May 18, 2003
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Can They Do It?

Last week’s attack of partisan politics, Washington-style, notwithstanding, the 78th Texas Legislature is within sight of completing its business within the assigned 140 days—if everything falls into place in the next 14 days.

The four-day walkout may actually have helped House-Senate budget conferees make faster progress on the appropriations bill than may otherwise have been the case. It now appears that the two sides will agree on a budget somewhere in the $58 to $59 billion range, pending the passage of numerous revenue bills needed to make up the difference between available revenue and the final spending plan. The necessary bills are now in the Senate. The only serious casualty of the broken quorum in the House, HB 2, a massive government reorganization bill that raises between $200 and $300 million in revenue, has been introduced in the Senate and is poised to move forward. The other primary revenue bills, HB 2292, the Medicaid reform bill, HB 2425, the Comptroller’s fiscal management bill, and various appropriations-related bills (including a public education spending measure tacked onto a House bill the Saturday before the Democrats fled) all are safely in Senate committees awaiting the final numbers from the conferees.

One other possible result of the work stoppage is that franchise tax reform could originate in the Senate rather than the House. A franchise tax bill, HB 450, died on Thursday night as a result of the operation of the House deadlines, although it may well be that the bill was given a kinder, gentler death than the one it was likely to suffer on the House floor. The Senate will now take a stab at doing what the House could not: write a franchise tax bill that picks up Delaware subs but nobody else. A draft floated toward the end of the last week was the most successful effort so far, although not entirely clean (it would still tax intercorporate payments and some traditional partnerships as well). The problem with this narrow “nexus” fix is that the Comptroller doesn’t believe that it will raise any money, hence the repeated Comptroller efforts to assert a very broad partnership tax bill with specific exclusions for certain types of business entities.

Should the Senate actually pass a franchise tax fix, it would represent the second time this session that the Senate has sent a serious tax bill to the House. This reversal of usual legislative procedure is not well-received in the House, which has already killed the Lieutenant Governor’s school finance plan, and has its long knives out for whatever franchise tax fix may arrive on its doorstep next week. Whether franchise tax reform will make it out of the Senate depends almost entirely on the final agreement between the House and Senate on the budget. If the House conferees agree to a number that requires the franchise tax bill to make, then there will be a franchise tax bill before the House next week. If not, there won’t be. Whether that bill will actually pass the House is another question.

It may be more likely that a combination of accounting maneuvers, Rainy Day funds, and possibly an increase in the cigarette tax, may end up in the package to the exclusion of any changes in the franchise tax. There may not be time enough to convince the House to vote for a tax increase, when everyone knows the Legislature will come back to Austin next fall or spring to restructure the school finance system and the tax system with it. Agreement on that is still a long way off, and House members may well want to get out of town without doing themselves any additional political damage.

In addition to the budget and revenue items, other issues crucial to the legislative report card are just about done. Those include tort reform, which passed the Senate last week in an acceptable form (acceptable to the tort reformers, that is), and insurance reform, which will be scheduled for House debate this week. The only big item that probably won’t happen is any definitive vote on ending Robin Hood, since the Senate and House are so far apart, and the House is so bruised by partisan power plays over Congressional redistricting that another killer issue is unlikely to show up on the calendar. House Republicans badly wanted to do this, but they didn’t count on the Lieutenant Governor upping the ante and making the game far too expensive to keep playing.

The long-term implications of the Killer D’s will not be known for a long time, but they may have had the short-term effect of getting the Legislature out of town as scheduled on June 2. There’s a small blessing somewhere in this mess after all.