House/Senate Budget Deal Ends Game of Chicken Over Tax Cuts

Late Thursday night, after hours of suspense, the budget conference committee passed a $210 billion state spending package for 2016 and 2017, paving the way to a timely wrap-up for a slow-moving state legislative session. Along the way, $800 million was directed toward “securing the border,” public schools got an 11th hour $1.5 billion bump, language that would have killed the nascent Houston-Dallas bullet train project was removed and Planned Parenthood effectively got the boot from a state-funded cancer screening program. 

The road to passing Texas’s budget did not appear to be a two-way street for the House and Senate for much of this session. At some points it more resembled a game of chicken being led by dogmatic Lieutenant Governor Dan Patrick and his crew of Senate supporters against the House Ways and Means Committee Chair Dennis Bonnen (R-Angleton and the obvious Kevin Bacon stand-in in this particular chicken scenario). Aside from the major potholes of public school financing and border security funding, as the joint conference committee cobbled together a final proposal from separate House and Senate draft budgets, the biggest barrier was how exactly to enact tax cuts for residents and businesses.

Early in the campaign season, the price of oil soared above $100 a barrel and Texas’ vast fracklands were still raking in money (collections from the oil production tax and natural gas production tax increased by around 30 percent from 2013 to 2014), leading to visions of overflowing state coffers. But what to do with all the dough? Increasing state spending might as well be constitutionally prohibited to state Republicans (and indeed, a cap provision does limit the amount any one session can approve for funding), so the next best thing for conservatives would be to refund those dollars to the people. Yet when oil tanked between the November election and the start of the session in January, incoming and returning legislators were faced with a less rosy budgetary forecast.

Of course, there’s always room for tax cuts in Texas, and Patrick promised as much even after the oil slump. “Let there be no doubt—there will be tax cuts," said Patrick in January, as quoted by the Dallas Morning News. He, and later chief Senate budget negotiator state Sen. Jane Nelson (R-Flower Mound), favored property tax relief for obvious reasons. Texas has the third highest property taxes in the nation according to some estimates (a trade-off for not having a state income tax, but that can seem like cold comfort to homeowners), making it a particular concern to many residents. 

The problem with the state promising property tax relief, though, is that taxing authority largely belongs to the counties. Even the portion that the Legislature can affect, including increasing the amount of the homestead exemption, may not compare to rising property appraisals and county-levied rate hikes. For this reason, Bonnen, not nearly the RINO he seems in comparison to Patrick, preferred a plan that would rely heavily on cutting the sales tax as well as the franchise tax, which local Texas businesses have long complained about. In fact, during his less conciliatory days, he called the Senate’s property tax relief plan “double taxation.” 

But the Senate would have their property tax cut, if only to say they did it. Negotiations earlier this week resulted in losing the sales tax cut (something that would have affected not just homeowners, but all Texans) in favor of a $10,000 increase in the homestead exemption, which is estimated to save the average homeowner a whopping $126 every year, and which still needs to be approved by voters in the fall. In another tense standoff, the Senate pushed for that exemption to be realized on 2015 tax bills, at a cost to the budget of $640 million and heartburn for the Tax Assessor-Collectors Association of Texas, tasked with sending out tax bills shortly after, if not before, the actual November vote on the proposed cut. The Senate proposed dealing with skyrocketing property taxes with a bill that would require any rate increases be approved by 60 percent of the appropriate local governing body. The franchise tax was also cut 25 percent across the board, resulting in an estimated total of $3.8 billion in cuts.

Members of the conference committee, including Houston state Rep. Sylvester Turner and House lead negotiator John Otto (R-Dayton), hashing out the budget deal were initially also at odds over public education financing, though a $1.5 billion booster unveiled Thursday seemed to smooth things over. Turner previously cast the lone dissenting vote on that portion of the budget on Wednesday, shaking his head that “conservatives spend money like they’re printing money,” unless that expense is for public schools. Because property taxes largely fund the school system in Texas, any cut is made up for with state general-purpose revenue, hence Bonnen’s double taxation remark.

Almost as peeved as public education advocates were supporters of Planned Parenthood, thanks to a Senate budget item regarding Health and Human Services that prioritized state funding for groups conducting breast and cervical cancer screenings for uninsured women. Planned Parenthood and other organizations that provided abortion services were dead last in the groups eligible to receive public funds, which also included “non-public” comprehensive care organizations. “Don’t perform abortions and you get the money,” Nelson sniped earlier in the session, according to the Texas Tribune.

One thing the state can apparently afford is the “surge” of Texas Department of Safety officers, National Guard troops and equipment being sent to the border, some as part of former governor Rick Perry’s ongoing Operation Strong Safety in a budget item somewhat obscured by the title “extraordinary operations.” The eventual $800 million total price tag was much closer to what the Senate proposed than the House (a measly half billion dollars) and probably had something to do with Gov. Greg Abbot making border security a priority of this session.

And despite what Nelson described to the Austin American-Statesman as “strong feelings on both sides,” in the end a Senate provision that would have effectively stalled any high-speed passenger rail project in the state, including the (already specifically not publicly funded) Houston-Dallas bullet train currently in the works, was scrapped. That was one of the last holdups to the joint committee’s plan.

The budget heads to the Legislative Budget Board for final tweaks and then onto the House and the Senate for approval. If passed, it could stave off the need for a special session this year. 
KEEP THE HOUSTON PRESS FREE... Since we started the Houston Press, it has been defined as the free, independent voice of Houston, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Callie Enlow