JOINT COMMITTEE LOOKS AT SCHOOL FUNDING OPTIONS

(AUSTIN) — A Joint Committee heard testimony Monday about new tax structures to pay for public education. The state heads to court in October to respond to another lawsuit that contends the current system violates the Texas Constitution's requirement that public education funding be adequate and equitable. With this ongoing lawsuit, education funding is sure to be one of the largest issues lawmakers consider the 83rd Legislative Session begins in January. Monday's testimony highlighted some of the remedies the Legislature will look at if it decides to reform the education finance system.

One method, proposed by the Texas Public Policy Foundation, would expand the sales tax base. TPPF representative Talmadge Heflin testified that his group favors taxing the sale of property and services, while reducing or eliminating local property taxes. His group recommends starting by paying for the school maintenance and operation budgets with the proceeds from this sales tax expansion. Members of the committee met this proposal with some skepticism, worrying that such an expansion could have a chilling effect on property sales. Other members raised concerns that the sales tax burdens lower income individuals more than affluent people, and would advantage property owners over those that rent. Heflin responded by noting that the upfront cost of a tax on the sale of property would be offset by a few years of the owner not paying property taxes. He went on to say that the current property tax system already impacts low income individuals who don't own property, as landlords pass property tax costs onto their tenants in the form of higher rents.

The Center for Public Policy Priorities made their case for combing through the tax code to make sure it reflects modern economic realities. Senior Fiscal Analyst Dick Lavine began by opposing raising the sales tax, saying it hits those in lower income brackets much harder. His organization favors an expansion of the sales tax to service based industries. Levine also said that many of the current property tax exemptions should be looked at, arguing they can impact those in lower income brackets. He advocated a sunset process, similar to what the legislature already uses to evaluate state agencies, to look at tax exemptions after a certain amount of time to consider whether these exemptions are still working as intended.

Another proposal, supported by Lubbock Senator Robert Duncan, is to move to a statewide property tax. This would shift responsibility of property tax collections from local school districts to the state. Duncan argued that the current system, with more than a thousand districts assessing property taxes at different rates and on different property values, makes an unwieldy, complex and volatile system that directly contributes to inequity in the system. Assess the tax at a statewide level, he said, would make the system predictable and more streamlined.

When the session begins, lawmakers will have to weigh these options, and more, in order to decide whether or not to change the way the state pays for public education. Public education funding reform is a complicated and controversial issue whenever it comes before the Legislature, and the lawsuits before the state courts will put pressure on both houses to come up with a system that is more palatable to local school districts.

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