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Texas Agriculture Archive

May 21, 2004

School finance—it may be a long summer!

When the Texas House finally unveiled their plan to reform public school finance, it was very promising. The plan would have added $1.5 billion of new money to fund public education in Texas, while reducing the school property tax rate by 45 cents. The bill included an increase in the state's sales tax, a tax on business payroll, the addition of video lottery terminals (VLTs) and the addition of taxes on several items not currently taxed including newspapers, mixed drinks and billboards.

The optimism generated by the House plan was short-lived. Just minutes before the House floor debate for HB 1, the Speaker of the House announced that VLTs and the payroll tax would be removed from the bill by an amendment. The elimination of these two revenue streams removed $1.5 billion dollars from the bill. That, in essence, removed all of the new money added to the bill for education and significant property tax relief.

To compensate for this shortfall the tax on property values was raised from $1.05 to $1.20 per $100 valuation, and the sales tax rate was increased to 7 percent. At 7 percent, Texas would have the second highest sales tax in the nation.

In what was probably the final nail in the coffin on this special session, the House voted 116 to 28 against the House Joint Resolution (HJR 1), which is needed for some of the new tax changes to be constitutional. According to the Texas Constitution, all tax laws must originate in the House. If the House can't get the 100 votes to pass a constitutional amendment, whatever the Texas Senate does is moot.

The Senate is currently meeting as a "committee of the whole" to discuss a school finance plan. However, they are skeptical that this special session can be salvaged. Senators are reviewing the idea of a business activity tax and an overhaul of the current franchise tax. Also, the Senate has talked of revamping a bill offered last session which added taxation on services.

The legislature will have until May 19 before the clock runs out on this special session. If a plan is not achieved by that deadline, Governor Perry has publicly committed to calling more sessions until the school finance issue is resolved. It may be a long summer.