12:35 PM CDT on Tuesday, July 19, 2005

moderator: The Texas Legislature is working on a plan to reduce property taxes and increase funds for public education. Austin Bureau Chief Christy Hoppe chatted about the proposals and their implications for Texas taxpayers.

Tony S.: How will this plan effect the Texas homeowner and when can we first see the impact?

Austin Bureau Chief Christy Hoppe:  Right now, the House and Senate are locked on how to lower property taxes and how much to raise other taxes to pay for it. We're not sure they're going to be able to accomplish this before the session ends tomorrow, but Gov. Perry has said he'll call the lawmakers back immediately to start again if the plan is not approved.

That said, the plans being floated right now would allow homeowners and businesses to see about a 17 percent reduction in their tax rates. The maximum tax rate would drop from $1.50 per $100 valuation of the home to $1.24 the first year. The second year it would drop to $1.20, with an additional $7,500 homestead exemption kicking in. What's all that mean? The first year, on a $150,000 house, the tax savings would be $241. The first wave of property tax reduction would take effect for the taxes this year. Of course, sales taxes on everything else will increase at the same time.

KCA: Good morning Ms. Hoppe. In June, an article that appeared in The Dallas Morning News reported that charter schools in Texas get the same amount of money to operate as the public schools. Yet the charter schools claim that they only get 80% of what the public schools get to operate. Which is it?

Austin Bureau Chief Christy Hoppe:  The story that said charters actually get a little more funding than public schools was based on a study by the Texas Center for Educational Research at the University of Texas. According to the report, the average charter school received $8,045 for each child in 2003, compared to $8,028 for regular public schools. The study dealt with averages, so it could be true that some charter schools spend more.

jehaire: With facts supporting a much larger increase in alcohol taxes than in cigarette taxes, how does the Legislature justify a token alcohol increase? Is this outrageously special treatment of the Texas beer industry connected to Governor Perry's trip to a tropical island with Texas' largest beer distributor to discuss school finance? If not, how does one explain it?

Austin Bureau Chief Christy Hoppe: The House has voted down alcohol taxes by a 3-to-1 margin several times. The booze industry has a strong lobby that gives generous campaign contributions. One of Gov. Perry's biggest donors is John Nau, a beer distributor who accompanied him on that working vacation in the Bahamas. Meanwhile, we have relatively low cigarette taxes compared to other states and lawmakers have seen tobacco as fair game.

Charlie Love: Are we at the point that no school finance bill is better than passing any bill? Legislators need to put aside what is best for them and do what is best for the school system and the average working Texan!

Austin Bureau Chief Christy Hoppe: That's the question that a lot of lawmakers are asking themselves right now: is the squeeze worth the juice. There are virtually no educator groups that favor anything the Legislature is discussing. Schools would get about four percent more money under the discussed plans, which covers the cost of higher enrollment and not much else. Much of the emphasis has been on lowering property taxes, not on increasing school funding. And if you look in the tax department, the 30 percent of Texans who don't own property get hit with a hefty increase in sales taxes while reaping no offsetting benefit. Tax equity studies show that the tax swaps being discussed benefit only those earning over $100,000. Everyone else would pay more.

Dewayne: Why lower property taxes?

Austin Bureau Chief Christy Hoppe: Because they're incredibly high and it's making it hard for some homeowners to make ends meet. A little more than a decade ago, the state paid about 65 percent of the costs of education through general tax revenue. 35 percent came from property taxes. Now, those numbers have flipped. The costs of running schools over the years has shifted to property owners, and a lot of lawmakers ran their election campaigns promising to ease the burden on those homeowners. Of course, the problem is that if lawmakers lower property taxes enough for people to notice, it means they have to raise $7 billion from somewhere else to fund the schools. That's expensive, and as we're seeing, politically painful.

Gary H.: Since negotiations are difficult enough without more distraction, is there a legal way to ban ALL lobbyists from the premises of both chambers during any regular or special session?

Austin Bureau Chief Christy Hoppe:  Well, tempting as it is, that would be pretty anti-democratic. Businesses have the right to have a representative talk to lawmakers to express their feelings. What's good to know, though, is that lawmakers are attentive to phone calls and e-mails they receive from individual constituents. When those start breaking through their offices in noticeable numbers, they realize they've hit a nerve and they start paying close attention.

Gary H.: Is there a good model of education finance in another state we could learn from? Our leaders in Austin seem clueless so why not look elsewhere for rational and equitable solutions?

Austin Bureau Chief Christy Hoppe:  We're the only large state without an income tax and so it's hard to compare with other models. I'm sure they've looked, but I couldn't point to any particular place. I'll also throw in that a lot of states are struggling with this same problem.

Gary H.: Does our State Supreme Court offer any real chance of breaking this embarrassing log jam with meaningful decisions that can be enforced without endless exceptions and appeals?

Austin Bureau Chief Christy Hoppe:  There are two main questions before the court right now:

1. Is school funding equitable? Do all school children, regardless where they live, have equal access to a good education?

2. Is the state giving adequate funding to achieve that standard?

I won't venture to guess how the court will rule. They could see whatever plan the Legislature passes and send it down to lower courts to re-evaluate whether the plan solves the problems. Or they could say the whole thing is adequate and equitable. Or they could order lawmakers back to the drawing board and tell them that schools need more money.

doogie: Do you think the Legislature will solve the school finance problem if there is another special session?

Austin Bureau Chief Christy Hoppe:  I wish I knew. I think there will be another session, and then we'll see. The questions they're wrestling with now are down to who gets taxed and how much.

Janet Br.: What are the chances that a state income tax could be introduced and passed this next special session? It seems to me that would take the burden off of “consumers” and be a more fair, progressive tax.

Austin Bureau Chief Christy Hoppe:  There are a few brave lawmakers who have proposed an income tax as a broader, fairer tax that will solve education financing for a long time to come. Sen. Eliot Shapleigh of El Paso springs to mind. But Texas is very proud of the fact that we don't have an income tax, and there is no political support for such a proposal, especially among Republicans who control all levels of state government. So I would say that the answer is nil.

DJC: Christy, I simply do not understand why the state refuses to adopt a statewide level property tax, where everyone in the state pays the same rate.

Austin Bureau Chief Christy Hoppe: Well, the first reason is that there's a provision in the state constitution that prohibits a statewide property tax. The Senate initially wanted to change that, but couldn't muster the votes. Proponents like it because it makes school funding fair, regardless of the property wealth of a district. The state takes in money from all districts and redistributes it equitably. Opponents say that it's the ultimate Robin Hood scheme, where every district has to give up money to the state. School districts don't like it because they lose local control and that it would make it virtually impossible for them to raise more money for enhanced services and classes. Then there are questions lingering on bonded indebtedness of the school districts and how that would be managed statewide.

Wm. McKenzie: What happened to the effort to close loopholes in the franchise tax? That seemed like the one tax reform with the most consensus, and it now appears dead.

Austin Bureau Chief Christy Hoppe:  Some loopholes are still being closed. The last count indicated that 10,000 new businesses that have escaped paying would now join the other 150,000 who already pay. But the business lobby is powerful and they have ready ears from lawmakers who are concerned about jobs and the economy. And businesses that might be more civil-minded if they could be convinced all this money was going to education are less inclined when they know that all the money raised by taxing them will go to reduce property taxes. Not just residential. Half of those property taxes are on other businesses. So some businesses feel they're being taxed so other businesses can save money. They don't like that.

Wm. McKenzie: Two months ago, legislators were talking about spending an extra $3 billion over the next two years for schools. Now, they've reduced it down to $2.4 billion, which probably won't keep pace with inflation. What happened?

Austin Bureau Chief Christy Hoppe:  The state has a large trust fund, mostly dedicated to health issues, that comes from the tobacco lawsuit settlement. House Speaker Tom Craddick put his foot down and said that money could not be used as leverage to pay for more education. So, that accounting maneuver was lost, and with it the $600 million.

Jane A.: I praise The Dallas Morning News for pointing out that this 'tax cut' will end up costing consumers money. Keep it up! Is there any provision for oversight or accountability for schools under the proposal? I'd hate to see the money frittered away, as we have seen in Wilmer-Hutchins district. Money does not guarantee a good education.

Austin Bureau Chief Christy Hoppe: There are new provisions for accountability, and it's one of the strong points of HB 2. That bill would guarantee more transparency and accountability for school districts. They would have to publicly report how much and what percentage they are spending on administration versus classrooms. There are other provisions like that to make voters more aware of how their tax money is being spent.

Jane A.: No matter what the Legislature does, the court get the final say in the fall, right? Could they order a state income tax?

Austin Bureau Chief Christy Hoppe: The courts traditionally have told lawmakers that they have a problem and that schools will be shut down as unconstitutionally administered if they don't address the problems pronto. But the courts have always shied away from telling lawmakers how to raise the money. That's a legislative prerogative.

doogie: How much is GOP Politics playing into the Legislature's decisions?

Austin Bureau Chief Christy Hoppe:  Rep. Joe Nixon, R-Houston, said earlier this year, "We're Republicans. We don't know how to raise taxes." That seems to be the case so far.