By Andrea Zelinski AUSTIN BUREAU
AUSTIN — It’s enough money to build seven football stadiums for the Dallas Cowboys, more than President Donald Trump budgeted to build a wall on the Mexican border, and even enough to construct three space stations to orbit the moon.
Texas lawmakers are considering an infusion of $9 billion to improve public schools and lower property taxes over the next two years. The additional $6.3 billion in the classroom is being billed as a transformational effort to better educate the state’s 5.4 million students, while another $2.7 billion would stem the tide of escalating property taxes for homeowners.
“If we’re going to make some strides on these really big items, it really has to happen this session,” said Rep. John Zerwas, R-Richmond, chairman of the influential Appropriations Committee.
While lawmakers are confident the state’s booming economy will provide big bucks to spend on public schools, they are also pitching a number of plans to increase the state sales tax in the future. The proposals include hiking taxes on items such as sweet snacks, gasoline, e-cigarette fluid and heavy machinery rentals. But the proposal with the most apparent momentum is a tax swap that would allow local governments to charge a higher sales tax in exchange for reducing property tax levies.
Even raising the sales tax by 1percent “contributes a lot of money” that school districts, cities and counties could use to offset reductions in property tax revenue, Zerwas said. Some estimates predict such an increase would raise more than $5 billion a year. The statewide sales tax rate is now 6.25 percent a year. Local governments can add up to 2 percent.
Although Republicans are leading the charge with major tax swap proposals, it’s unclear how they will fare in the GOP-led House and Senate, particularly among lawmakers who narrowly won their re-elections as Texas Democrats gain ground.
Financial implications of the bills are shaky. Several tax bills were filed a week ago, just under a deadline, and have yet to be analyzed by the Legislative Budget Board, which predicts financial effects.
Increasing reliance on the sales tax troubles Eva DeLuna Castro, a budget and policy expert with the left-leaning Center for Public Policy Priorities. Not only is a sales tax considered regressive for taking more money from low-income people than the rich, but its collections are more susceptible to the ups and downs of the economy, she said.
“You need to find a revenue source that doesn’t all the sudden tank on you. Or if you know that it is going to do that, you need to put most of it away for a rainy day and use it when that rainy day comes,” she said.
The Legislature could be asking too much by trying to fund aggressive school finance while simultaneously reducing property taxes, said Vance Ginn, a senior economist at the right-leaning Texas Public Policy Foundation, who says it will be difficult to keep funding schools at the level the Legislature has proposed.
“It’s kind of like the weather forecast: you never know what it’s going to be in a couple days, much less for a $1.7 trillion economy. Things can change pretty quickly,” he said.
More funds in hand
For the short term, much of the $9 billion can already be found in the state’s budget forecasts. Texas lawmakers will have $119 billion to spend over the next two years, the Texas Comptroller estimated in January. That leaves state officials with $9 billion more than in the last two years. Legislative leaders are also willing to tap the state’s rainy day account for some one-time expenses this year, such as for Hurricane Harvey relief, and health care costs are largely at bay due to an increase in federal funds — taking two typical budget complications off the table.
There are other potential sources for additional money for schools. A Houston Chronicle investigation earlier this month revealed that the state’s massive public school endowment has been sending far less to K-12 schools than other typical endowments. The Chronicle analysis showed that if the Texas Permanent School Fund paid out 5 percent of a four-year average market value, as many endowments try to do, the state’s schools would have received $720 million more in 2018.
In inflation-adjusted dollars, the Permanent School Fund is now paying out less to schools than it did decades ago.
The “Broken Trust” investigation also showed that the fund, parts of which are managed by the General Land Office and the Texas Education Agency, has paid hundreds of millions in fees to outside money managers while getting returns that trail its peers.
Bills filed in the Legislature proposing tax swaps include HB 705, filed by Rep. Charlie Geren, R-Fort Worth, which would permit local governments — provided they get voter approval — to eliminate school property tax collections for maintenance and operations in exchange for a higher sales tax. About 535 cities and 36 counties appear to have a large enough tax base to make the swap work, according to an initial legislative fiscal analysis of the bill. The analysis does not detail how much money would be raised in property relief, although it warned the swap could dramatically reduce local spending. Aprevious version of the bill allowed governments to increase the sales tax by 1 percent, estimating that would raise $5.6 billion for property tax relief in the first year if every applicable area adopted it.
Rep. Drew Springer, R-Muenster, is proposing Texas increase taxes on gasoline and close tax exemptions on items like ice cream, certain baked goods, e-cigarette vapor fluid and over-the-counter medicine.
“I don’t think people realize their ibuprofen is tax-free,” Springer said. In exchange, House Bill 2915 would allow the state to lower the maintenance and operations property tax that funds schools. His bill would also increase the homestead exemption to 50 percent of a home’s value. Texans in a home valued at $274,000 would average $1,400 a year in property tax relief, he said, amounting to $6.2 billion less in property tax collections statewide.
‘It’s our responsibility’
Another bill, House Joint Resolution 3, proposes inching up the sales tax and using money from that increase exclusively for public schools. The resolution is proposed by Rep. Dan Huberty, R-Houston, the architect of the House’s $9 billion school finance plan. The measure would require a vote in November to change the state Constitution and increase the statewide sales tax, which is now 6.25 percent. Huberty emphasized that raising the sales tax is just one measure under consideration, and that it’s still too early to pencil in numbers.
“We have to put more money into the system. It’s our responsibility,” Huberty said Thursday at an event hosted by the Texas Tribune.
Rep. Chris Turner, D-Grand Prairie is proposing the state systematically examine each tax exemption every six years to decide whether it is needed. House Bill 3968 will raise revenue by closing out-of-date tax “loopholes” over time, he said, and is a good alternative to raising sales taxes.
“It is important to note that Texas already has a high sales tax — 8.25 percent in most areas,” said Turner, who chairs the House Democratic Caucus. “The lower someone’s income, the more it hurts, so an increase in the sales tax will hurt a lot of Texas families.”
With three months left in the Legislative session, the House and Senate are still far from agreeing on final plans to overhaul school funding and property tax relief, let alone how to continue funding it.
The House and Senate have introduced separate proposals on how to reform education spending. Both offer to fund full-day pre-K programs in schools and allow teachers to earn pay raises through a merit-pay system. A separate plan that passed the Senate this month would offer teachers across-the-board raises. However, plans in both chambers are likely to change over the next three months as lawmakers try to hash out a plan they might agree on before the Legislature adjourns in May.
On school funding, “the House and Senate are close philosophically but we’ve got to make the numbers work,” said Sen. Larry Taylor, R-Friendswood, who chairs the Senate Education Committee. andrea.zelinski@chron.com