Senators consider education funding, House talks economic development

Posted by Jon Weist, on Sat March 02 2013 at 01:22 AM

Texas senators will join the education funding debate for the first time this session today, while last week lawmakers heard about the critical nature of some state economic development incentives, and an upcoming hearing in a Senate committee will at least focus on something that spans the partisan divide: Beer.

Last Wednesday the Senate Finance Committee weighed in on the bill to fix the state’s current budget – patching the $4 billion Medicaid hole – and added another $1.75 billion to make a payment to school districts in August that otherwise wouldn’t happen until September. The text of the committee substitute is posted under “Legislation of Interest” heading on www.voteforarlington.com.

That bill, which originated in the House and is now known as the committee substitute for HB 10, is set for the Senate’s first substantive act when the body convenes today at 2 p.m. The public education funding was delayed by 82nd Legislature to balance the budget – the payment should have been set for the end of the current budget year in August but was kicked into September 2013 and thus into another fiscal year. While budget writers have always wanted to reverse that delay, there had been some concern that Governor Rick Perry wasn’t all that supportive of the idea.

Whether Perry supports it or not, House Appropriations Committee Chairman Jim Pitts, who originated HB 10, said he will accept the Senate version, avoiding an early session conference committee and speeding final approval of the legislation, thus dispensing with this legislature’s work fixing technical details from the 2011 legislative session.

Adding the public ed funding also raises the base spending level on which the upcoming budget’s spending limit is set, creating a little more room for legislators to fund new programs or restore funding cut last session, all of it with the flood of increased revenue the state has experienced in the last 18 months.

No guarantee that will happen, but the additional breathing room is welcome as legislators consider dipping in to the economic stabilization fund for one-time spending to kick-start water and – maybe – transportation projects.

One thing you don’t hear much about now though it was a big subject just six weeks ago is the desire for spending some of the surplus in the form of a tax cut. Legislators are starting to realize the surplus isn’t all that big when one considers the demands resulting from a growing population.

The tax structure, and how it affects business growth, was the main subject of a presentation to the manufacturing subcommittee of the House Economic Development and Small Business Committee last Tuesday.

Dale Craymer, president of the Texas Taxpayers and Research Association, told committee members that while Texas has a reputation as a low-tax state, that broad picture changes when you look a little deeper.

“For individuals, we are a low-tax state,” Craymer said. “When you look at business taxes, the tune is not quite the same.”

He said businesses pay more than half of all state property taxes and about 46 percent of sales tax. The marquee value of not having a personal income tax is undeniable, he said, but as a consequence “we have very high property tax rates and very high sales taxes. Those take a toll on business.”

Texas also taxes personal property – machinery, inventories – which many states do not. Eliminating that tax is also a problem.

“If you want to do a revenue-neutral change to eliminate the personal property tax, you will drive up the property tax rate,” Craymer said.

He identified the state’s economic development challenges going forward as infrastructure – water, transportation – job training and education, the same issues the Arlington Chamber has considered priorities for several legislative sessions in a row. Because of the lack of a personal income tax, Texas is attractive for high-income corporate executives, but that incentive may not allow as much job growth as we think.

“It may make more dollars and sense for a corporation to put a headquarters here rather than to put a manufacturing plant here,” he said.

Craymer focused on the lack of a state research and development incentive and underlined the importance of extending Chapter 313 of the Texas Tax Code, a provision set to expire next year that provides incentives for very large manufacturing operations, such as the Toyota plant in San Antonio. He noted that only two states provide few, if any, incentives for research and development, Texas and Tennessee.

“In spite of all the budget difficulties California has been through, they have never talked about doing away with the R&D tax credit,” he said.

Craymer’s presentation to the committee, including various comparisons with other states, is posted here.

While the pace in Austin has been slow, that’s about to change. Friday is the deadline for filing bills, and a week later we hit the halfway point in the session. The Legislative Council, which drafts bills and tries to make sure the changes fit in the right places in existing law, is reported to have 3,000 bills backed up with a week to go.

The other headline-grabbing issues in the state don’t seem to have much movement in the next week. The big public education testing and accountability bills don’t have any new hearings set, transportation advocates see many different ideas for funding infrastructure but no agreement on any one thing, and pressure continues to grow to find a face-saving way to accept the $100 billion the federal government is offering over the next few years to expand Medicaid services to some of the 25 percent of Texans who do not have health insurance.

One effort to find a middle ground is Senate Bill 7 by Senate Health and Human Services Chair Jane Nelson. Nelson, a staunch conservative, has proposed seeking some flexibility in administering the program in return for accepting the obligation to expand services to adults up to 133 percent of the federal poverty level. That approach – seeking some wiggle room – has helped move prominent Republican governors in New Jersey, Arizona, Florida, Ohio and Michigan away from their adamant refusal to accept the deal. Governor Perry has not offered any conditions under which he would accept the funding.

Texas’ Medicaid roles have improved, there are fewer recipients now than anticipated two years ago, but that doesn’t help the arguments of conservative legislators who ferociously resist accepting the Medicaid expansion dollars that the federal Affordable Care Act offers.

If legislators believe their own rhetoric about how never raising taxes and being stingy on spending will elevate the state’s economy, then they should believe that economic expansion applies to everyone, including those who they think will swamp the Medicaid rolls and “bankrupt” the state. Following that logic—a rising tide lifts all boats—fewer people with incomes at or below 133 percent of the federal poverty level will exist in the state. That income level, by the way, is currently $26,000 for a family of three.

If that’s true, then this deluge of Medicaid claims that will overtake all other spending will never materialize. Either that or it’s a cynical argument that’s more about playing to anti-government political sentiment than concern for the state’s budget or the 25 percent of Texans without health insurance. As many have said, if it weren’t for the politics this wouldn’t even be a discussion.

It’s enough to drive a person to drink, and the Senate is showing up just in time to help with that. On Tuesday, the Senate Business and Commerce Committee will take up a roster of proposed legislation loosening rules on the production, distribution and sale of beer, focusing on brew pubs and small businesses associated with beer production and distribution.

No samples will be allowed during the hearing.

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