April 28, 2006

Top Leaders Make Deal on School Reforms
While Senate Panel OKs Business Tax Plan

By Mike Hailey
Capitol Inside Editor

Apparently feeling pressure from the Republican powers that be, House Speaker Tom Craddick and Lieutenant Governor David Dewhurst appear to have set an intense rivalry aside long enough to strike tentative deals that could lead to higher teacher salaries and other measures designed to improve public education in the current special session.

While the top two leaders reached tentative agreements on school reforms, the tax package that's been the Legislature's chief priority so far this spring continued a relatively smooth trip through the process as the Senate Finance Committee gave its blessings to the business tax overhaul that Governor Rick Perry wants to see passed.

After taking testimony for several hours, the committee forwarded House Bill 3 to the Senate floor for debate on a 10-4 vote that was split along party lines. Four Democrats - State Senators Juan Hinojosa of McAllen, Royce West of Dallas, John Whitmire of Houston and Judith Zaffirini of Laredo - voted against the proposed business tax expansion while Democratic State Sen. Frank Madla of San Antonio and nine Republicans on the committee backed the plan that has been recommended by the special tax panel that Perry asked former Comptroller John Sharp to lead.

The committee's decision made it appear that the vote next week on the floor will be close with support from 21 senators needed to send the business tax plan goes to a conference committee. If Madla and one other Democrat vote aye for HB 3 on the Senate floor, one Republican would have the ability to sink the business tax proposal at a time when conservatives are blasting the plan as a major tax increase.

Dewhurst and Craddick reached the tentative accord on teacher pay and other school reforms amid speculation that powerful forces within the GOP including some of the biggest contributors had become concered that an ongoing feud between the two leaders could cause the special session to collapse and hurt Perry's chances for re-election. The bad blood seemed to began when Craddick and Dewhurst clashed on school finance in 2003 when Republicans had control of both chambers for the first time in more than a century. A compromise plan fell apart last year as the two leaders accused each other of dealing in bad faith during the negotiations on schools and taxes.

Earlier Friday, however, Craddick's office confirmed that the House leader has reached a basic agreement with his Senate counterpart on a $2,000 across-the-board annual pay hike for all public school teachers in Texas. The teacher pay raise would take immediate effect as long as the legislation that contains it is approved with two-thirds support in both the House and the Senate. At this point it looks like the vehicle for public education reforms will be Senate Bill 1 by Republican State Senator Florence Shapiro of Plano.

The Legislature's top two leaders have also reached a tentative pact on a $300 million teacher incentive pay plan that would be phased in with one-third of the funding earmarked for the 2007-2008 school year and the remainder budgeted for the following year. Funding for incentives the first year would be limited to school districts that close substantial achievement gaps as determined at the state level while the second-year funds would go to local districts that would build their own incentive programs. Teachers would have the opportunity to design the incentive programs at both the state and local levels.

Legislative leaders would also like to see money earmarked for programs designed to better prepare Texas secondary students for college but may have to lower the initial goal of an allotment of $500 per student. A college readiness plan could be included in the property tax relief measure in House Bill 1.

The legislation that won Senate committee approval would replace the existing franchise tax that's based on capital or earned surplus with a margins tax that would be paid on gross receipts. HB 3 would generate an estimated $3.4 billion that would be used to help foot the bill for a $5.9 billion rollback in property taxes.

While Republicans on the Finance Committee were unanimous in their support for the measure, grassroots conservatives continued to protest the possibility of a new tax on businesses when the state has more money than ever in its surplus account. Norman Adams, a Houston insurance agent who's been a key player in tort reform efforts, expressed his frustration with the proposal while testifying before the Senate committee on HB 3. Adams, who's co-chairing a group called Texans for No New Taxes, suggested that other business interests had endorsed the tax plan simply because Perry had supported their push for tort reform or because they didn't want to offend the governor, the lieutenant governor or the House speaker. But Adams said the plan would be bad for most businesses - especially those who haven't already been promised special breaks in the plan.