Legislative session ramps up with focus on budget concerns, tax cuts

 - Open Government measures gaining traction

Although the preliminary budgets introduced by the Texas House and Senate vary slightly, both spending plans leave on the table about $8 billion which will likely be dedicated to a combination of tax relief and a wide range of statewide policy needs.

Potential tax cuts for businesses and homeowners will likely come in different forms.  Lawmakers are eyeing changes to the franchise tax to relieve the burden on businesses. Options proffered to date include continuing the higher revenue exclusion adopted last session and scheduled to expire next year, increasing the revenue exclusion further, or eliminating the franchise tax altogether.

For homeowner tax relief, lawmakers may increase the homestead exemption or reduce the property tax rate increase local jurisdictions can enact without voter approval, known as the property tax rollback rate.

State Senators already are putting down markers on key spending priorities for the state’s next two-year budget, focusing mostly for now on transportation funding and potential tax cuts as the state remains awash in cash despite lower oil prices.

There is some disagreement even among Republican leaders over just how much tax relief the state can afford to deliver as the state’s population continues to boom and place greater stress on education programs, infrastructure and health and human services.

Some argue lawmakers should begin reserving money for the likelihood that the State Supreme Court will demand they add more funding to the state’s beleaguered school finance system which may require a special session in 2016.

Nonetheless, legislative leadership is committed to providing a meaningful measure of tax relief this year; the only questions now are how much and in what form.

Financial transparency measures on the rise

On the Open Government front, a number of bills have been filed this legislative session which are meant to shed more light on the contracting and economic development process undertaken by state and local governments. 

The most recent of these is SB 434 by Sen. Konni Burton, R-Ft. Worth, which would repeal the provision in the Texas Open Meetings Act that allows for closed door meetings by local government to deliberate the economic incentives being offered to have businesses locate to a jurisdiction under that local government’s control.

The discussion of whether state or local government should be in the business of what some term “choosing favorites” is indeed on the front burner this session. Earlier this month Gov. Abbott announced his plan to scuttle the Emerging Technology Fund, the incentive program started by former Gov. Rick Perry to attract and retain start-ups and tech firms.  

Under Perry the fund awarded $400 million to support many start-up businesses, but it has drawn criticism for poor management, oversight and transparency. A state auditor’s review indicated the state lost millions of taxpayer dollars on bad investments.

Abbott wants half of the fund to go the University Research Initiative so it can be used to recruit top faculty and researchers to Texas. The other half would go to the Texas Enterprise Fund, which also has received criticism for its operations. Abbott says he wants all of the state’s incentive funds such as these and the Major Events Trust Fund to undergo reform this session.

The state’s contracting practices are also under legislative scrutiny as a result of the 21CT imbroglio and problems with several high dollar no-bid state contracts. HB 1027 and SB 353 are companion bills filed by Rep. Four Price, R-Amarillo, and Sen. Jane Nelson, R-Flower Mound, which seek to reform the state’s contracting process.

The bills include safeguards on potential conflicts of interest and required ethics training by state contracting personnel. Certain types of contracts would be prohibited, namely those for the purchase of goods and services with a person with whom state employees or officers at the same agency have a financial interest.

Questions?  Contact TAB’s Oscar Rodriguez or Michael Schneider.