Thursday, June 23, 2005

Special Session Analysis

Looking over the early landscape of this, what may be the first of many, special session it doesn't appear much has changed since the Republican impasse at the end of the regular session. The Big Three – Gov. Perry, Lt. Gov. Dewhurst and Speaker Craddick – still cannot agree on a plan.

The big question is why did Gov. Perry decide call this special session without a plan? Especially going against his own word, and calling it without an already agreed upon plan? Could it be that it was just politics? It's hard to say. I mean, Kay Bailey Hutchison, his main competition, who had prodded him to call a special had already decided not to run against him. But Comptroller Strayhorn had announced that she was going to make an announcement. Did he do it to upstage her announcement? Trying to figure out the governor's motives is more than likely an act of futility. None the less, why he did it is not the main issue. When a governor calls a special session they are sticking their neck out, to a certain extent, and should the session fail the governor is left with more bad choices. Does he call another and try again or does he try and act like the last one didn't even happen? If this session ends without an agreement is he then vulnerable and if he gets an agreement is he invulnerable? All good questions, we'll just have to wait and see.

Since our governor called this $1.7 million boondoggle there's already been many things written about it (see below). One thing is clear through all of that writing. The focus for the last several years on school finance has not been on doing what is best for public schools in Texas, instead the focus has been on lowering taxes on the wealthy. The one thing our governor and the legislators can agree on is that teachers need a pay raise. The current Republican leadership has absolutely no clue how to raise the money to pay for that common goal though.

From Judge John Dietz's ruling late last year he pronounced there were two things wrong with the current public school finance system – it's underfunded and the funding relies too heavily on local property taxes. Nobody has put forth a plan that will fix those two problems. Most Republicans think there is plenty of money already going to public schools. We are back to the same place we were a few years back. How do we increase funding for public schools and not raise taxes? It can't be done. They've go to come up with a scheme, like supply-side economics or toll roads.

The Democrats have put forth some principles they would like to see included in a new school finance plan but it's unlikely the Republicans are even paying attention. That's not to fault the Democrats, it's just a fact that the Republicans don't need any Democratic support to get a plan passed. It is definitely good to have these principles so Democrats can start now presenting an alternative for next year's election.

But here is where the battle should be fought. Every single Republican plan for school finance will raise taxes on the poor and middle classes and lower them on the wealthy. The Houston Chronicle has a great analysis of this point today, Perry's plan helps rich at others' expense:
The funniest part is when they quote Byron Schlomach from the Texas Public Policy Foundation:Byron Schlomach, chief economist for the business-oriented Texas Public Policy Foundation, said focusing on the savings by individuals is valid but may not catch a long-term picture.

"The change you would have to make would have to be huge to have an impact on people's (individual) finances," he said.

But he noted that the comptroller's fiscal analysis of taxes finds that even business taxes are eventually paid by individuals because they are passed through to consumers.

"People pay taxes, and only people pay taxes," he said.

Schlomach said a renter may not receive a direct rental rate cut but the property tax cut received by the owner may reduce a future rate increase.

Schlomach said property tax cuts also are important for prompting business investment that ultimately may have an impact on individuals in the form of new or retained jobs.

"If you're a welder, you may not realize you would have lost your job if this had not happened," Schlomach said. "Property tax decreases do a lot to stimulate investment."
Now, to a certain extent Mr. Schlomach has a point, businesses always pass their increased costs onto the consumer. I just think it is funny when he talks about the lowered rent renters MAY get some day. What Mr. Schlomach didn't say is that although renters MAY get their rent lowered one day they DEFINITELY WILL pay more in sales taxes.

To speculate on more time, maybe Gov. Perry just thinks he can outlast the legislature and force them to act. Or maybe they did work out a deal and haven't told us yet? Whatever the case may be the one thing you can be sure of is that whatever this Republican led legislature comes up with, it is guaranteed the poor and middle classes will get soaked and the wealthy will get a tax break.


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