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June 21, 2005     (512) 463-0300

LEGISLATURE KICKS OFF SPECIAL SESSION ON PUBLIC SCHOOL FINANCE REFORM

Today, the Senate opened the first called session of the 79th Legislature, and filed its version of school finance reform with Senate Bill 2. The 79th regular session ended without an agreement on the year's top issues, public school finance reform and property tax reduction. Last week, Governor Rick Perry vetoed the education portion of the state budget, and called lawmakers back to Austin to tackle these issues once again.

The major obstacles to an agreement between the House and Senate revolve around how to pay for the revenue shortage caused by a potential reduction in school property taxes by 40 cents per $100 valuation. The Senate wanted to cover the reduction by eliminating the Delaware Sub and Geoffrey loopholes that allowed five out of six businesses to avoid paying franchise taxes, with a half-cent increase in the state sales tax. The House plan did not broaden the business tax as significantly as the Senate, and made up the majority of the revenue difference with a full cent increase in sales tax.

Lt. Governor David Dewhurst said today that the Senate is committed to reducing property taxes and increasing money to schools without shifting the tax burden on to consumers, by eliminating loopholes in the franchise tax system. "The businesses that do pay the franchise tax pay more than they should, and consumers pay more than they should, because somebody pays for that loaf of bread and it's the consumers when you have loopholes," he said. He added that there is not a lot of support in the Senate for an increase in the sales tax of above one-half cent.

The Senate Finance committee, chaired by Bryan Senator Steve Ogden, will take up the tax reform bill when it comes out of the House. Ogden has been one of the biggest supporters of changes to the state's tax code, which he said reflects a 19th century agrarian economy, rather than the modern 21st century economy of today's Texas. This reform could be reached largely by broadening the state business tax, which will give the state the extra revenue it needs to lower property taxes. "We certainly should not pass on this opportunity as a method to reduce property taxes," said Ogden. "I think it would be a mistake to reduce property taxes without taking advantage of the opportunity to reform the tax code at the same time."

Senator Florence Shapiro, whose Education committee will take up the school finance reform package, SB 2, on Wednesday, said that both houses reached agreements on most of the major details surrounding school finance before the session ended on May 30. SB 2, she said, will include most of those agreements within the body of the bill. She added that she plans to pass the bill out of committee on Thursday or Friday, and hopes to have the bill out of the Senate early next week.

School finance may not be the only issue the Legislature takes up during the special session. Dewhurst said that if the House and Senate can reach an agreement on the finance reform package, the Governor will likely expand his call to allow lawmakers to take up other issues that died during the regular session, such as tuition revenue bonds, judicial salaries, and telecommunications regulation reform. But no legislation to address these issues will pass the Senate, said Dewhurst, until both houses reach an agreement in principle on education finance reform. "We're going to do everything we can, to reach an agreement with our colleagues and friends in the House and make sure we can reform our schools and put more money in the classrooms, and raise our teacher pay and lower our property taxes," he said.

The Senate will reconvene, Monday, June 27, at 1:30 p.m.

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