Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
August 11, 2003

***CAPITOL UPDATE***

Constitutional Amendment Election Information

(AUSTIN) - This week, I will continue with the analysis of proposed constitutional amendments. The election will be held on September 13, and Texans will vote on 22 proposed amendments to the Texas Constitution. This article focuses on amendments nine through eleven. The analyses contained in these articles comes from the Texas Legislative Council's "Condensed Analysis of Proposed Constitutional Amendments." To view the entire document, please visit their website at www.tlc.state.tx.us, or feel free to contact my office for a hard copy.

AMENDMENT NO. 9

The constitutional amendment relating to the use of income and appreciation of the permanent school fund.

SUMMARY: The proposed amendment amends Section 5, Article VII, Texas Constitution, to allow the State Board of Education or the legislature to determine the amount distributed from the permanent school fund (PSF) to the available school fund (ASF) from a portion of the "total return," including capital gains, on all investment assets of the PSF. The amendment places limits on the portion of total return that may be transferred to the ASF and provides for payment from the PSF of the expenses of managing permanent school fund assets.

ARGUMENTS FOR: Texas voters in 1999 approved a total return policy for the permanent university fund, which supports various institutions in the University of Texas and the Texas A&M systems. Because much of the increase in value of a portfolio such as that held by the PSF comes as capital gains, the corpus of the PSF can be protected even if a portion of those gains is distributed to the ASF. Changing to a total return policy for the PSF is expected to yield significant additional net revenue for the benefit of public schools. The Legislative Budget Board estimates the change would produce additional net revenue of over $230 million in fiscal year 2004, $247 million in fiscal year 2005, and somewhat less in fiscal year 2006 and beyond.

ARGUMENTS AGAINST: Because the PSF is a permanent endowment, a conservative investment strategy would retain all capital gains as part of the PSF. The state should avoid any danger that the corpus of the PSF, on an inflation-adjusted, per-student basis, will decline. It is possible that a continued drop in stock prices would lead to lower distributions from the PSF to the ASF, not higher. Even if PSF distributions to the ASF increase, that does not mean most public schools will receive more money. In districts that receive state aid under the Foundation School Program, the increase in ASF payments is matched by a decrease in foundation school fund payments. As ASF payments to wealthy school districts increase, so does the gap between the revenue available to school districts that rely on state aid and the revenue available to the wealthiest districts. This could potentially disturb the equity of the school finance system.

AMENDMENT NO. 10

The constitutional amendment authorizing municipalities to donate surplus fire-fighting equipment or supplies for the benefit of rural volunteer fire departments.

SUMMARY: The proposed amendment adds Section 52i, Article III, Texas Constitution, to create an additional exception to the general constitutional prohibition against a county, city, town, or other political subdivision of the state granting a thing of value to any individual, association, or corporation.

ARGUMENTS FOR: Rural areas often do not have the financial resources to purchase necessary fire-fighting equipment or supplies. The proposed amendment creates a method by which municipal areas may "recycle" unused equipment or supplies for the benefit of rural communities in need. Surplus fire-fighting equipment or supplies normally will have little, if any, value, and the cost incurred in selling the property may exceed the revenue generated by the sale. A cost-effective way to dispose of the property is to donate it to rural volunteer fire departments that have a recognizable need.

ARGUMENTS AGAINST: The amendment allows for the donated equipment or supplies to be distributed to rural volunteer fire departments "based on need." However, the amendment does not provide any criteria under which a finding of need can be made. The donating municipality may incur some costs in making the donation, and the amendment should have contained provisions to require the donating municipality to recover those costs.

AMENDMENT NO. 11

A constitutional amendment to allow the legislature to enact laws authorizing and governing the operation of wineries in this state.

SUMMARY: The proposed amendment would amend Section 20, Article XVI, Texas Constitution, to permit the legislature to authorize wineries to manufacture, sell, and dispense wine in any area of the state, even if the sale of wine in the area has not been authorized by a local option election.

ARGUMENTS FOR: The proposed amendment would permit potentially large growth in the state's agricultural base in a new area that could replace past agricultural practices that are no longer viable by expanding the areas in which wineries may operate to include dry areas. The legislation ensures that state agriculture would benefit from the sale of wine in dry areas by requiring that wine sold or dispensed by wineries in those areas be made primarily from fruit grown in this state. The amendment provides a very narrow exemption to the requirement that alcoholic beverage sales be authorized by a local option election, allowing dry areas to maintain local control of most alcoholic beverage sales and eliminating the need for the expense of holding an election to permit the sale of alcohol by a narrow class of permit holders. The amendment would bring greater uniformity to laws governing the operation of wineries in this state.

ARGUMENTS AGAINST: The amendment would override the preference of many local communities to prohibit the sale of alcoholic beverages within their boundaries. A community that wants to authorize only the sale of wine by a winery may already do so. Current law does not prohibit the expansion of the wine industry in areas in which the manufacture and sale of wine is already legal.

If you would like to receive the Capitol Update via e-mail, please contact me at bob.deuell@senate.state.tx.us.

To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711. The website for the Texas Senate is www.Senate.state.tx.us. The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

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