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Perry Proposes School Finance, Tax Relief Proposal

By J. Lyn Carl and Jennifer Bendery, GalleryWatch.com

Austin, TX –

Touting a net tax cut of $300 million for Texas taxpayers, Gov. Rick Perry today offered his proposal for public education funding and property tax relief.

"My plan is both reasonable and significant and it addresses the issues that this legislature left unfinished," said Perry as he laid out his plan.

Saying his proposal represents "the middle ground" between the House and Senate proposals, the governor said it not only utilizes some of the best ideas from both Democrat and Republican lawmakers, but also "sides with property taxpayers, teachers and schoolchildren."

The Perry plan provides for what the governor says is the largest property tax cut in state history - $7 billion for the 2006-07 biennium, while providing funding for teacher pay raises, textbooks, education technology and classroom reforms.

Perry said his proposal puts $5 billion in new money into public schools. When asked where that money will come from, he said $2.7 billion is in the base budget, $1.9 billion has been certified by the Comptroller and $400 million has been set aside elsewhere for textbooks.

Additional revenue for his proposal comes from closing franchise tax loopholes, a .7 of 1 percent increase in the state sales tax (increase to 6.95 percent), and a $1 increase in the state cigarette tax. The sales tax also will be expanded to include elective cosmetic surgery, car maintenance and repairs and computer repairs and programming. Perry noted that savings through his vetoes at the close of the 79th Regular Session will also add to available revenue.

Perry said his proposal includes language from HB 1006 as it passed out of the House during the 79th Regular Session. That bill, which changes the process by which higher appraisals automatically provide new tax revenue to taxing entities, will ensure that taxpayers have protections, he said.

The proposal does not include a new business tax, he noted, but closes franchise tax loopholes that will ensure that businesses pay their fair share. The $7 billion in property tax relief will be realized with a 20 percent school property tax cut in 2006, and a 23 percent reduction in 2007 that will be accompanied by an increase of $7,500 in the homestead exemption.

The homestead exemption increase, said Perry, will "help homeowners on the lower end of the economic scale by providing greater relief than they would feel from a straight rate cut."

Perry said his proposal will provide a cap on local enrichment property tax increases at 2 cents per year, and a total of 12 cents, with voter approval. It also will mitigate Robin Hood by capping recapture at 45 percent of a school district's tax revenues as long as funding is at least 92 percent equitable. He noted that "not in Robin Hood's existence" has the state's public school system been at 92 percent of equity.

The governor issued a challenge to lawmakers, saying if they want to "study this issue and kick the tires some more," they should get out of the way "while the rest of us act." He said he had neither the "inclination nor the patience" to study the issue to death any longer.

Noting that lawmakers have had three weeks since the end of the 79th Regular Session to hear from their constituents regarding their failure to pass public school reform and finance legislation, Perry said his legislation offers legislators the opportunity to resolve the issue.

When asked what will happen if school finance reform doesn't pass during the special session, Perry said legislators shouldn't even need to go the full 30 days to do so. But if they need more time, "So be it," he said. The governor noted that he laid out his proposal to the House GOP Caucus this afternoon and said it was received in a "comforting" manner.

"Today the clock starts ticking," he said, adding that the special session and his plan "give lawmakers the opportunity to succeed on behalf of the people of Texas."

Addressing the possibility of the issue of video lottery terminals being back on the table as a method of financing, Perry said he doesn't think the votes are there. "The best chance was during the special session last summer," he said. Now, "chances are rather slim."