Chairman, Public Law Section, Locke Liddell & Sapp As we begin 2006, the State Legislature is focused on issues surrounding tax reform and school finance that must be solved before the Texas Supreme Court-imposed June 1 deadline. Everyone is gearing up for the impending Special Session to be held in the spring. In November, Gov. Perry appointed a bipartisan group of 24 Texans "to develop proposals to modernize the state tax system and provide long-term property tax relief as well as sound financing for public schools." He named John Sharp, a Democrat and a former Texas comptroller, to head the group, which will continue holding public hearings. On Jan. 9, Gov. Rick Perry’s Texas Tax Reform Commission held a public hearing in Austin to get input from audience members and to discuss the looming issues. It was clear that commission members take seriously the charge from the Court and are trying to come up with solutions. At the meeting, Sharp said he would like to see property taxes for school operations cut by about one-third, an effort that would require the Legislature to raise more than $5 billion a year in new state taxes or other revenue. But he said it would be a mistake for the Legislature to impose a permanent, lower cap on school taxes because it could soon land the state back in court over school funding. Sharp has said his goal is a straightforward overhaul of the state’s franchise tax that can provide a stable long-term source of revenue for Texas schools. Also at that Jan. 9 meeting, Solicitor General Ted Cruz told the Commission that the two most popular school finance solutions during the recent legislative session – rolling back the tax rate and capping it at $1 or doubling the current homestead exemption – fail to answer the issue of meaningful discretion raised by the Texas Supreme Court in its school finance decision. Meaningful discretion, Cruz said, is not local property tax relief, and the gap between floor and ceiling must be more significant. Cruz said the state essentially has three options: raise the cap, possibly from the current $1.50 to $1.65; lower the floor by dropping some of the state’s requirements on school districts, or buy down the floor by pumping more money into the system to pay for those requirements mandated by the state. In addition to the Governor’s Commission, Lt. Gov. David Dewhurst in December named a Special Select Committee on Education Reform and School Finance to also study issues regarding the court ruling. While Perry’s commission will report to the governor, Dewhurst’s committee (six Republicans; three Democrats) is charged with making recommendations to the Texas Senate for legislation that ensures compliance with the Supreme’s Court decision, improve schools and reduces school property taxes. Dewhurst’s Committee has its first meeting set for January 24. Speaker of the House Tom Craddick, meanwhile, delivered a strongly worded speech Jan. 10 at the Texas Public Policy Foundation’s Fourth Annual Policy Orientation in which he stuck to many of the education reform measures of the failed House Bill 2 from the recent legislative session. He told the group that his constituents – and members of the House, for that matter – want to see more accountability in the spending of dollars in education, rather than throwing more money at public schools. All of this means to expect an interesting Special Session, which most likely will be held in late March or early April – after the Primary Elections and early enough for the Legislature to try to resolve the issue before the June 1 deadline. The one thing that seems certain is that all parties still are trying to come up with a plan that would be amenable to state legislators. Locke Liddell & Sapp will continue to monitor the events closely and stay in constant communications with our state legislators. We will make sure BOMA members are kept abreast of issues that are of particular interest to its members.
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