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Tax breaks are spending, too

Let’s see who among the “we have to live within our means” crowd opposes this.

Faced with a looming budget shortfall, the Senate’s most powerful member is carrying legislation that would cap state spending on school property tax breaks that are Texas’ primary tool to attract major business relocation or expansion projects.

Sen. Steve Ogden, chairman of the Senate Finance Committee, wants to cap the state’s overall financial liability for the tax breaks that local school trustees have granted to ventures as diverse as Gulf Coast refineries, West Texas wind farms and Samsung’s chip plant in Austin.

His Senate Bill 1590 would give the comptroller, not local trustees, the final say over which companies qualify for tax benefits. It also would eliminate the side deals that allow companies to pay school districts extra money outside the school finance system.

Since 2001, local school trustees have granted property tax breaks to qualifying businesses locating or expanding in their districts, and the state has covered the districts’ lost revenue by increasing their state aid. The estimated cost to the state is about $400 million over the next two years.

Ogden, a Bryan Republican, said the state’s tax and budget systems are out of sync and that Texas no longer can afford to reimburse school districts for what he called an unlimited liability largely out of state control. His bill would cap the state’s liability at $225 million per year, considering the total value of all school tax breaks.

“We’ve got an unsustainable situation,” Ogden said Monday. “I’m worried about this state.”

Business interests naturally howled about this during testimony before the committee. Funny how this sort of thing is always the one priority we can’t afford to lose, isn’t it? This is sort of an unfunded mandate in reverse, as local decisions affect the state’s bottom line. I agree with the intent of the bill, though I’d feel better about it if the state were half as sensitive to the more well-known type of unfunded mandate. Ogden is correct to say that our arbitrary tax code is out of sync with the budget. This is a relatively small potatoes fix, but to his credit Ogden is also willing to bring up the gigantic elephant in the room, the structural deficit caused by the insufficiently funded property tax cut of 2006.

Ogden’s committee is preparing to review and revise House Bill 1, the state budget for the next biennium, which proposes $23 billion in cuts. He said his committee is still looking for extra revenue to close some of that gap. Even so, he says there is only so much the Senate can do because revenue bills have to originate in the House.

“There’s a lot in motion right now, but one of the fundamental underlying issues in the budget approach that both the Senate and the House is taking is, ‘What are you going to do about the structural deficit?’ Basically, neither house is answering that question satisfactorily right now,” he said, adding that without a change in statute, the state will owe public schools $7.8 billion more than the House budgeted.

“All we’ve done is we’ve postponed and delayed and deferred our obligations into the next biennium. You think we’ve got a problem? Just keep doing that with the current budget and look at the car wreck you’re going to have in 2013.”

I’m afraid we’ll get a close look at that car wreck of which he speaks, because a fix for the structural deficit ain’t gonna happen this session. (The fecklessness of David Dewhurst is also an obstacle.) And frankly, unless an awful lot of Republican legislators get unelected in 2012, I wouldn’t hold my breath on it in 2013, either. Trail Blazers has more.

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  1. […] Day Fund. There’s still the structural deficit caused by the 2006 property tax cut, which the Senate is willing to address but the House isn’t. You guys know damn well that HB1 is a steaming […]

  2. […] Lege does something to fix it. To his credit, Senate Finance Committee Chair Sen. Steve Ogden is willing to attack this problem. Unfortunately, he can’t do anything about it because tax legislation must originate in the […]