Senator Eliot Shapleigh - El Paso, Texas

AUSTIN – The knotty effort to fix school finance got a jump start in the Texas Senate on Wednesday, as Lt. Gov. David Dewhurst announced that all 31 senators agree on a broad plan to cut school property taxes and boost funding.

But a broad plan is a long way from a consensus on details, and this problem is still a long way from being solved.

Mr. Dewhurst spent much of the day persuading reluctant senators to sign on to his proposal, then called a late-afternoon news conference to announce the agreement that sets the stage for talks with the House and Gov. Rick Perry on education.

Most senators appeared with him.

"All 31 senators have signed on to our draft plan that will change the way we pay for our schools, dramatically improve quality and put substantial new resources into public education," Mr. Dewhurst said. The lieutenant governor also said the plan would deliver much-promised property tax relief by lowering the maximum property tax rate for school operating expenses from $1.50 to $1 per $100 valuation. Schools can levy up to 50 cents more per $100 for construction bonds.

"This is meant to be a starting point," Mr. Dewhurst explained. "Our feet are not in concrete, but that's the legislative process."

The plan, titled "Texas Children First," would create a statewide property tax to replace locally levied school taxes. Revenue would be distributed equally to all districts. The districts could then levy an extra 5 cents each two years for local programs, up to 15 cents over six years.

Some $5.6 billion in property tax cuts would be replaced with increases to the state sales tax and motor vehicle sales, cigarette, alcohol and franchise taxes. Another $1.6 billion would be raised next year through a telecommunications tax and by closing the used car sales tax loophole and improving delinquent tax collections.

The biggest new source of revenue would occur with reform of the state's main business tax, the franchise tax, so that all businesses – except sole proprietorships – would pay.

A leading option is to levy a franchise tax of about 1.25 percent on after-tax earnings, plus compensation. The projected new annual revenue is $3.5 billion.

Agreement on the broad plan – which leaves out many details that will have to be worked on later – came on the second day of the 2005 legislative session.

Gov. Perry applauded the Senate for developing a "good starting point" in the debate, and House Speaker Tom Craddick, R-Midland, also complimented senators.

Mr. Dewhurst said specific increases for any of the proposed taxes are still to be decided. However, the combined new revenues would total $7.2 billion next year and $7.5 billion the following year.

The plan envisions that total spending on public schools would increase $6.7 billion in the next two-year budget, including extra money for enrollment growth. Texas now spends about $30 billion a year.

Sen. Florence Shapiro, R-Plano, who will be lead author of the legislation, said creation of the state property tax is the only element that requires a constitutional amendment. That means approval is needed from two-thirds of the House and Senate, and voters in a statewide election.

While local school districts and some House members are opposed to a state property tax, Ms. Shapiro said it has the advantage of equalizing funding of schools and eliminating the current "Robin Hood" system where high-wealth districts must share property tax revenue.

"A state property tax is the great equalizer," the senator said. "We want to be sure we preserve equity in the system as we get rid of Robin Hood."

Sen. Royce West, D-Dallas, said the agreement is a signal to the House that Republicans and Democrats in the Senate "are ready to take on the number one issue in the state."

"We don't all agree on everything, but we do agree that something must be done."