Last Week in the Legislature
May 10, 2019 | Issue #17
By John Sharbaugh, CAE
Managing Director of Government Affairs
Sunset Bill Passes in Senate
Late last Friday, after we went to press with “Last Week in the Legislature,” the Texas Senate passed the Sunset bill on the Texas State Board of Public Accountancy, HB 1520. The bill passed 30-0, with one senator absent. Thus, we are now inches from the goal line of seeing this legislation enacted.
Since the Senate amended the bill in committee to add a minor provision requested by the Sunset Commission, the bill must now go back to the House for concurrence on that change. This should not be a problem and getting House concurrence is more of a “pro forma” process that will eventually take place. We just have to be patient and wait for the bill to get scheduled on the House calendar.
Once concurrence by the House take place, the legislation will be “enrolled” and sent to Governor Greg Abbott. We are hopeful that will happen in the near future. Once the governor receives it, he can sign it, veto it (which we do not expect to happen) or it becomes law without his signature after 10 days.
Nonprofit Bill Passed in the Senate
I reported last week on SB 1463, a bill that provides clarity as to exactly what kinds of books and records nonprofits must share with the public on request under the law as defined in Texas Code Section 22.353. SB 1463 also puts parameters on how many requests an individual can make under the statute before it becomes unreasonable. The hope is that this type of clarity will reduce the number of harassing and abusive requests that some nonprofits have been encountering under the current law.
TXCPA is supporting SB 1463 and testified in favor of it when it was considered in Committee. The bill was reported favorably out of the Senate Business and Commerce Committee on Monday and it was passed by the Senate yesterday. Read a copy of SB 1463.
SB 1463 now goes to the House where a companion bill was introduced earlier in the session, but never got out of committee because of concerns raised by the AG’s office. This Senate version was modified to respond to those concerns. It is likely that SB 1463 will be received more favorably in the House when it is taken up there.
Bill to Require Monitoring Software Likely Dead
I reported a few weeks ago on HB 1352, sponsored by Rep. Giovanni Capriglione (R-Southlake), which would require vendors who provide professional services or technical information technology services to governmental entities (including state and local governmental entities) in Texas to install software on their computers that would track their key strokes and require that screen shots be captured once every three minutes and be maintained for seven years. This type of legislation has been popping up in a number of states around the country and is being promoted by a software developer who just happens to sell the kind of software HB 1352 envisions.
Many groups, including TXCPA, opposed the bill and testified against the measure at the House committee hearing when it came up several weeks ago. Major concerns revolved around privacy and data security issues, as well as the cost of compliance and liability worries.
The bill never made it out of the House committee by the deadline earlier this week. All House bills needed to be reported out of committee by Monday, May 6, in order to have any chance of receiving a vote in the House. Since there is no counterpart bill in the Senate, the issue is for all practical purposes now dead for this session. The only way this issue could continue to survive is if a similar bill suddenly surfaced in the Senate or the proposal is amended to a bill that is still alive in the House. Neither of those options is likely to happen.
Wayfair Legislation Passes – Sent to Governor
Last year, the U.S. Supreme Court issued its opinion in South Dakota v. Wayfair and eliminated the “physical presence requirement” for the collection of sales tax, thereby opening the door for states to impose sales tax collection-and-remittance obligations on remote sellers outside the state. Since the Wayfair decision, the Texas Comptroller has been working to develop rules in response to the decision and also recommended to the legislature statutory changes to assist in implementing Wayfair in Texas.
The legislation recommended by the comptroller, HB 2153, was passed in the Senate on Monday. It had been passed by the House about a month ago. And on Wednesday, the legislation was sent to the governor, who is expected to sign the bill. The effective date for the legislation is October 1, 2019. Read HB 2153. Also see this analysis of the bill.
Basically, the legislation amends the tax code to provide for a single local use tax rate as an alternative to combined local use tax rates for computing the amount of local use taxes that remote sellers are required to collect and to the allocation of tax revenue collected at that rate. The bill requires a remote seller who is required to collect and remit one or more local use taxes in connection with a sale of a taxable item to compute the amount to collect and remit using the combined rate of all applicable local use taxes or, at the remote seller's election, the single local use tax rate published in the Texas Register as required by the legislation.
The legislation requires a remote seller who elects to use the single local use tax rate to notify the comptroller of public accounts before using that rate and the legislation establishes that such an election applies to all sales of taxable items made by the remote seller unless the remote seller revokes the election by notifying the comptroller. Finally, the bill requires notice to the comptroller to be made in the form and manner provided by the comptroller.
Senate Passes School Funding Bill – Not Tied to Sales Tax Increase
On Monday, the Senate finally passed its version of the school finance bill – HB 3 – which differs from the House version, so the next step will be for a conference committee to work out the details and come to agreement on one package. The big news as this played out was the elimination of a proposal to increase the state sales tax by 1 percent and apply that revenue to property tax reduction. That was an idea that had been floated and supported by the state’s top leaders several weeks ago. But that proposal has serious detractors from legislators in both parties and in both chambers, who are opposed to a higher sales tax.
As a result, the bill’s sponsor, Senator Larry Taylor (R-Friendswood) stripped the proposed sales tax increase from HB 3 and offloaded some of the more expensive property tax relief provisions in the bill. The bill no longer includes an expansion in the homestead exemption from school district taxes. It lowers property tax rates by 10 cents per $100 valuation, instead of 15 cents, saving the owner of a $250,000 home $250 instead of $375.
The legislation would still limit the growth in school districts’ revenue due to rising property values, a proposal the governor pitched before the session began. School districts that see their property values increase significantly would have their tax rates automatically reduced to keep tax revenue growth in line. That would now start next year, instead of in 2023.
Instead of increasing the sales tax, the bill creates a Tax Reduction and Excellence in Education Fund to fund school district tax relief. Senator Kirk Watson (D-Austin) said during debate on the bill that a working group came up with a plan to get $3 billion from several sources, including the severance tax on oil and gas extraction and an online sales tax.
The House and Senate have now each passed different versions of HB 3, but both versions would dedicate around $9 billion in new revenue toward improving schools and delivering tax relief over the next two years. In some ways, the bills are similar. Both would raise the base funding per student, a number that hasn't budged in four years and would provide about $780 million for free, full-day pre-K for eligible students.
But the bills also have differences. One area where they differ is on raises for teachers and school employees. The Senate has prioritized $5,000 pay raises for all full-time teachers and librarians. The House has directed districts to give all school employees about $1,388 in raises on average statewide and designated extra money for raises to be given at districts' discretion. Senate Democrats' efforts to extend those $5,000 raises to full-time counselors and other employees failed along party lines Monday.
Another controversial difference is that the Senate also includes money providing bonuses to schools based on third grade test scores and funding districts that want to provide merit pay for their top-rated teachers. Many teacher groups have opposed both, arguing they would put more emphasis on a flawed state standardized test.
House Responds by Ditching Sales Tax Swap Plan
After seeing the Senate strip the “sales tax swap” proposal from its school funding bill on Monday, on Tuesday the House reciprocated by tabling until the next legislative session (in 2021) House Joint Resolution 3 and the accompanying House Bill 4621, which would have proposed a constitutional amendment to ask voters at the upcoming November election to increase the state sales tax by one penny to buy down school district property taxes. While it is possible that lawmakers could try and resurrect the idea by using a different bill as a vehicle to fund school district tax cuts, that does not appear to be likely, as the idea has never gotten the necessary traction from legislators needed to be successful.
The first major public blow to the tax swap proposal happened last Friday, when Representative Chris Turner (D-Grand Prairie), who chairs the Democratic caucus, stated that there were more than 60 “hard no” votes from members against it. That is more than enough opposition to block the House from passing a constitutional amendment, which requires at least 100 votes in the House. And on Monday evening, the night before Tuesday’s scheduled debate, Turner and several other House Democrats in leadership positions signed on to a letter addressed to Rep. Dan Huberty (R-Houston), who chairs the House Public Education Committee, that made it clear they “cannot support HJR 3 or any other proposals to increase the state sales tax.”
The Democrats’ opposition to the proposal centers on the fact that the sales tax is regressive and would take a bigger portion of income from poorer Texans than richer ones. An official analysis of the economic impacts of HJR 3 showed that the average Texas household making less than $100,000 would expect to see an increase in its annual tax bill. The average household making $100,000 and up would see a lighter annual tax bill. Read the analysis from the Legislative Budget Board.
This Week’s Deadlines Kill Many House Bills
Under the rules of the House of Representatives, legislation that started in the House, but did not get out of a committee by this past Monday night is no longer eligible to be voted on in the House. Bills that did make it out of a committee by that deadline, but didn’t get onto the House agendas for this week are toast, as well, and can no longer be considered. And finally, House bills and joint resolutions that didn’t come to a vote in the full House by midnight last night are also no longer eligible for consideration. So, a lot of bills in the House, in essence, died this week.
That’s normal. Thousands of bills are introduced each session, but only about 20 percent make it through the process. This week’s deadlines in the House don’t affect Senate bills. If the House bill had a Senate companion, then it may still have a chance. The rules in the Senate are different and legislation there can continue to live for a while longer.
Everything now tilts toward the end of the legislative session on May 27. As the old ballad says, “the days dwindle down to a precious few” and they are certainly dwindling down in the Texas Legislature as you read this.
Rep. Stickland Finally Passes a Bill
Normally, a legislator getting a bill passed that he/she sponsors is not that big a deal in Austin. After all, that is why most people run for the legislature. They want to make a difference and a major way of doing that is to introduce legislation and work to get it passed through the process.
If you are a freshman legislator, you will normally get some hazing from your fellow senior legislators when you get your very first bill passed. It’s a normal, “welcome to the club” kind of thing. If, however, you have been serving as a legislator for seven years and you finally get your first bill passed, that is not normal and it becomes a big deal. That is what happened this week for Representative Jonathan Stickland (R-Bedford).
On Tuesday night, the House passed HB 1631, sponsored by Stickland, which would ban red light cameras across Texas. But the House did amend the bill to allow current contracts that cities may have with vendors for red light devices to be honored. The amended bill would allow those contracts to continue until completion, without giving them the ability to extend the contracts or negotiate new ones. The bill now goes to the Senate where there is a companion bill. So, before the session is over, we may see the demise of red light cameras in Texas. Read HB 1631.
While Stickland is not a freshman, he did get a fair amount of hazing by his colleagues this week, since it is the first time he has passed a bill in that chamber during his seven years of service. For those not familiar with Stickland, he is a very conservative legislator who believes in the old phrase that “the least government is the best government.” And he carries that philosophy over to his legislative role by voting against most everything that comes up on the House agenda. Some jokingly refer to him as Representative “No.” He would definitely not win a popularity contest voted on by his peers. But popular or not, this week was his moment in the sun. In his closing comment in presenting the bill for the vote in the House, he said, “Liberty for Texas, I move passage.”