THE 3rd CALLED SPECIAL SESSION OF THE 79th LEGISLATURE

APRIL 28TH - How HB1, HB2, HB3, HB4, and HB5 were changed from the versions voted out of committee.

Dear Friends,

HB2 is the bill that dedicates revenues from the change in the business tax, any increase in the cigarette tax, and any sales of automobile tax to property tax relief. It passed the House first by a vote of 81 to 65. It had 5 amendments added including some disclosure language, equalization language and certification language. An amendment was defeated that would have sent the funds to sources other than property tax reduction.

HB1 was the second bill addressed by the House. This bill is the property tax relief bill that meets the requirement of the Texas Supreme Court to address school funding. The first item in the bill is a tax rate for M+O school taxes to be cut to $1.33. This was assured with an amendment to the bill attached by Rep Eissler and Rep Chisum.

The second amendment to the bill added that recapture would be done on any local enrichment. Most of us that represent chapter 41 (Robin Hood) districts strongly opposed this amendment and voted against it. However there are more receivers than givers and the amendment passed. If left in the final bill this will hurt the ability of districts like Plano and Richardson from accessing local enrichment since our voters would have to vote to spend some of their money on our local schools but would also be sending significantly more money to the state for recapture. It is our hope and firm belief that this section will be modified when the bill is finalized or that the basic allotment will be changed enough to get some districts over their fear that some other districts will raise so much more money than they can. Also as the property tax comes down recapture is reduced and this bill will see a significant drop in the Robin Hood payment by Plano even with this provision.

The next amendment limited the total revenue for the coming year to 2,385,800 dollars. It also told the Commission how to calculate the district share of the funds. We also had amendments on how the citizens are notified of the tax reduction in the bill and how the report language would look.

One of the more interesting and long term amendments was offered by Rep Eissler and dealt with fiscal accountability. It had several of the accountability items we had previously worked on in HB2 of the Regular 79th session. It includes language on sharing information with the regional education centers, public access to PEIMS information, a best practices clearing house as recommended I believe originally by Sen. Shapiro, use of federal funds language, indices for measuring administrative efficiency in the districts, language to encourage cooperatives and thereby reduce overall school district costs, requirements for the district to post proposed budgets on their website and if they do not have a website at their administrative offices, a review by outside accounting firm of school district accounting systems, have the commissioner of education develop spending targets for each district which would include items like the 65% rule. Rep Hochberg added that the State Board of Education will provide the Legislature with a report on standardized accounting software available for the districts. These were all adopted.

Rep Naishtat then added an amendment to safeguard current property tax exemptions like those for over 65 etc. This was adopted. The Bill was then passed by the House on a Record Vote of 139 Ayes, 5 Nays.

The third bill and undoubtedly the most controversial of the bills was then brought up. It was HB3. This is the bill know as the Sharp Perry or Perry Sharp Plan. There were several very technical amendments made on the bill and it is not my intention to go into those in any detail.

The first and I feel very good amendment to the bill will require that the rate of the tax which is set at 15 (or 0.5% for retail and wholesale business) may not be increased without a statewide vote of the citizens. This passed. Another good amendment by Rep Larry Phillips raised the tax base such that if the computed tax was less than $1,000.00 there would be no tax. This is a good protection for small businesses and is much better than the $100.00 figure in the original bill. Rep Noriega also amended the bill to allow any costs associated with payroll for people called to active duty to be excluded.

We also voted to exclude from deductions any amount paid as wages to someone who is not a legal alien or citizen of the United States. We did accept an amendment that allowed rental companies that rent large items to deduct their costs associated with the obtaining of the rental item from their taxable revenues. This helped some companies that rent large ticket items like cars, railroad freight cars, large construction equipment companies and others who would not have a large payroll and would not have a high cost of goods actually sold but do have a high cost of purchase of the rental equipment.

There was also an excellent amendment by Rep Myra Crownover that allowed the cost of medical savings plans as an employee wage deduction for businesses. There was also an amendment to require a report by any company with over 100,000 employees of the number of people and familles they have on Medicaid and Chips. Rep Fred Hill also offered an excellent amendment that allowed a company that has been paying the franchise tax and has a loss recorded and reported to the state to carry over that loss to the new franchise tax. We wanted to say to those companies that had not gotten out of paying the franchise tax and had a loss that we respected them and would not penalize them for following the current law. There was also an amendment that required any insurer that had been ordered to pay refunds to Texas citizens and had not would not receive favorable treatment by exempting them from the franchise tax.

We also said that the Texas Supreme Court has jurisdiction over this legislation and any challenge to it. There were also exemptions for some revenues from low producing oil and gas wells. We also allowed lawyers to exclude the costs of Pro bono work where there was no expectation of repayment. with a maximum of $500 per case.

After these amendments and some long speeches the bill passed 80 Ayes, 69 Nays.

During the final hour of the debate we also passed a resolution honoring Our Dallas County friend Nate Crain (husband of a lady I work with a lot Christina Melton Crain-TDCJ Board President) as a rising star from Campaigns and Elections Magazine.

The next bill to come up was HB4. It received some major rework on the floor. We changed the meaning of the term value and deleted the term "retail value" several places in the bill and replaced it with the stand alone term value. This clarified a lot of language and removed a lot of concerns for many of us from the bill. We also fixed a portion of the bill on a vehicle that had been totaled in an accident and how it would be handled by insurance companies. We also had 2 or 3 other clarification amendments. The bill then passed on a record vote of 77Ayes 65 Nays but if you then include some members who said they intended to vote differently the vote would have been even closer.

The last bill of the group, House Bill 5 which is the cigarette tax had a point of order sustained on it so it was rescheduled for later in the week. I will be doing a Madden report soon on the week in review and will discuss that bill in that report.

I do want to thank you for the interest you have shown in the activities of this special session and for your comments and suggestions on each of these issues. These last three reports have been somewhat dry factual reports and I will have more general comments in the next report.

Jerry Madden