An F for Effort
Too much finance, not enough school: That was one of the problems with the special session called for the purpose of eliminating Robin Hood in favor of—what? Nobody seemed to have a workable alternative. Regardless, the Speaker and the governor bumbled along, and all signs point to the people of Texas paying dearly.
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Instead, Perry proposed directing new money into education through taxing sin: gambling, cigarettes, and unbelievably, a $5 cover charge for patrons of gentlemen’s clubs. The idea that the future of Texas—which, let us not forget, is what education is all about—would rest upon the ample bosoms of lap dancers was so ludicrous that the Austin Chronicle, the city’s alternative weekly, took notice of it under the headline “Tits for Tots.”
One thing you can always count on from Perry: His internal compass will invariably point to the political path of least resistance. The significance of his plan was not what he proposed but what he did not propose, which was to put new money into education through broad-based taxes. This can only mean that he believed to do so was too fraught with political risk, that the Republican primary electorate will not look kindly on a candidate who proposed new or increased broad-based taxes, even to support public education. This is very bad news for Texas.
The governor’s plan was DOA. Dewhurst and Craddick didn’t want Perry to call the Legislature into session. They preferred to try to find some consensus first rather than flail around publicly in search of a solution. But Perry felt that the only way to get a consensus was to call the lawmakers into session. He handed the ball to the Legislature, and it fell into the hands of a special House committee, 29 members strong, that has been working on school finance for almost a year. But it wasn’t ready. Chairman Kent Grusendorf, a former member of the State Board of Education who has waited for this moment through many years of Democratic dominance of the House, had lots of ideas about improving education but few specific ideas about how to pay for them. The committee had done no serious work on taxes, nor had it reached a decision on the most basic decision of all: whether to go for a little fix that would ease some of the pain of Robin Hood or a big fix that would overhaul the state’s tax structure and the formulas for funding education as well.
One reason, perhaps, is that it would have been futile to do so. Since Craddick became Speaker, in January 2003, all of the big decisions have been made by him. Early in the session, he made his choice: The big fix it would be. This was consistent with a view he had expressed to me during the debate over Governor George W. Bush’s tax reform plan in 1997: “We should either go all the way or do nothing,” he said, disdaining Bush’s little fix. For a couple of days there was cautious optimism in the Capitol, but when Craddick came out with his tax plan—cutting property taxes by approximately one third, achieved by expanding the sales tax to include professional services, such as legal fees, and sin taxes for education—the wheels began to come off. Many Republicans couldn’t vote for a bill that taxed other Republicans, as most professionals are. Democrats couldn’t vote for a bill that still relied on sin taxes. In the regular session, Craddick had been able to bend reluctant Republicans to his will on issues they resisted, like tuition deregulation, but this time he couldn’t do it. The legislators took one look at Craddick’s plan, with its long list of new taxes and new taxpayers, and lost their resolve. The committee had to postpone voting on it. Finally, Craddick capitulated on taxing professional services, and the optimism died.
Now there was a new plan: Jim Keffer, a Republican from Eastland, proposed getting rid of the ailing corporate franchise tax, which many companies now avoid by reorganizing themselves into partnerships, and substituting a flat tax based on employees. This solves a big problem, which is getting every business (except those with five or fewer employees) to pay some state tax. “I felt, as chairman of the Economic Development Committee, I had to weigh in,” he told me. “We can’t fight business. We saw in California that business will leave the state if taxes get too high.” But every plan creates winners and losers, and the losers made their voices heard. Keffer’s plan was good for heavy industries such as oil refineries, which pay very high property taxes, but it was anathema to labor-intensive businesses such as airlines and big retailers. The failure of Grusendorf’s committee to work on taxes loomed large, because just as lawmakers would have to vote on the bill, they were hearing from lobbyists about the problems with the tax proposals for the first time.
When the committee met on May 1 to vote on whether to send the bill to the full House, it was clear that the Speaker’s plan, which now included enlarging Keffer’s employee tax to include a payroll tax, was in big trouble. Republicans and Democrats alike condemned the gambling provision, which purported to raise an optimistic $1.5 billion for education, a figure that few believed. One Republican committee member after another promised to vote for the bill to get it out of committee but vowed to vote against slot machines on the floor. Democrats objected to funding public education with gambling, which they see as an unstable source of revenue, and cigarette taxes, which are even more unreliable because cigarette consumption is declining. This was not partisan wrangling; it was pervasive skepticism.
The biggest problem for the bill, it was becoming clear, was not taxes. It was that the bill—and the rationale for it—had no constituency. This school finance bill was all about finance and only a little about schools. Its main purpose was to get rid of Robin Hood, and it didn’t even do that; the richest of the rich districts would still be affected. Lawmakers who did not represent districts victimized by Robin Hood may have been sympathetic, but they had no incentive to vote for the bill, especially since the vast majority of property tax relief would go to residents of rich districts that have shouldered the burden of Robin Hood.
One way to build a constituency for a school finance bill is through rhetoric—to talk about how you’re providing more money to schools to make Texas a better place in the future. You may recall that the state’s previous Republican governor used just this sort of rhetoric as the centerpiece of his successful campaign for president of the United States. The current crop of Republicans did provide more money for education, but they were grudging about it rather than proud; it was something they had to do, not something they wanted to do. (One senior Republican called it “the big bribe” to get school organizations to support the bill.) Every school district was guaranteed at least a 2 percent increase in state money, and the funding formula will include an adjustment for inflation. Another provision called for updating an index that is supposed to ensure that districts in high-cost-of-living metropolitan areas, where salaries average $10,000 more than in rural Texas, get the extra funding they need but haven’t received in more than a decade, since the index is still based on 1989 numbers. (Skeptics noted, however, that the 2 percent increase will not kick in for two years, and that future Legislatures can ignore inflation adjustments, as past Legislatures have done.)
So where was the uplifting rhetoric? Certainly not from Perry, whose program was all about property tax relief and placing limits on the ability of all local governments (not just school boards) to raise money. And certainly not from Grusendorf, the House sponsor of the bill, who at times expresses open hostility toward the education community. A little over a year ago I served as the moderator of a panel whose members included Grusendorf and a Republican state senator. The audience was strongly pro-education, and the senator gave a pep talk about how everybody in the room was there because they believed that education came first. I remember only one thing about Grusendorf’s remarks: He spoke of driving past the headquarters of a large teachers organization before the election and seeing all the “Tony Sanchez for Governor” signs. He spent many years in a Democratic House where his ideas, such as vouchers, weren’t welcome, and sometimes his accumulated resentments boil over. Recently, in a brief conversation with me in the hall outside his office, he referred to education—the budget area—as a “black hole” that swallows money; in keeping with the theme, he has been known to call education lobbyists “Galileo.” As his committee prepared to vote on the bill, he noted from the chairman’s seat that the education community did not support it and threatened to remove the inflation adjustment from the bill.
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