The Revenues Working Group of the Texas Commission on Public School Finance met on November 27 to consider and take action on recommendations submitted to the working group.
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.
Representative Diego Bernal was also in attendance.
Opening Remarks
Sen. Paul Bettencourt
- Taking major plans and presenting to group today
- Working to understand revenue during next session
- Will talk about weaning off Robin Hood and possible revenue sources
- Look at ESF as alternative source of revenue in the future for public education
- Recommendations will not be absolute solution, nor only solution
- Still have a month to go for discussions
- Point to consider:
- Robin Hood – to grant tax relief they will have to compress taxes, state does benefit from tax value increases, 10 years ago state share was around 52%
- Nicole Conley-Johnson – question on procedures, provided $14 billion in ideas so
- Will we broaden tax base?
- Bettencourt – points out that she is the only non-legislative member besides the Chairman so need to discuss revenue portion
- Bettencourt begins to review certain plans
Increase General Revenue – as one possible source for recommendations
- Use increase in general revenue, Comptroller has increased the revenue estimate to just over $5 billion
- Bettencourt provided a sales tax collection comparison chart, revenues are up everywhere in the State of Texas, says he will not predict a number but notes general revenue will be up
Governor’s Comprehensive School Finance Reform
- The state will only pay the amount that a school district does not collect through local property taxes
- Bettencourt notes without tax reform, recapture will also skyrocket
- Bernal – asked about how these choices would impact equity
- Bettencourt – would need to do thousands of runs to see how it impacts
- Bernal – is there something that can be done before an actual recommendation could be made
- Bettencourt – have at 4 plans to review, they give like four corners to review so perhaps they could have that discussion after they go through each plan
- Bettencourt – restates some of the previous testimony on the Governor’s plan
- Ken King – districts can’t tax their way out of this situation and it seems like talking about adding additional caps, same for hold harmless – if it’s bad, its bad at all levels
- King – if going to base a plan on a revenue source, it needs to be a sustainable source
- Bettencourt – state is hooked on additional property taxes coming in, state has to ween off it and needs to bring in other revenue to do it
- King – General revenue is fluid, it’s not a sustainable source
- Bettencourt – sustainable for the solution it will provide
- King and Bernal talk about property wealthy districts vs student populations and equity
- Bettencourt – believes this discussion will be resolved after he lays out further details
Freeze Recapture Progress
- $2.3 billion item to stop progress and freeze recapture
- Conley-Johnson – would need to find $2.3 billion to fund recapture freeze? Question if this will be done and fund public education?
- Bettencourt – will talk about ESF and GR as a source, they are up but wants to talk about this in light of all recommendations
Eliminate all M&O Taxes Entirely
- Believes this is a plan that TPPF had proposed, districts collect in M&O $25 billion in 2018 or $51 billion a biennium
Share Recapture Plan
- From Lindale Superintendent
- Let everyone benefit from rising property values
Severance Tax Revenue
- Permian Basin production continues to expand
- Bettencourt says we are “looking at a tremendous increase in production”, when you get an increase in production you have to recognize it
- Once you have gone through a shift like this, the production won’t go away unless there was a very unique set of conditions
- Bettencourt says he would be open to ESF fund options for public school finance, but cannot speak for the Senate – does not want billions of dollars stacked up in the fund
- Conley-Johnson agrees that this idea has very good potential
- King noted that a severance tax only effects oil & gas and there are many other industries
Discussion
- Bettencourt – the idea is to move these ideas forward knowing that scoring and runs need to be completed with the ultimate goal of finding combinations of these ideas
- Bernal – has concerns with the effect of the 2.5% cap on the system as it stands before making adjustments that may heighten the problems
- Bettencourt – the 2.5% was one of 4 options proposed, this gives us the opportunity to look at all of the impacts while bringing all of the options to the table
- Bettencourt – stated that there is no predetermined outcome he is aware of and no commitment to any of these solutions
- Conley-Johnson – need to examine reasonable ways to fund public education and funding specifically the base. Does not believe all of these options are addressing the outdated components of the funding formulas and not all of them are viable
- Brister – does not believe the goal of any of these is to cut spending
- Conley-Johnson – do not see additional revenue source to make up for the lost revenue from cuts (speaking to elimination of M&O property tax)
- Bettencourt – the plan does not cut spending, it has a 90/10 split it works to buy down M&O
- King – this plan talks about property tax replacement without saying where it comes from
- Bettencourt – the plan is designed to increase funding to schools while buying down M&O
- King – can see advancing other plans, but do not understand this plan
- Bettencourt – moved to take all 6 plans to the full commission
- King – moved to table the elimination of the M&O plan and taking all others to the commission
- Motion passed with one objection (Conley-Johnson)
- Brister – would like to review these plans more, but anything that can help reduce the problem with revenue to property taxes while retaining equity would seem to be a good idea
Closing Remarks
- Brister – next commission meetings are expected to be this Friday, November 30th, December 5th and again in the 3rd week of December. Anticipating reaching a decision in the first week of December on revenues and to have an outline of the report in the third week
- Conley-Johnson – requested information on how to advance additional options for revenue?
- Brister – would be beneficial to work with the revenues working group chair but there would be an opportunity to offer and option to the full committee