The Texas Legislature: A Lesson in How Not to Learn a Lesson

Dick Lavine

You would think that, having just written proposed state budgets that would underfund or cut health care, financial aid, and more, the Texas Legislature would want to avoid similar tight budget sessions in the future.

But, here we are in 2017 preparing to repeat the mistakes of the past.

Lawmakers are actively considering two bills that would eliminate a major source of support for our public schools and other state services. These bills, SB 17 by Sen. Jane Nelson and HB 28 by Rep. Dennis Bonnen, would phase out the franchise tax (also known as the margins tax), which will supply $7.8 billion to the state budget currently being considered in conference committee. HB 28 has been placed on the House calendar to be discussed on Thursday, April 27.

The franchise tax is Texas’ major business tax and the third largest source of state tax revenue. As the franchise tax is cut, at first the money comes out of the Foundation School Program, but as the tax sinks below the level it would have brought in in its pre-2006 form, then the loss would be from General Revenue.These two tax-cut bills would gradually reduce and then eliminate the franchise tax, which is certain to cause future headaches for our state budget. SB 17 would trigger a tax cut if the Comptroller’s Biennial Revenue Estimate forecasts that available GR will grow by more than five percent over the prior biennium.This would ensure that General Revenue would not be able to keep up with population and cost growth drivers in the state budget, which usually average 8 percent every two years. The Senate passed SB 17 on March 21 by a vote of 23-7.

HB 28 would reduce the franchise tax by the amount of any cash balance that remains at the end of each biennium. According to the fiscal note prepared by the Legislative Budget Board, the bill could reduce state revenue by up to $3.5 billion in the 2020-21 and subsequent biennia. The House Ways & Means Committee approved the bill on April 12, and it is scheduled for a House floor vote on April 27.

Passage of either bill would condemn Texas to an endless future of tight budgets, choking off any ability to make investments in our people that could create a Texas where everyone is healthy, well-educated, and financially secure.

Watch my Facebook Live conversation with Representative Donna Howard and CPPP’s Gina Chavez, where we discuss these bills and how Texans can contact their lawmakers to stop them.

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