Senator Eliot Shapleigh - El Paso, Texas

AUSTIN – House and Senate leaders met publicly and privately Thursday in a last-ditch effort to compromise on opposing plans to fix school finance and cut property taxes.

The two sides reported little headway in breaking the logjam as time elapsed before a critical deadline Friday. And even if they beat the clock, Senate Democrats threatened a filibuster on any compromise that relies too much on sales taxes.

Few lobbyists in the Capitol shared the optimism of Senate Finance Committee Chairman Steve Ogden, R-Bryan.

"There are several variables out there that can still be negotiated," Mr. Ogden said. "The positions look kind of irreconcilable, but there is a lot of potential for movement there."

Lawmakers are attempting to both fix the school-finance system deemed unconstitutional by a state court and deliver billions of dollars in property tax relief.

Lt. Gov. David Dewhurst, House Speaker Tom Craddick and other key lawmakers met privately to try to bridge their sharp differences. Shortly before the meeting, House and Senate tax negotiators held their first public bargaining session in several days and appeared to have made little progress.

The biggest obstacle is how to offset $3.7 billion in property tax reductions. The House wants consumers to shoulder more of the burden through a higher sales tax; Senate leaders contend that businesses should pay more through franchise levies.

Hanging over the talks was a threat from Senate Democrats to filibuster any bill that raises the state sales tax more than the half-penny the Senate agreed to in a bill passed earlier this month. The current state sales tax is 6.25 percent. The House is pushing for a full penny increase.

"We had a firm agreement from the lieutenant governor and leadership to limit the sales tax increase to half a penny, and if that agreement is violated, then we will do what we have to do," said Sen. Eliot Shapleigh, D-El Paso.

Democrats have argued that a higher sales tax would punish low- and medium-income families.

The threat of a filibuster, a tradition that allows a lawmaker to speak as long as he or she can remain standing at his or her desk on the Senate floor, must be taken seriously because of Senate deadlines.

If a compromise can be reached by today – the last day under Senate rules for such an agreement – senators would have 48 hours to review the deal before it could be voted on. That means a vote could not occur before Sunday, the last day under House and Senate rules to approve legislation. A filibuster that lasted until midnight would kill the measure.

Senators could suspend the so-called 48-hour layout rule and take up the bill Saturday, making a filibuster harder. But that would take a two-thirds vote of the 31-member Senate, or 21 votes. The Senate has 19 Republicans and 12 Democrats.

During Thursday's meeting of the joint committee on taxes, each side held firmly to its own plan.

"We have attempted to keep a balance between business and consumers," said Rep. Jim Keffer, R-Eastland, House chairman of the joint committee. Mr. Keffer argued that if the tax bill is too hard on businesses, many will leave the state.

Sen. Kim Brimer, R-Fort Worth, said the House plan does not balance the burden as well as House leaders say and actually would shift at least $500 million in state taxes from businesses to consumers.

"Our philosophy in the Senate is fairness," he said. "We want an equal swap of taxes."

Because businesses would get about 56 percent of the property tax relief, businesses should pay a similar percentage of newly fashioned business taxes, Mr. Brimer said.

Mr. Keffer said businesses pay 56 percent of sales taxes and should get some credit for that. But Mr. Brimer disputed that, pointing to a study showing that consumers pay 56 percent of sales and other consumption taxes.

A new franchise tax proposal presented to the House by Senate leaders also drew strong questions from House members, one of whom suggested it was an unconstitutional income tax.

Mr. Brimer, however, said senators have a letter from the attorney general advising that the latest Senate plan is legal.

"It is constitutional, and the attorney general is willing to stand behind that," he said.

An outline of both proposals indicated that each would cut the maximum school property tax rate from $1.50 per $100 valuation to $1.15 this fall – a reduction of 23 percent. The rate would fall 4 percent more in 2006 to $1.10.

To make up the lost revenue, both chambers want to raise taxes on businesses, consumers and smokers – but the specifics they offer bear little other resemblance.

Rep. Warren Chisum, R-Pampa, another member of the joint panel, said House members are prepared to work through today to find common ground.

"There are still several options out there," he said. "I would not be surprised to see us come out with a bill that will be ready to go to both houses tomorrow."

PASSING THROUGH

The Senate on Thursday approved:

HB 183: Would require children younger than 5 years old and shorter than 3 feet to be in car safety seats or booster seats when they are in a moving vehicle.

STATUS: Goes back to the House for approval or rejection of changes.
SIGNING ON
Among the bills Gov. Rick Perry has signed into law:

HB 685: Allows certain members of the military, reservists and veterans to obtain a concealed-handgun permit without taking a gun-safety course.

HB 1076: Waives fees for hunting and fishing licenses for active-duty military personnel and disabled veterans.