Senator Eliot Shapleigh - El Paso, Texas

As a former state employee and interested, but biased (a bias that legislators will do the right thing) observer of legislative events, I could only roll my eyes at the latest efforts to address the school finance issue. During last summer’s special session, the State’s leadership specified a number of goals they would attempt to achieve. These goals included:

-Eliminating Robin Hood

-Achieving Absolute Equity for all students

-Ensuring sufficient revenue to fund public education

-Devising a transparent and simplified finance system

-Have a positive impact on the Texas economy

The special session was not able to arrive at an acceptable plan that met the requirements of the Governor and was agreeable to both houses of the Legislature. During this regular session considerable time and resources have been devoted to developing acceptable legislation. Unfortunately, all versions of the two bills (HB 2 and HB 3) that have been proposed rivals the worst major legislation ever considered by the State’s legislators.

The proposed legislation does eliminate Robin Hood and replaces it with the Sheriff of Highland Park plan – take from the poor and give to the very, very rich. The tax equity note for HB 3 showed that only those with family incomes above $80,000 would receive a tax cut of more than 1%. Families with income below $80,000 would find their taxes increasing by 1.5%. In the original Senate bill, CSHB 3, only Texans in households with incomes above $140,000 would have received tax relief. Their taxes would decline by 1.5%. Taxes for households with income under $100,000 would increase by 3.1%.

During floor debate, the Senate drastically changed their method of finance. The results are not markedly different from the original. While the fiscal note and tax equity note for the engrossed version of the Senate bill is not available, it is possible to derive the impact of the bill on equity. Remember, their original bill (CSHB 3) was probably the most inequitable tax bill ever considered on the floor of the Senate.

The bill that passed the Senate incorporated a reduction in school property taxes similar to that in the House bill. Instead of the statewide property tax in the original Senate bill, a further increase in the sales tax rate and modified franchise tax was included. As the Comptroller’s tax incidence study shows, both these taxes are more regressive than the school property tax. As part of the modified franchise tax a payroll tax is among the options. This tax imposes a tax of 1.75% on earnings, with a maximum tax of $1,500 per employee. Those who earn $86,000 or more will not incur any additional tax. There is also a 0.25% gross receipts tax, which sets the minimum amount that corporations or partnerships with gross receipts above $150,000 will be liable for. The gross receipts tax is similar to a sales tax, but every sale is subject to the tax. One expects that each of the new components of the franchise tax would be found more regressive than the property tax.

Both the House and Senate bills will result in Texas having a more regressive tax system, i.e., those with lower incomes paying a greater percentage of income in tax. It would also appear from both bills that only families with income above $100,000 will actually pay less in taxes than under the current tax system. Unfortunately, for those who benefit from the reduction in property tax, they will find their federal tax liability increasing.

One might argue that Texans would be willing to pay higher taxes in return for greater equity for all students. However, as former Representative Paul Colbert’s analysis has shown, "the funding gap between the wealthiest school districts and the poorest school districts will go up under CSHB 2" (the spending bill.) Using LBB numbers, Colbert found that "little new money is being offered to school districts once the $1,000 pass through money is accounted for and the elimination of recapture (Robin Hood) will result in a greater disparity between the 100 most property rich school districts and all others. Under CSHB 2, the disparity between the poorest and wealthiest school district will increase from $762 per student under current law in 2007 to $888 in 2007 under CSHB 2.

Colbert’s analysis also indicated that little new money would be available to school districts in 2005-06. In fact, because of the pass through to staff, existing programs are likely to be reduced or eliminated.

While many have decried the financial sleight-of-hand of Enron, Tyco and WorldCom, it appears to me that each of these organizations couldn’t hold a checkbook to the authors of the proposed public education legislation. So let’s look at the bottom-line and see whether the goals are achieved.

Yes, they’re markedly reducing Robin Hood by replacing it with the Sheriff of Highland Park plan of finance. Residents of the State’s wealthiest districts will find their taxes decreasing, while the amount they can spend per student increases. Why isn’t this (pay less, spend more) available to others in the State?

No, on both absolute equity and sufficient revenue: the proposed system will be less equitable and revenue will be insufficient to fund existing programs.

I would hope Texans contact their legislators to ask their position on these bills. When the conference committee reconciles these bills, any hope for improving public education will have vanished. Fortunately, my children are older and I have no need for public education. However, for the future of Texas I am more than willing to pay what is required for our legislators to achieve their goals. I hope others are also willing.