Perry Seeking Tax Relief Texans Can Feel

Gov. Rick Perry announced plans for a tax cut aimed at Texas small businesses on April 15, 2013, at the Austin Chamber of Commerce.
Gov. Rick Perry announced plans for a tax cut aimed at Texas small businesses on April 15, 2013, at the Austin Chamber of Commerce.

Every Republican consultant — even some Democrats — will tell you it’s never a bad idea to be in favor of tax relief.

But in his push for tax cuts this session, Gov. Rick Perry is opting for pragmatism over populism.

The governor is urging lawmakers to cut the state’s franchise tax on businesses and extend some current exemptions that would otherwise expire. While many businesses wish that tax would go away, their dislike doesn’t compare with the hot anger millions of homeowners feel toward the property taxes they have to pay.

The Tax Foundation, which calculates how states’ tax burdens compare, rates Texas as one of the best states for businesses in terms of overall taxes paid. But on property taxes, the group ranks Texas 32nd best. (California, the place Perry enjoys portraying as an overtaxing mecca where good businesses go to die, ranks 17th.)

Despite some requests to do so, Perry isn’t proposing that state lawmakers tackle property taxes with, say, a larger homestead exemption. The idea came up in a recent tele-town hall hosted by a conservative group, Empower Texans, and Perry revealed he’s still haunted by the spirit of special sessions past.

A caller asked what Perry plans to do about property taxes. You could hear the frustration in the governor's voice as he explained that he had been down that route before.

“We made a major reduction in property taxes, I think, six years ago,” Perry said. “We cut a third of the property taxes. … You are correct in being concerned about property taxes.”

He was referring to the 2006 special session in which lawmakers revamped the state’s school finance system, created the franchise tax and lowered local school property taxes in one fell swoop. Ever since, Perry and others have publicly taken credit for providing property tax relief though few homeowners felt particularly relieved. The cuts were quickly swallowed up by local rate hikes and skyrocketing appraisals.

“When the local taxes and the property taxes can be raised at the local level, we don’t have any control over that in Austin, Texas,” Perry said. “But what we do have control over is things like the franchise tax.”

After initially calling, somewhat vaguely, for $1.8 billion in tax relief at the start of the session, Perry got more specific last month. His $1.6 billion, four-point plan includes cutting overall franchise tax rates by 5 percent. He’s also threatened to call a special session if “significant tax cuts” don’t reach his desk by the end of the session on May 27.

Perry spokeswoman Lucy Nashed said the governor isn’t ignoring the tax burdens of regular voters. “The cost of doing business is ultimately passed on to consumers so if we can remove that cost, all consumers benefit,” Nashed said.

Dale Craymer of the business-backed Texas Taxpayers and Research Association said most businesses' bottom lines are far more impacted by what they pay in property and sales taxes than by the franchise tax, which generated $4.6 billion for the state in 2012.

Perry is targeting the franchise tax because he wants the relief to be noticeable, Craymer said.

“You could throw $5 billion at the property tax and barely make a dent, as we discovered in 2006 when we threw $7 billion at it,” Craymer said. “But if you throw $5 billion at the franchise tax, you’ve eliminated it.”

Can They Put Humpty Together Again?

Sure. This happens every two years, just as regularly as the bad guy gets to hold the gun at the beginning of the last minutes of every Batman episode, before the tables turn and our hero yet again triumphs.

Seriously, there is plenty of time to put together a finance plan for water and there are several vehicles already on the road that would work. Like the budget, for instance. Water will get done. Transportation might get done. If tax breaks get done, they’ll be smaller than they are now. Public education will get its money in the regular budget and not from the Rainy Day Fund, and in a cleanup to be named later, meaning lawmakers can leave some of their school spending for a special session after the Texas Supreme Court has ruled on school finance.

The House took a swipe at budget diversions with legislation that would reduce the size of that problem from the current $5 billion to about $4 billion. The idea in Rep. John Otto’s bill is that they can lower it some more later until they’re finally weaned. The diversions use unspent balances in 200 programs to account — literally, this is an accounting thing — for spending in other areas, thus keeping the state budget balanced. The problem is that money dedicated to those 200 causes doesn’t get spent where the voters thought it was getting spent.

The budget trap hasn’t changed in the last week, still revolving around factions that do and don’t want to spend money from the Rainy Day Fund and around factions that do and don’t want to bust the constitutional cap on growth in state spending. That’s before you get to the usual disagreements about what to spend the money on if everyone can agree do spend it.

The betting here is that state finance is the closing drama of the session and that in spite of the sharper debates here at the end, that everybody goes home singing Kumbaya.

The governor, through aides, suggested he might call a special session if his wish list doesn’t go well. But in person, he was milder: “We have plenty of time to get the work done in the session. We have 30 days. It’s that classic period of time when people start getting a little bit stressed.”

A Waiting Game for University of Texas Regents

Lawmakers have proven to be effective allies of anyone wary of the University of Texas System regents and have accused those regents of “micromanaging” UT-Austin. The legislative session has seen a fair share of threats that appear to have inspired a change of course on at least some controversial proposals by the UT board. 

But the last few months have been short on action. No regent has yet been summoned to the Capitol and subjected to a public hearing. A joint oversight committee created specifically to investigate the UT situation has yet to hold a substantive meeting.

The clock is ticking. While lawmakers say they will continue to pay attention after Sine Die, it won't get easier to assemble once they head home in less than a month. Meanwhile, it is not entirely clear that all the self-appointed regent watchers will be able to keep their eyes on the same target — or exactly what that target is.

The latest evidence of that is a slickly produced internet video that was widely distributed this week that very directly accused Gov. Rick Perry and some of his appointees of being “intent on tearing down” the flagship university.

To the dismay of some members of the Texas Coalition for Excellence in Higher Education, a high-profile group that formed in 2011 to oppose Perry’s higher education proposals, the video was produced by three members of the Texas Coalition for Excellence in Higher Education.

The direct attack on the governor, which was not in keeping with the group’s previous strategy, gave Perry the opportunity to take the high road. His spokesman accused them of putting “petty rivalries” ahead of progress. Ray Sullivan, the governor’s former chief of staff, said they were “motivated by profound elitism and deep paranoia.”

It’s not the first time an attempt to land a blow has backfired.

In February, John Beckworth, the president of the Texas Exes, sent an email blast to the alumni organization's thousands of members saying, “A university of the first class deserves first-class regents.” Many interpreted that as a shot at previously appointed board members.

It prompted prominent Texas Ex Red McCombs of San Antonio to respond to Beckworth: “By using Texas Exes letterhead, you indicated that fine organization is supportive [of the knock on the regents]. I doubt that is true. I have been contacted by many today and everyone is contrary and upset by your comments.”

If anything, the upshot of the exchange was that McCombs’ note had an emboldening effect on the controversial cadre of regents.

It’s unlikely that either side was moved by what little public testimony on the issue there has been this session.

At a Senate Higher Education Committee hearing in March, discussing Senate Bill 15 by committee Chairman Kel Seliger, R-Amarillo, which adds training requirements and voting restrictions for new regents, the Texas Exes leadership and members of the UT-Austin student government testifying were unable to provide legislators with convincing examples of micromanagement by the regents.

That did not stop Seliger’s bill from moving; it is now resting in the House Calendars Committee. There were also budget amendments added in the House, restricting the UT regents’ funding and authority, to be mulled over by the conference committee. And the Senate Nominations Committee appears to be taking its time with Perry’s newest UT regent nominees. If they don’t win approval by the end of the session, those nominees will be prohibited from joining the board. On the other hand, Perry could then put whoever else he wants in the empty slots until the next regular session, in 2015.

The potential for legislative maneuvers that break in favor of the anti-regent camp remains, but only for the month. If May proves as productive as the months that preceded it, groups like the Coalition may find themselves finishing the session about where they started, only with more cracks showing.

And that may be by design. Back in March, the joint oversight committee submitted a massive records requested to the UT board and indicated that what they receive would inform their hearings. Ostensibly, those hearings have yet to happen because the regents deliberately delayed their responses to that and other requests. The regents also know that the clock is winding down.

Newsreel: Rainy Day Fund, West Explosion, Deadlines

In the latest Newsreel: The House fights over whether and how to tap the Rainy Day Fund, lawmakers hold hearings on the explosion in West and Gov. Rick Perry says there is plenty of time left in this session to get things done.

Inside Intelligence: About Those Spending Taboos...

The insiders weighed in on budget issues this week, which seems appropriate at a moment when funding for water, transportation, public education and tax cuts is in play at the state Capitol.

Almost everyone — 92 percent — said the state’s water plans will be funded out of the Rainy Day Fund before the budget is completed. Most think transportation will find money there, too, but less than half believe lawmakers will use the RDF for public education needs, and fewer than one in six said franchise tax cuts will be funded that way.

A slight majority said lawmakers will vote to exceed the constitutional limit on growth in state spending. A similar number — 52 percent — said Gov. Rick Perry will call a special session if lawmakers don’t do everything on his wish list.

Most — 53 percent — don’t think lawmakers will expand the Medicaid program under the federal Affordable Care Act, while 37 percent think the opposition to that idea, led by the governor, will fade.

We also included an open-ended question about what issues might cause real problems between now and the May 27 end of the session. The full comments on that and our other queries are attached. Here’s a sampling:

.

Lawmakers have talked about using Rainy Day Fund money for big items this session. When lawmakers are finished, which of the following will be financed with money from the RDF? (check all that apply)

• "It takes leaders who are wiling to educate the public and press lawmakers to address long-term state problems. Halfhearted efforts go nowhere fast. The big fear for conservatives is if we don't adopt conservative solutions to our problems we will end up with down with liberal solutions."

• "Believe there is full support in the senate but not in the house. Between the far right and the far left, there are not enough votes to pass the needed infrastructure legislation."

• "Want to kill Texas's economic success? Ensure we'll have inadequate roads, not enough water, not enough electric power, and an uneducated workforce."

• "Water is the key. Without water, our state will look like those in the rust belt: lots of unused machinery and no jobs to speak of."

• "As long as the Ds can stick together to demand something for public ed, all three (water, roads, schools) will get something."

• "Perry's veto doesn't scare anyone"

• "Members can run on addressing water and public education funding (even in a Republican primary)."

• "One time expenditures only, not for tax cuts, education, and health and human services.... having said that, they can spend it on whatever they can round up the votes for..."

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Some lawmakers want to stick with the constitutional cap on spending growth; others don’t. When the budget is complete, will spending growth exceed that limit?

• "Legislators seem intent on ignoring the constitutional spending stop sign. When they do, congratulations! The Texas Legislature will have become Congress."

• "I hope so. I'm all for fiscal restraint but Texas can't just let all of these problems linger and get worse."

• "Exceeding the cap will depend on permission from the voters."

• "If spending from the Rainy Day Fund is included - yes. If not - no, because there isn't enough available GR to even get to the spending cap."

• "Hard to know because 'budget' won't be complete until the 2015 legislature finishes paying for Medicaid (another IOU expected, though not as big as 2013's) and for schools (if assumptions about local property tax hikes turn out to be overly optimistic, and if there's a special session in 2014 that has to address inadequacies, not just inequities, in current system). So: 'Appropriations Act' might come in under the cap, but that's not the same as 'the budget.'"

• "Governor Perry will use his veto to achieve the cap."

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The governor called on lawmakers to find money for a tax cut, for water, and for transportation. Would he call a special session on those issues if lawmakers don’t heed his requests?

• "In a heartbeat. Newcomers to the Legislature will soon discover that when it comes to calling special sessions, this Governor doesn't bluff."

• "When was the last time he didn't get what he wanted? His veto pen is primed and ready...the House and Senate will fall in line."

• "He'll get 2 of the 3; thus, no special."

• "No way. Empty threat."

• "The governor understands political theatre. He will only call a special session on issues he can win."

• "It is dangerous to guess what Gov. Perry might do. He has demonstrated the ability to buck logic in his decision-making process."

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Will lawmakers find a politically acceptable way to expand Medicaid under the federal Affordable Care Act during this session?

• "Hard to expand without making it look like Obama won this fight in Texas."

• "Won't happen during this session, but it'll be an interim charge and it might have a chance next session, if there's a new governor."

• "Too much money to ignore."

• "Yes they will expand, no it won't be politically acceptable"

• "Texas will access these federal dollars but only after the legislature adjourns with a wink to HHSC Commissioner Kyle Janek - who will in turn cut a deal with the feds and then return to the lobby ASAP."

• "No interest in the senate."

• "There is no way Perry will allow Obama Care in Texas. If he cant get the President to answer his immigration letter, what makes any of us think the President will answer a letter on Medicaid when asked."

With a month left in the current regular session, what issues or bills do you think will prove to be particularly troublesome for lawmakers in May?

• "Water, transportation, education and medical care"

• "The pace has been slow and steady, but there is always a hiccup. Guns come to mind."

• "Funding the water plan."

• "Redistricting"

• "Paying for county road building and maintenance in oil production areas; how and how much to add to education budget"

• "The big issues are not finished yet, so put the budget, water, Medicaid, and tax cuts on that list."

• "Testing. Suburban Moms vs. business interests"

• "Still some kinks in the budget and it has several moving parts. Last session the main reason they had to come back was to fix budget issues and deal with issues related to the budget that didn't get hammered out in the session."

• "Wouldn't try to predict. Meltdowns are inevitable, of course."

• "Expect the unexpected... Whatever happened to the TEA Sunset Bill - AKA The Death Star? Look for a nasty fight around HB 5 as Mark Strama's words re watered down rigor echo through the Senate chamber."

• "Rick Perry will increase his veto threats over high-stakes testing, and legislators will have to uncouple tests with curriculum."

Our thanks to this week's participants: Gene Acuna, Brandon Aghamalian, Jenny Aghamalian, Victor Alcorta, Clyde Alexander, George Allen, David Anthony, Charles Bailey, Tom Banning, Eric Bearse, Dave Beckwith, Amy Beneski, Rebecca Bernhardt, Andrew Biar, Allen Blakemore, Tom Blanton, Hugh Brady, Chris Britton, Andy Brown, Raif Calvert, Kerry Cammack, Thure Cannon, Snapper Carr, Janis Carter, William Chapman, Elna Christopher, Addie Mae Crimmins, Beth Cubriel, Randy Cubriel, Curtis Culwell, Denise Davis, Hector De Leon, Eva De Luna-Castro, June Deadrick, Nora Del Bosque, Tom Duffy, David Dunn, Jeff Eller, Jon Fisher, Wil Galloway, Norman Garza, Dominic Giarratani, Bruce Gibson, Stephanie Gibson, Kinnan Golemon, Daniel Gonzalez, John Greytok, Jack Gullahorn, Clint Hackney, Wayne Hamilton, Bill Hammond, Adam Haynes, Jim Henson, Ken Hodges, Deborah Ingersoll, Cal Jillson, Jason Johnson, Mark Jones, Robert Jones, Robert Kepple, Richard Khouri, Tom Kleinworth, Sandy Kress, Nick Lampson, Pete Laney, Dick Lavine, James LeBas, Luke Legate, Richard Levy, Ruben Longoria, Matt Mackowiak, Phillip Martin, Scott McCown, Mike McKinney, Robert Miller, Bee Moorhead, Mike Moses, Steve Murdock, Nelson Nease, Keats Norfleet, Pat Nugent, Nef Partida, Gardner Pate, Tom Phillips, Wayne Pierce, Richard Pineda, Allen Place, Kraege Polan, Gary Polland, Bill Ratliff, Karen Reagan, Patrick Reinhart, Grant Ruckel, Jason Sabo, Jim Sartwelle, Stan Schlueter, Robert Scott, Dan Shelley, Bradford Shields, Jason Skaggs, Brian Sledge, Ed Small, Todd Smith, Larry Soward, Dennis Speight, Jason Stanford, Bob Strauser, Colin Strother, Sherry Sylvester, Russ Tidwell, Gerard Torres, Trent Townsend, Trey Trainor, Ware Wendell, Darren Whitehurst, Seth Winick, Peck Young, Angelo Zottarelli.

The Calendar

Monday, May 6

  • House Investments and Financial Services, 9 a.m.
  • Senate Administration, 9 a.m.
  • Senate Finance Subcommittee on Fiscal Matters, 9 a.m.
  • House Elections, 10 a.m.
  • Senate Nominations, 11 a.m.
  • House Judiciary and Civil Jurisprudence, 2 p.m.
  • House Land and Resource Management, 2 p.m.

Tuesday, May 7

  • House Natural Resources, 8 a.m.
  • Senate Jurisprudence, 1:30 p.m.
  • House Public Education, 2 p.m.

Wednesday, May 8

  • Senate Transportation, 8 a.m.
  • Senate Veteran Affairs and Military Installations, 1:30 p.m.
 

The Week in the Rearview Mirror

With about a month remaining in the legislative session, Gov. Rick Perry met with the Texas House GOP Caucus and talked to reporters about his support for a bill that would draw $2 billion from the Rainy Day Fund for water infrastructure needs. He said it was too early for talk of a special session and said the water bill was needed and was “one of the ways” to move the issue forward. Later in the day, the bill failed, leaving lawmakers to look for other ways to solve the problem.

The Texas Constitution prohibits government entities from recognizing domestic partnerships and offering those couples insurance benefits, Texas Attorney General Greg Abbott wrote in an opinion on Monday. He was asked about such benefits in places like Pflugerville, El Paso, Austin and Fort Worth.

The Texas Association of Businesses — a heavyweight in conservative lobbying circles — endorsed state Rep. John Zerwas’ proposal to negotiate with the federal government to find a palatable way to expand health insurance coverage to low-income adults. Gov. Rick Perry has said repeatedly that he is against expanding Medicaid in Texas.

Sixteen states haven't decided whether to expand their Medicaid programs, according to the Washington Post. That paper counts 20 states and the District of Columbia in the Expand category, Texas and 13 other states in the Decline column and the rest in something other than a final position on the issue. The Affordable Care Act — Obamacare, in the vernacular — is supposed to enroll millions of people on October 1. 

Plentiful state revenue and the short-lived death of the Texas Lottery last week probably spell the end of any chances for expanded gambling during the current legislative session. Promoters have been trying to legalize slot machines and casinos for years, but doing so would require a supermajority in both houses of the Legislature, and the appetite for new games seems pretty small.

The embattled district attorney of Travis County, Rosemary Lehmberg, apologized Saturday in an open letter to her constituents — and insisted she hopes to complete her term in office. The prosecutor in charge of public integrity cases for state officials is serving a jail sentence after she was arrested driving drunk.

Political People and their Moves

Former GOP gubernatorial candidate Debra Medina fired up a website that can scoop up small donations for a run for statewide office. It doesn’t say this online, but in an interview she said she is still looking at a race for comptroller of public accounts. That could be a crowded race if enough of the tire-kickers decide to bid. At various times, that list has included Sen. Glenn Hegar, R-Katy; Rep. Harvey Hilderbran, R-Kerrville; former Rep. Raul Torres, R-Corpus Christi, among others, and — don’t forget — the incumbent, Republican Susan Combs. Her speculation about running for lieutenant governor has spurred some of this.

Ed Espinoza takes over as executive director of Progress Texas, replacing Matt Glazer, who started it.

Phil Adams of Bryan is the new chairman of the board of regents at the Texas A&M University System, and that board elected Cliff Thomas of Victoria as vice chairman. Adams owns and operates an eponymous insurance company. Thomas owns an oil company and a chain of convenience stores.

It is apparently the high season for appointments, and Gov. Rick Perry has been busy, naming:

Veronica Edwards of San Antonio, founder and CEO of InGenesis, to the Texas Lottery Commission.

• Former Rep. Glenn Lewis of Fort Worth, Sarah Money-Arnoni of Houston and Erik Salwen of Houston to the Texas Southern University board of regents. Lewis is a partner at Linebarger, Goggan, Blair and Sampson. Monty-Arnoni is a partner at Monty and Ramirez LLP. Salwen is director of a counseling program at the Dallas Theological Seminary’s Houston campus.

Eric Gambrell of Highland Park, R. Terrell McCombs of San Antonio, and Thomas Wingate of Mission to the Texas Board of Criminal Justice. Gambrell is a partner at Akin Gump Strauss Hauer and Feld. McCombs is a partner at GC Barnes Group. Wingate is an attorney and a former state district judge.

Joseph Slovacek of Houston to the Texas Department of Motor Vehicles. He is a senior partner at Hoover Slovacek LLP. The governor tapped John Walker III of Houston, a trucking company exec and a rancher, to chair that board.

Dallas Barrington of Silsbee, an assistant Hardin County district attorney, to the Juvenile Justice Advisory Board.

Billy Atkinson Jr. of Sugar Land to chair the Texas Public Finance Authority and named Gerald Alley of Arlington, Walker Moody of Houston and Ruth Corry Schiermeyer of Lubbock to that panel. Atkinson is a CPA. Alley is president of Con-Real Support Group. Moody is a partner at Tudor Pickering Holt & Co. Schiermeyer is an agent with MassMutual Southwest.

Daniel Wong of Missouri City to chair the Texas Board of Professional Engineers and named Sina Nejad of Beaumont and Kyle Womack of Horseshoe Bay to that panel. All three are engineers.

• Adrian Arriaga of McAllen, Chart Westcott of Dallas and Avis Wukasch of Georgetown to the Texas Real Estate Commission. Arriaga is owner of AAA Real Estate and Investments. Westcott is a lawyer and chairman of the Westcott Foundation. Wukasch is a broker at Keller Williams in Round Rock.

• Cattle rancher Jason Peeler of Floresville to the Evergreen Underground Water Conservation District.

• Sharon Newcomer of Orange to the Sabine River Authority board. She is a former educator.

Troy Allen of Edcouch, Dario “D.V.” Guerra Jr. and Sonny Hinojosa of Edinburg, Sonia Lambert of San Benito, Lance Neuhaus and Frank “Jo Jo” White of Mercedes, and Joe Pennington of Raymondville to the Rio Grande Regional Water Authority. Allen is general manager of the Delta Lake Irrigation District. Guerra is a retired rancher. Hinojosa is general manager of Hidalgo County irrigation District No. 2. Lambert is general manger of Cameron County Irrigation District No. 2. Neuhaus is president of Neuhaus and Co. Pennington is owner and manager of Pennington Farms. White is general manager of Irrigation District No. 9 for Hidalgo and Cameron counties.

They’re renaming a dorm at Texas A&M-Kingsville for Eduardo and Josefa Lucio, the parents of Sen. Eddie Lucio Jr. and the grandparents of Rep. Eddie Lucio III.

Quotes of the Week

My understanding is it’s doorknob dead.

Rep. Allan Ritter, R-Nederland, after a point of order stopped his water bill

People who understand what the functions of the rules are, you never see them complain. It’s the folks who think that because you have a mathematical majority that you should do anything around here. And simply, the rules don’t let you do that.

Rep. Trey Martinez Fischer, D-San Antonio, talking to KUT after a water bill fell to a rule violation

When they’ve got five children and three pork chops, they get rid of two kids.

Rep. Harold Dutton, D-Houston, on legislative budget hawks

I’d be happy to vote for it if I thought it would do any good when it got to Washington.

State Rep. Charlie GerenR-Fort Worth, on a resolution asking Congress to reform immigration laws

If you don’t think this is real, then you’re not paying attention. Cruz already has grassroots on his side, and in this climate, that’s all he may need.

An unnamed "Republican insider" to National Review on Ted Cruz's presidential ambitions

If Ted Cruz had prevailed, my constituents would be homeless.

U.S. Rep. Peter King, R-N.Y., complaining about fellow Republicans raising money for the Texas senator in New York

I would be very reluctant to stand up and say that I was poorly informed and ill-prepared and clueless, which is exactly what we’re talking about happened here.

Sen. Kel Seliger, R-Amarillo, after senators voted to recall a bill they had already passed