when she told him, "You just made my day when I heard you had finally come home. We're so excited to see you, we're throwing a party for you." Johnson, in a statement, said she had cooperated with the commission, that she'd been surprised by the attention the event attracted, and ended with this: "If my celebration of the return of fugitive Billy Wayne Williams offended any member of the community, I deeply apologize"...

Former Judge H. Lon Harper of Houston got a Public Reprimand from the commission for not doing enough of the legally required judicial education work while he was on the bench. At one point, he offered to resign in response to the complaints, but didn't follow up...

And finally, the commission issued a Public Reprimand against Oscar Tullos, a JP in Brownsville. He told a lady suing a body shop to include the court fees in the amount she was claiming (in small claims court). She did, but the other side eventually got the case killed, by Tullos, because of an error in her original filing. The error? She included court costs in her claim and didn't specify what they were for. The commission had previously sanctioned Tullos for similar behavior, saying this time that he "failed to comply with the law and demonstrated a lack of professional competence..."

Appointments: Gov. Rick Perry named T. Dan Friedkin of Houston and Peter Holt of Blanco to the Texas Parks and Wildlife Commission. Friedkin is president and CEO of Friedkin Companies, which includes Gulf States Toyota among its investments. Holt's the jefe at Holt CAT, which bills itself as the biggest Caterpillar distributor in the U.S. He's also the principal owner of the San Antonio Spurs. He's on the commission now, and Perry's reappointing him.

Perry put six people on the Brazos River Authority's board and named Steve Peña of Round Rock, who's already on the board, to chair it. The newbies include U.S. Air Force Gen. (ret.) Christopher Adams Jr. of Granbury, former chief of staff of Strategic Air Command and former associate director of Los Alamos National Laboratory; former Clifton Mayor Truman Blum; U.S. Army Col. (ret.) Robert Christian of Jewitt; Christopher DeCluitt of Waco, an exec with The Sovereign Corporation; Carolyn Johnson of Freeport, an environmental consultant with Dow Chemical; and Roberta Killgore, a Somerville rancher.

The local elections last week included the City of Lago Vista, which elected Pat Dixon, chairman of the Texas Libertarian Party, to its city council. He got 68 percent of the vote.

Deaths: Rep. Joe Moreno, a well-liked Houston Democrat who worked as an aide in the Capitol before running successfully for office in 1998, in a much-reported traffic accident. He was 40. Rep. Rafael Anchia, D-Dallas, was treated and released after the accident, and Monica Piñon, an aide to Rep. Joe Pickett, D-El Paso, remains hospitalized with injuries from that accident. The three were returning to Austin after a basketball game in Houston. The House adjourned for a day out of respect and moved one day's legislative work to 6 p.m. so friends and colleagues could attend the funeral in Houston and the burial in the state cemetery.

Quotes of the Week

Carolyn Boyle, coordinator of the Coalition for Public Schools, quoted in The Dallas Morning News on a school voucher measure moving in the state House: "Legislators need to do the math. We can't afford to take away money from public schools to subsidize private schools in Texas."

Lt. Gov. David Dewhurst, from the dais toward the end of a long day: "Senator West, for what purpose do you rise?" Sen. Royce West, D-Dallas: "Um, Mr. President, it's my bill."

Sen. Steve Ogden, R-Bryan, during the Senate's debate over a tax bill, opposing a change to the state's inheritance tax:  "I want more people in the top decile."

Ogden, explaining during that same debate that he dropped the idea of a state property tax to pay for schools because his fellow senators wouldn't go along: "The pesky thing about a constitutional amendment is that it takes 21 votes."

Rep. Harold Dutton, D-Houston, arguing to preserve the law that requires Texas universities to show admissionqs preference to students who finish in the top 10 percent of their high school classes: "The University of Texas wants to be an all-white university... I think they are trying to give us the middle finger."

Rep. Jim McReynolds, D-Lufkin, during a hearing on laser hair removal before the House's Public Health Committee: "In East Texas we use four-times Nair and a pair of tweezers for this problem."

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Texas Weekly: Volume 21, Issue 46, 16 May 2005. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2005 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (800) 611-4980 or email info@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.