From the Office of State Senator Troy Fraser

For Immediate Release
April 14, 2004
Contact: William A. Scott - (512) 463-0124

Legislature Could Consider Many Options to Fund Public Schools

By Senator Troy Fraser

With a special legislative session on the horizon, many members of the Legislature are working toward a consensus on the best approach to address the method of funding our public schools.

So far, finding that consensus has proved to be very difficult. The reason is simple: solving the school funding problem is nearly impossible without tinkering with the state's tax structure and adding additional revenue.

In sorting through the options, I start with the basic premise that property owners, through their school taxes, have for too long carried a disproportionate share of the tax burden. In 1980, state government funded 52 percent of public education while local property taxes funded 48 percent. Today, state government funds about 38 percent and property owners contribute 62 percent. Clearly, we cannot continue this trend. Property owners need tax relief.

Another fundamental problem with the current system is that nearly half of the state's 1,031 school districts have reached their $1.50 tax cap allowed to pay for maintenance and operations. According to the Texas Association of School Boards, 691 districts -- roughly 70 percent -- are at $1.45 or above. Simply put, the system is maxed out, and teachers and administrators are calling for a cash infusion.

With these challenges in mind, elected officials, including the governor, lieutenant governor and speaker, business leaders, policy think tanks, and others have begun to discuss a multitude of options.

Under the governor's plan, the tax rolls would be split between residential and commercial property. The residential property maximum tax rate would be reduced from $1.50 to $1.25 per $100 assessed valuation and would continue to be taxed by local school districts. All businesses would be subject to a new state property tax of $1.40, a 10-cent reduction from the current maximum.

Proponents of this plan say lost property tax revenues could be offset with a higher cigarette taxes, legalization of video gambling at existing horse and dog racetracks, and closing some of the business franchise tax loopholes that are currently exploited by some of the state's largest companies. While I have never been a supporter of the franchise tax, I believe if we're going to have one, it ought to be fair. I would consider closing the loopholes so that every business pays its fair share, but I would insist that the current tax rate be lowered at the same time.

Any changes to the gambling laws would require a two-thirds vote in both the House and the Senate to place the issue on the ballot for a constitutional amendment that requires voter approval. A significant number of us in the Legislature have reservations about educating our children with a gambling tax.

In the meantime, I have joined the lieutenant governor and other members of the Senate in calling for an immediate school property tax cut of up to 75 cents per $100 assessed valuation. The lost revenue from property taxes would be replaced with a much broader consumption tax.

The Senate, during the 2003 regular session, unanimously passed a similar plan that would have cut school property taxes in half, in exchange for a broader consumption tax. To me, that is the fairest approach because a sales tax is paid by individual consumers and businesses alike. Also, the Senate plan that I voted for would have ended the Robin Hood funding plan as we know it.

The Texas Constitution provides that any legislation for raising revenues must originate in the Texas House of Representatives, where there appears to be no clear consensus on the options outlined above. Until the House rallies around and embraces a plan, the Texas Senate is placed in the awkward position of waiting until the House acts and sends us a proposal.

Senator Troy Fraser, R-Horseshoe Bay, represents Senate District 24, which comprises 21 counties in the geographic center of Texas.