It’s reports like this one that we’ll use to hold state leaders accountable for how they spend our hard-earned tax money this next budget cycle. They promise more money for roads, but TxDOT’s perpetual excuse to levy toll taxes on every highway will continue to be ‘it’s still not enough’ unless we demand NONE of this new money or existing tax revenues can be used to build toll roads. If they’re going to build a toll road, it should pay for itself with just the toll users alone - no tax money!
Tax relief figures high on legislative budget priorities
By Peggy Fikac
December 6, 2014
AUSTIN — Texans can expect tax relief, a focus on border security and more efforts to fight traffic congestion when a cash-flush Legislature convenes in January.
The budget priorities line up with campaign promises from Republican state leaders and lawmakers, who handily won their spots with a message of keeping state government lean while carefully weighing additional spending for its benefits.
At least some outnumbered Democrats also appear to be on the tax-relief bandwagon, as the state welcomes the prospect of having $5 billion or more in greater-than-expected revenue when the current two-year budget period ends. Future economic growth is expected to yield billions more, with the caveat that uncertain oil prices must temper expectations.
The tax-relief issue “crosses party lines,” said Senate Finance Committee Chairwoman Jane Nelson, R-Flower Mound. “Property taxes are really something that people would like to address.”
Besides property-tax relief — pushed by Sen. Dan Patrick, the incoming lieutenant governor — the potential for cutting the state’s business tax has been highlighted by Attorney General Greg Abbott, the governor-elect.
Rough estimates of costs for budget ideas
Increase state school funding by $1,000 per “weighted student” (term that includes additional money for those needing extra assistance) — $6.4 billion
Eliminate “diversions” of Highway Fund to Department of Public Safety — $500 million
Dedicate half of motor vehicle sales tax to highway fund — $2.2 billion
Reduce school maintenance and operations property tax rates by 10 cents (roughly 10 percent) — $2 billion
Increase the school homestead exemption by $15,000 — $1 billion
Exempt business inventories from the school property tax — $1.5 billion
Eliminate the franchise tax — $5 billion
Source: Texas Taxpayers and Research Association
The devil, as always, is in the details of a state budget that totals $200 billion in the current two-year fiscal period, including state and federal funds that are largely spoken for before lawmakers convene. Education and health and human services alone take up nearly three-quarters of the total.
“I fully expect there to be some tax relief. The question is, what’s the nature of it?” said Rep. John Otto, a Dayton Republican who serves on the House Appropriations Committee.
State leaders also promise serious work on education, including a look at boosting quality pre-kindergarten programs, as proposed by Abbott.
But it’s unclear how much more money school districts may expect. Leading lawmakers say they want to ensure student population growth is covered by the system, which is based largely on local school property taxes and state aid. But school districts continue to feel the cuts made in the face of an inaccurately projected 2011 budget shortfall, which were addressed but not completely restored in 2013.
The school funding uncertainty is largely because lawmakers are awaiting a Texas Supreme Court ruling on whether the current finance system must be overhauled in response to a lawsuit from school districts. The districts already have won a judge’s ruling that it’s inequitable and inadequate. While some want to improve the system, perhaps strengthening the state’s case, others want to first see what the top court will require.
It’s also unclear what progress may be made toward attacking long-standing issues affecting Texas’ future such as the plight of uninsured people, whose emergency-care bills are footed by local governments and those with insurance; the unmet need for college financial aid; and just how close the state can come to meeting the multibillion-dollar tab required just to keep road congestion at its current levels.
Nelson said, “Economically, we’ve been doing really well, so we’re going to have the money to do what we need to do. We’re going to be very frugal. We’re going to probably have enough to meet our needs and do something that I know the conservatives want to do, with some kind of either property tax reduction, or (business) margins tax reduction or both.”
What’s clear is that despite the billions of greater-than-predicted dollars awaiting lawmakers’ allocation, the list of programs that can use more money is far longer than the dollars can cover, especially in light of a spending cap on certain general revenue.
“It’s sort of easy when there’s not a lot of money. You just say we haven’t got the money,” said Rep. John Zerwas, a Richmond Republican who serves on the Appropriations Committee. “Whereas now, I call it kind of a food fight. You’ve got a lot of food on the table, and people are going to start grabbing for it and trying to make sure they get their programs funded at a level that they want.”
Simply keeping current levels of services to a growing population would cost an additional $6 billion to $7 billion in state general revenue, said Eva DeLuna Castro of the Center for Public Policy Priorities, which focuses on services important to middle- and lower-income Texans. That’s without addressing the lingering cuts from 2011.
“All we’re hearing about is tax cuts. Nobody is talking about, 'What did we cut out of the budget in 2011?’” she said. “I don’t think it’s exaggerating to say that our future economy and prosperity are at stake. We need good roads, but we also need good schools and universities.”
As they look at tax relief, longtime lawmakers are only too mindful of the tax cut and swap championed by Gov. Rick Perry in 2006 in response to a court order to revamp school funding.
Local school property tax rates were reduced in the swap, and the state business tax was revamped to help cover the cost of that reduction. But other local property taxes, and increases in property valuations, ultimately added up to higher bills anyway.
That left the state to shoulder more of the cost of schools without a lot of gratitude from local taxpayers.
“You can’t slay a $45 billion beast with $7 billion,” said budget expert Dale Craymer, president of the business-based Texas Taxpayers and Research Association. “Even though the Legislature provided substantial tax relief in 2006, a lot of folks didn’t notice it.”
Sen. Kirk Watson, D-Austin, is out front on the property-tax issue, with a proposed $10,000 increase in the homestead exemption that would cost the state about $650 million annually.
But cutting homestead taxes without addressing businesses’ substantial property tax burden could be a tough sell. Craymer said one idea would give a break to business-inventory taxes at a cost of $1.5 billion a year. (Doubling the $15,000 homestead exemption, a bit more than Watson is proposing, would cost $1 billion.)
“I don’t think you’ll find a member of the Legislature who wouldn’t be interested in property-tax relief. The challenge will be, how do we address it? How do we provide property tax relief without causing unintended problems — without hurting education, for example?” said Sen. Judith Zaffirini, a Laredo Democrat on the Finance Committee.
Patrick, a Houston Republican, “is committed to reducing property taxes,” said his spokesman, Alejandro Garcia. Abbott has said property tax relief should be evaluated along with business-tax relief.
“I have an interest in finding ways to reduce the tax burden on individuals and businesses in this state,” Abbott said recently. “We need to be able to do the math on it.”
Limited-government groups including Empower Texans and the Texas Public Policy Foundation would like to eliminate the business tax, and the foundation also would like to do away with the property tax in favor of a broader, higher sales tax. Such groups will keep the pressure on lawmakers as they evaluate the balance between cuts and services, which also have powerful advocates.
The top priority for the Texas Association of Business, for example, is more money for transportation, which would benefit from $1.7 billion in new funding approved by voters last month but needs an additional $3 billion or so just to stay even, according to state estimates.
House Speaker Joe Straus, R-San Antonio, is pushing to use all the highway fund for transportation, which would give more than $1 billion to the effort over the next two-year budget period. Abbott has proposed a constitutional amendment that would dedicate upwards of $2 billion from the motor vehicle sales tax to transportation. In both cases, the money directed to transportation would need to be made up elsewhere.
Border security will continue to get strong attention, as lawmakers consider a permanent solution in the wake of stepped-up efforts that drew national headlines. Abbott has proposed adding hundreds of state troopers to the border. Patrick has said that when he takes office, he wants to take steps to keep the National Guard on the border longer than currently envisioned. “Border security is a top priority for me,” Patrick said.
And as Zaffirini noted, that’s the key.
“The fact of the matter is that whoever is governor or lieutenant governor or speaker will have his or her priorities addressed,” she said.