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1.06.2005
Dewhurst School Finance Proposal Circulating In Capitol
Touches on general proposal at press luncheon
By Harvey Kronberg – www.quorumreport.com
Lt. Gov. David Dewhurst has promised
a broad sweeping plan to overhaul the state’s school
finance system, cutting property taxes by a third and maintaining
the current proportion of business contributions in the overall
school funding formula.
Dewhurst held his pre-session luncheon with the Capitol press
corps today, outlining his priority objectives for the upcoming
session. He did not provide the specifics of his school finance
plan because the Senate has yet to reach consensus on all
the details but Dewhurst promised a "bolder plan than
I’ve ever seen" to fund schools, with substantial
new resources for teachers and an emphasis on improving education.
"After we’ve reached consensus on the plan we are
proposing, we should have a good starting point to work with
our colleagues in the House," Dewhurst said. "I
am determined to do everything I can to continue our good
working relationship with Gov. Perry and Speaker Craddick.
I’m going to work as hard as I can to make sure the
Senate works effectively with the House."
Dewhurst would not reveal his specific revenue sources, but
according to paperwork on the "Dewhurst plan" circulating
the Capitol, the plan would raise $7.2 billion in Fiscal Year
2006 and $7.4 billion in Fiscal Year 2007. The revenue side
would be franchise tax reform ($3.5 billion in 2006 and $3.7
billion in 2007); a half-cent sales tax increase and motor
vehicle tax increase ($1.3 billion and then $1.4 billion);
a cigarette tax increase of 50 cents and other tobacco increases
($490,000 and then $510,000); the renewal of the telecommunications
infrastructure fund ($210,000 each year); a 1.5 percent real
estate transfer fee ($999,000 and then $1 billion); alcohol
taxes ($100,000 each year); and other increases in tax collections
($609,000 and then $533,000).
According to the document, about $5.5 billion would go to
property tax relief in the state each year, with a maximum
property tax rate of $1 per hundred dollar valuation. Another
$1.6 billion would go to "educational excellence spending."
Asked why the Senate had not stuck to its 75 cent tax rate,
Dewhurst said that many in the House had felt that cutting
the current property rate in half was considered too ambitious.
As Dewhurst pointed out, the more the Senate cuts property
taxes in a good year, the less the state will be collecting
to spend on education. Dewhurst is basing his figures on an
assumption that the state will be in the red between $1 billion
and $2 billion for the coming biennium, with a rate of growth
of 5.65 percent per year. The actual revenue forecast will
not be out from the Comptroller’s office until early
next week.
The key to the Dewhurst proposal – and the way he avoids
saying there is a tax increase ahead for the state –
is to say that the proportion of taxes will remain the same
under the plan. Currently, 54 percent of the state’s
property taxes are paid by business. Business continues to
pay about 50 percent of the overall taxes in the state. So
even if the state collects more money, or more money more
broadly, it will maintain that proportion.
Dewhurst’s guiding principle will be to keep that balance
in check. Like Perry, Dewhurst wants a plan that will maintain
a pro-business climate in the state. He says that taxpayers
in Texas have a general tolerance for tax levels, usually
about 15 percent of income. Right now, Texas’ combined
tax rates sit at about 13 percent of income.
By providing a broad-based low-rate business tax – no
more than a 1 to 1.25 percent effective rate across all industries,
including professional services – the state can generate
significant funding, Dewhurst said. Dewhurst also spoke of
the use of a statewide property tax rather than tax collections
in local school districts, although Dewhurst did not indicate
the Senate had a firm commitment on the concept.
Dewhurst says the one message he gets from businesses is that
they would accept taxes if those taxes were low, fair and
equitable across industries. Dewhurst joked that he had coined
a term for such acceptance of new taxes – "intrafraternal
genocide."
Collecting property taxes on a statewide level could provide
both equity and would be cheaper than collecting taxes on
a district-by-district basis. Such a concept, however, may
run into resistance from local districts that have insisted
on local control. Under the Dewhurst plan, local school districts
would collect up to 15 cents for enrichment.
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