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House Appropriations met on April 27 to take up a number of bills. This report covers discussions on HJR 82 (Craddick), HB 958 (Oliverson), HB 125 (Buckley), HB 1063 (Bell), SB 1336 (Hancock), and SB 1605 (Huffman). The video archive can be found here.

 

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

HJR 82 (Craddick) (CS) – Proposing a constitutional amendment providing for the creation of and use of money in the Grow Texas fund and allocating certain general revenues to that fund, the economic stabilization fund, and the state highway fund.

  • Craddick – Bill was passed last session with 129 votes; did not have enough time to get it through
  • Texas accounts for 1/3 of the country’s total oil production
    • Oil and gas support 30% of state economy
  • Energy producing regions have increasing teacher shortages, road issues, heavy traffic, and understaffed/underbuilt hospitals
  • Would utilize funds paid for by oil and gas to reinvest in these communities
  • Will help all counites except 32 that do not have oil and gas present; important across state
  • Industry does not know what will be available from year to year; in terms of money to supplement schools or for roads
  • 12% of oil and gas severance tax would be committed after 25% revenue for the Foundation School Program is taken out
    • Would be a net 9%; would stay in a fund in the Treasury
  • Provision to allow state agencies to have grants they can put into it
  • Added appropriations amendment that allows federal funds to come down in the fund
  • Howard – Would it be in addition to a transfer to the ESF?
    • They will give some parameters to what the federal funds can be used for
    • There may be federal funds, but not sure how they will come in
    • We have a maximum of $250 million that can be taken out of the ESF
  • Howard – How many funds do we create out of the ESF? You’re expanding this beyond roads, correct?
    • Yes, think schools will be hard as every school needs more money
    • Issue is there are so many new people at schools that its hard to handle; can’t plan for next year without knowing funds
  • Howard – Anything built in like State Highway Transfer like a minimum balance needed for transfer to be made?
    • No; it is hard to do because its working on percentages
    • Uses 12% after you have got 25% out for FSP
  • Schaefer – How do we know local jurisdictions will fix the specific roads beaten up by this activity?
    • Designed as a non-paid commission
    • Assuming people will apply for the grants and receive them in that way so they won’t be used by TxDOT somewhere else
  • Schaefer – Would you be open to any language in this that would ensure accountability?
    • Absolutely; looked at that and could not figure out how to do it but would love to add
  • Schaefer – Citizens should be able to see where it is going publicly
    • Citizens should be able to see it in the roads that are fixed
  • Morrison – Have worked to get funds for oil and gas districts; supports proposal
    • We have a problem in healthcare infrastructure; 85-90% of people have to go elsewhere
    • Lack of healthcare a huge pushback for people considering moving there
  • Craddick – Open to making it better if there are things you can think of

 

James Beauchamp, Midland-Odessa Transportation Alliance – For

  • Permian basin numbers grow faster than anywhere else due to renaissance of energy industry in last 2 decades
  • 25 or less counties account for most of state’s production; concentration leads to issues discussed on roads/hospitals
  • Have already started to make improvements; not asking for a handout, but need a strategic partnership with the state in this process
  • Billions of dollars invested in pipelines, 6 million barrels produced daily; great economic opportunity for the state

 

Ben Sheppard, Permian Basin Petroleum Association – For

  • Legislation would assist everyone; critical infrastructure for the health, safety, and welfare of many
  • 10% of road fatalities in Permian basin; need to fix roads
  • Producing just over 4 million barrels of oil a day
  • In 2019 royalties and taxes paid in oil and gas was $13.4 billion; Permian Basin counted for $9 billion of that
  • Bill is the “Protect the Economic Stabilization Act”

 

Ed Longanecker, Texas Independent Producers and Royalty Owners Association – For

  • Bill has been one of TIPRO’s priorities for years
  • 15% of Texas economy is made up from oil and gas
  • Need long term solution to road repair, maintenance, to protect industry, workers, and communities around them

 

James LeBas, Texas Oil and Gas Association – For

  • New fund would aid communities who house the vital oil and gas industry
  • 12% set aside would allow for general law on how to distribute the monies and creates the committee

 

Closing – Craddick

  • High levels of growth, lacking the infrastructure to support it
  • Open to any ideas to make it better

HJR 82 left pending

 

HB 958 (Oliverson) – Relating to the allocation and deposit of certain surplus state revenue to the property tax relief fund for use in reducing school district maintenance and operations ad valorem taxes.

  • Oliverson – Constitution says the state should fund public schools; should not be majority paid by property taxes
  • Aim to eliminate 40% of the M&O of the property tax operation
  • Would use surplus revenue to buy down overtime the amount of M&O paid for by local property taxes
  • Over time, the state would take a higher and higher share
  • Would require state to use 90% of surplus to buy down local-level taxes
  • Could take 10-14 years to get where we would need to be
  • Would remove tax burden from constituents who often complain about unmanageable rising property taxes
  • Howard – Already have something in place to lower property taxes?
    • This is an overtime buy down until we get to 100%
  • Howard – How would be able to invest more of that excess revenue into spending more on public education if it is all going into property tax relief?
    • 90% is going into relief and doesn’t take into account other sources of income like federal funding
    • Would take a while but eventually excess would be freed up to fund other things

 

Dr. Vance Ginn, Texas Public Policy Foundation – For

  • $6 billion dollars in budget is still allocated for property tax relief
  • Would limit government spending to 4% which could be spent anywhere, 90% would be used to buy down property tax
  • Provides figures to show how elimination would occur
  • Would see more economic growth across the state and improve livelihood of Texans
  • Will need constitutional amendment saying schools cannot impose an M&O property tax
  • Holland – Can you talk about what an average school tax bill was? What did Texans see in relief after compression?
    • Do not have specific numbers; most property tax payers saw less liability
    • Most did not see a decline in their bill because there are other taxes
    • Recommend providing cuts in all areas of property tax (not just M&O) to see an impact
  • Holland – If we were to start a slow buy down of M&O we would see significant tax cuts?
    • Yes
  • Holland – How long would it take us to effectively eliminate M&O?
    • About a decade depending on how much spending has been limited and growth rates
  • Holland – By the next redistricting we can tell constituents we eliminated M&O?
    • Yes
  • Toth – 8.25% sales tax, where does that rank us?
    • Currently 14th highest, with California at the highest
  • Toth – Plus businesses pay a franchise tax and that is passed to consumers?
    • Yes
  • Toth – Have highest property taxes so if you go into a store that is all passed onto the consumer is it not?
    • Yes the ultimate burden is passed to consumers even though businesses submit taxes
    • Consumers and workers pay through higher taxes, lower wages, and fewer jobs
  • Toth – If money is left in hands of consumer by enabling us to buy down M&O, the rate that the currency moves through the economy is what creates jobs?
    • Correct
  • Toth – HB 3 gave us reform rather than relief; bill critically important
  • Dean – As Texas continues to broaden sales tax base, how much of that factors into projection of 0 M&O in a decade?
    • This particular bill would not broaden the base
  • Dean – Not saying that, is data coming from natural growth?
    • Static analysis vs. dynamic analysis, a good pint
    • There is some growth based on historic growth
    • Moving towards consumption based taxed would bring more economic growth
  • Dean – So growing sales tax we might get there sooner rather than later?
    • Definitely a possibility
  • Howard – Property tax compression last session did not show large decrease, driven by property values as well. Is that not correct?
    • Officials determine amount of tax revenue that will be received
  • Howard – 2019 property taxes brought in $20.4 billion? That’s what you’re talking about replacing?
    • Correct
  • Howard – If you take the $5 billion put in for property tax relief and just look at what was spent, general revenue funds increased by only 5%; some parents want some local property taxes so they can make school decisions on local level as well
    • Adjustments for population growth and inflation goes back to the 4% set aside for spending
  • Stucky – Do you have information comparing states with income tax to those without? Is it better to do it through consumption tax or property?
    • Its about how much you’re going to spend because that will determine taxes
    • Been concern about effect on the poor, but property tax also has a high effect
  • Stucky – those are things that all need to be included, thank you
  • Toth – Who else has skin in the game? It all comes out of the same pocket, does it not?
    • Yes
  • Toth – Taxing young people out of the American dream and taxing elderly out of their homes. Little to no help from Texas real estate. Need to do something about it
    • With property taxes, it’s based subjective determination
    • Sales tax is objective due to market exchange
    • Property tax hurts those who can’t afford it the most
  • Schaefer – Goes right to the heart of gentrification and people no longer able to afford property tax due to neighborhood changes
    • Agreed

 

Paul Hale, Self – For

  • Is for anything that will make a move in reducing property taxes
  • Asks for an amendment to take away waste; school boards say they have to blow money on things they do not need to get the money the next year
  • Property tax relief needed, cannot fund the current culture

 

Closing – Oliverson

  • Local control comes in in different areas; two different buckets
  • Using additional revenue, not taking it away from other appropriations

HB 958 left pending

 

HB 125 (Buckley) – Relating to the applicability of the law governing the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled veterans.

  • Buckley – 1.5 million veterans in Texas and 18 military instillations
  • State of Texas offers property tax and homestead exemption; this has created unwanted mandate and outcomes
  • Reimbursement program created to provide counties opportunity to receive portion of revenue lost
  • Bill would create adjacency requirement rather than milage requirement
  • When others are exempt from property tax, either someone else pays or they are not collected; impacts infrastructure, economic development, etc.
  • Military installations contribute more than $100 billion to Texas economy; need to keep Texas attractive and understand communities serving installations are important as well
  • Create a BRACK to make sure that department of army will want to move more missions there

 

Jerry Bark, Assistant City Manager, Harker Heights – For

  • Community proudly serves retired and active service members
  • In no way advocating removing benefits from veterans
  • Community desires high quality service; average of 31% revenue losses

 

Hilary Shine, Executive Director of Communications City of Killeen – For

  • Receive benefits of payment; provides significant amount of relief
  • Regardless of whether or not a city touches boundary, what’s disproportionate is disproportionate
  • 70% of soldiers stationed at Fort Hood reside in these communities
  • Not an intended consequence but a reality; should not matter if you touch an installation because all of these cities are housing veterans and soldiers
  • Schaefer – These funds would go to offset loss of property tax; what mechanism is put in place to make sure the property tax does not go up?
    • Are bringing it back to communities and are not having to raise taxes to fill those gaps; we were given about 40% to put back into services last year

 

David Williams, Mayor Pro-Tem of Nolanville – For

  • Income comes from sales taxes and property taxes; hurts smaller communities because are losing out on both
  • Funds that come back will be seen in essential programs like fire and police departments

 

Closing – Buckley

  • Some communities have commercial tax bases that offset this, some do not
  • Is an unfunded mandate

HB 125 left pending

 

HB 1063 (Bell) – Relating to the Texas State Guard uniform and insignia fund.

  • There is not money currently in the fund; bill expired on Senate calendar next time
  • Bill gives the legislature the option to appropriate to the fund next session

 

SB 1336 (Hancock) – Relating to a limit on the rate of growth of certain appropriations.

  • Bonnen – Codifies a new consolidated general spending limit
  • Would limit holds economic growth to growth of population and inflation
  • A 3/5 vote required for any spending over the estimated growth rate and population

 

Dr. Vance Ginn, Texas Public Policy Foundation – For

  • Would strengthen state’s spending limit
  • Larger share of budget would be underneath limit
  • Base’s growth rate on population growth and inflation; better measure of taxpayer’s ability to pay
  • Of last 3 budget cycles budgets passed have been below population growth plus inflation
  • Making this state law gives more consistent look at growth over time
  • Might potentially see another large influx of money; also reduces burden of government on taxpayers

 

Luis Figueroa, Every Texan – Against

  • Arbitrary spending caps tie the hands of state leaders; Texas already has an effective cap
  • Concerned this bill does not apply to growth fund or other services like state highway fund
  • Puts spending cap just on healthcare and education services
  • Howard – Is it possible to ask a question of LBB? Just trying to see what the impact would be? What would it look like in terms of working with current limits?
    • Kevin Kavanaugh, LBB – Would work together, just adding a third one
    • Budget passed out of committee 2 weeks ago is within this limit
  • Howard – So there would be no impact?
    • New limit wouldn’t go into effect until next budget
  • Howard – Right now way we are looking at spending limit is using comptroller’s office and rating industry resources? Spending limit is determined by legislative budget board?
    • One is chosen to use
  • Howard – Right now we are using personal income growth? LBB board makes a decision
    • Economic forecasting forums used
    • LBB typically adopts Comptroller’s

SB 1336 left pending

 

SB 1605 (Huffman) – Relating to directing payment, after approval, of certain miscellaneous claims and judgments against the state out of funds designated by this Act; making appropriations.

  • Required to be passed each session
  • Claims include warrants voided, outstanding invoices in court judgments or settlements
  • Court judgements greater than $250,00, claims older than 8 years, etc. are all required to be discussed

 

Ed Heimlich, Self – Against

  • One right listed in Texas bill of rights more important than any other; right to remedy
  • This would present attorney general as above the law

SB 1605 left pending