Senator Carona's Email Update
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EMAIL UPDATE

December 14, 2011

What's New . . .

  » Constitutional Amendments – Since my last Email Update, Texas voters have spoken on 10 proposed constitutional amendments. Voters adopted all but three of the proposed amendments; rejected were Amendment Nos. 4, 7 and 8. Once the votes are canvassed, the Amendments are effective immediately unless the enabling legislation specifies otherwise. In my website Press Room, I have added a Summary of the 10 proposed amendments with their outcomes, as well as detailed analyses and condensed analyses of the proposed amendments.

  » Higher Education Hearings – On May 6, 2011, Lieutenant Governor David Dewhurst and Texas House Speaker Joe Straus announced the creation of the Joint Committee on Oversight of Higher Education Governance, Excellence and Transparency. I am privileged to have been appointed to sit on the Committee. The Committee's purpose is to examine the practices of college and university governing boards and ensure they follow best practices when developing and implementing policy. The Committee will additionally examine the adequacy of transparency in the process in order to ensure the state's institutions of higher education maintain the highest of standards. The Committee's specific charge is to examine:

To date, the Committee has held three hearings during which representatives of most of the state's institutions of higher education testified on each of the matters which are the subject of the Committee's charge. Witnesses testifying included members of Boards of Regents, Presidents and Chancellors of our universities as well as some visiting from other states.

You can follow the Committee's blog (http://heget.posterous.com/), which features key hearing dates and agendas and allows for real-time posting of written testimony during committee hearings. The Committee will make recommendations for legislative or administrative action and issue a report of its initial findings and recommendations to the Lieutenant Governor and Speaker of the House by January 7, 2013.

  » Senate Business and Commerce Committee – We have begun to receive interim study charges and will start interim charge hearings in January. However, in my role as Committee Chair I have requested regular updates from agencies that we oversee as they have begun to implement policy resulting from recent legislation. Accordingly, the Senate Business and Commerce Committee held a public hearing on October 4. In that hearing:

I also co-chair the Windstorm Insurance Legislative Oversight Board, which met on November 3. The Texas Windstorm Insurance Association (TWIA) and the TDI told the Legislative Oversight Board that TWIA's new leadership is working to find stable financial ground through rate adjustment and pre-event bonding reinsurance. However, the system is not actuarially sound, and getting there is - in my view - a great challenge.

You can also follow the Senate Business and Commerce Committee and the Windstorm Insurance Legislative Oversight Board at the Senate Business and Commerce Committee's blog (http://bandc.posterous.com/), which includes meeting notices, agendas and real-time posting of written testimony during hearings.

Focus . . . Lawsuit Updates

Several important issues in Texas are currently the subject of lawsuits. These issues include the state's business tax (often referred to as the margin tax), school finance and redistricting. Following is a brief background summary and status on each of these.

  » In re Allcat Claims Service, L.P., the Business/Margin Tax Case
On November 28, 2011, the Texas Supreme Court issued an important ruling holding that the state's main business tax, the "margin tax," does not violate the Texas Constitution. As background, in 1993, Texas voters adopted an amendment to the Texas Constitution, commonly referred to as the "Bullock Amendment," that prohibits the imposition of a state income tax unless authorized by voters. The Bullock Amendment applied the prohibition to "a person's share of partnership and unincorporated association income."

The margin tax was enacted after the Texas Supreme Court held in 2005 that the state's system for financing public schools was unconstitutional. This holding required the Legislature to revise the state's method of financing schools, which it did in 2006 in a special session. The attempted fix involved a two-pronged approach -- lowering school property taxes and revising the state's business tax. The tax revisions included applying the tax to a larger number of business forms. As a result, for the first time, limited partnerships and certain associations were required to pay the tax.

The issue before the Texas Supreme Court was whether the Bullock Amendment prohibited application of the revised margin tax to limited partnerships because the tax on a partnership might be, in effect, an income tax on the partners. A majority of the Court found that the tax applied to the business, not the business's partners, so it did not run afoul of the Texas Constitution. A second suit raising similar concerns has not yet been decided.

Whether good or bad, this decision gives the Legislature much needed guidance as we approach the next legislative session. Most of us believe we will be revisiting the margin tax issue since it has not performed as anticipated. Resolution of this lawsuit provides guidance as we consider difficult but necessary changes to address equity in our tax structure.

  » School Finance Cases
Since 1970, there have been seven major school finance lawsuits in the state generally revolving around the Texas Constitution's requirement that the state provide efficient and adequate funding for public schools. Legislative attempts to address the decisions of the courts have proven problematic and concerns remain among school districts that the education funding system is unfair. This is in large part because it relies on a funding formula that allots some school districts as much as $12,000 per year per student and others as little as $4,000 per year per student. This disparity too often triggers the system's recapture requirement, better known as "Robin Hood," which requires property wealthy school districts to share property tax receipts with other school districts.

This last session, along with every major component of the state's budget, education funding was adjusted to accommodate the budget shortfall. The budget measures, combined with the long-standing funding equity issues, have led three separate groups of school districts, representing hundreds of districts across the state, to again file lawsuits challenging the state's public education funding system. At the center of all three suits are challenges to the constitutionality of the state's system and the question whether it is adequate, efficient, and equitable.

It is anticipated that the suits will be tried sometime in the summer or fall of 2012. This timeframe means we will most likely have an answer from the courts sometime late next year or possibly during the 2013 legislative session. If the courts rule that Texas' school finance system is unconstitutional, it will be the Legislature's responsibility to address the problem. For this reason and because of the importance of school financing issues, I and my Senate colleagues will be closely monitoring the progress of the suits.

  » Redistricting
Once again there is high drama in the redistricting debate and, as a result, there is also a significant degree of uncertainty about what Texas' final election districts will look like. Please refer to Current Status of Texas' Redistricting Process (as of 12/13/11) for a review of the redistricting process, requirements of the Voting Rights Act and the current status of the pending lawsuits. Since the state does not have election districts in place and most likely will not have in time for the primary elections, we are experiencing a fair amount of chaos in the political process. Without election districts under which the state can orderly proceed, candidates cannot be sure in which districts to run; and, without a feasible primary election date, counties and political parties cannot appropriately prepare for elections.

Even though there is a possibility that Senate District 16 could change again as a result of the preclearance process or legal challenges to the plan, I filed for re-election in the District on Monday, November 28, and I continue to conduct my re-election campaign on the assumption that the final composition of the District will not significantly change. In the last few months, I have enjoyed meeting many of you who are new to District 16 and I look forward to meeting more of you.

Student Opportunity . . .

The Texas General Land Office is sponsoring the 16th Annual Treasures of the Texas Coast Art Contest. Open to students in Kindergarten through Grade 6, it is a fun and educational opportunity for the children as well as a chance to win fun prizes. Visit the website for rules and entry form. Deadline for entry is Monday, March 5, 2012.

In Closing . . .

As this year comes to an end, I will enjoy the closeness of family and friends as we celebrate Christmas. I hope that you will find joy and peace this holiday season and wish you a prosperous new year in 2012!

Sincerely,

John Carona
State Senator - District 16
http://www.carona.senate.state.tx.us/

Capitol Office District Offices
P.O. Box 12068
Austin, TX 78711
512-463-0116
800-662-0334
512-463-3135 (fax)
john.carona@senate.state.tx.us
8080 N. Central Expy.
Suite 1440, LB 44
Dallas, TX 75206
214-378-5751
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