Office of the Governor Rick Perry

Gov. Rick Perry’s Testimony Before House Select Committee on Public School Finance

*Note - Gov. Perry frequently departs from prepared remarks.
Thursday, May 20, 2004  •  Speech

Thank you.  Today we embark on a shared mission that transcends party politics because it is about something substantially more important, it is about the future of Texas.  I am honored to appear before the members of this bipartisan select committee on school finance because truly it is going to take the courageous leadership of members of both parties for us to succeed in cutting property taxes and improving our schools.  It is easier to be bipartisan in times of large surpluses, but it is most important to be bipartisan when facing great fiscal challenges.  This is such a challenge.

 

But before getting into the details, let’s take a moment to talk about the end goal.  Let’s define success, and then discuss the course to that end destination.  If this Legislature significantly reduces school property taxes, increases funding for education, eliminates Robin Hood while making funding more equitable, and protects the job climate, then you will have achieved a tremendous success.  I have offered a plan that achieves all of those goals.  

 

My plan increases education spending by $2.5 billion and makes sure we get more education for our money.  It eliminates Robin Hood but ensures greater funding equity.  It cuts property taxes on residential properties by 17 percent, and commits Texas to a path that will lead to cutting property taxes in half for homeowners and employers.  It provides appraisal relief, and empowers taxpayers to control their own taxpaying destiny.  And it does all these things without creating economic uncertainty with a risky new taxing scheme.

 

Now, I do not contend this is a perfect plan that was delivered to me on two tablets.  And I have been “House-broken”…which means I understand the art of negotiation and compromise.  But I believe my plan is the best plan out there, and the best basis for future consensus on the details of a school finance plan.  Let me talk about some of the details. 

 

My plan to cut, cap and control property taxes provides real and permanent tax relief, not temporary tax relief.  It provides $3.2 billion in property tax rate relief, and $3.3 billion in savings for Texans from growing property tax bills because of a property tax revenue cap.  So the savings in the first full two-year budget cycle would be $6.5 billion, a savings that is greater than the additional revenue raised from voluntary and often unhealthy behavior, and greater tax fairness.  The property taxpayer who owns an average-priced home would save more than $5,000 over the next six years because of my proposed rate cut and a property tax revenue cap.  Those who have said it would only provide enough savings each month for a homeowner to buy a hamburger must be eating at some very expensive burger joints.  The property tax revenue cap is the difference between an illusive and temporary property tax cut, and a long-term savings for Texans who pay the bills. 

The revenue and appraisal caps I am proposing are very different from California’s Proposition 13.  And I find ironic the concerns some have that California was hamstrung from spending enough when they just last year faced a state budget deficit of $36 billion.  California’s most recent budgetary crisis did not occur because they don’t spend enough, it occurred because they spent too much and because their tax system is punitive toward job creation.  And according to a recent survey commissioned by the California Business Roundtable, of the companies looking to move jobs elsewhere, Texas is the number one destination of choice.

 

That’s why we can’t put up a u-turn sign that will divert employers from looking to Texas.  That means not only avoiding the temptation to pass a new business tax to replace the property tax it means providing real property tax relief that stands the test of time.  The property tax revenue cap protects current employers and prospective employers from a tax shift.  It severely limits the silent tax hike of appraisal creep where rates may stay the same but tax bills continue to grow.  That’s because the revenue cap limits the growth of overall property tax bills meaning if appraisal go up too high, rates will have to come down.  But overall tax bills would only grow with inflation and population growth.

 

Let me discuss why I proposed a constitutionally linked roll.  Under every other plan, it costs an additional $2.8 billion to lower all rates by 25 cents for every $100 of assessed value.  At the same time, the vast majority of employers would still receive an initial property tax cut under my plan even though the cut would be smaller than the property tax cut for residential taxpayers.  

Furthermore, my plan protects employers in a number of ways.  First, it requires additional property tax cuts during times of surplus until rates are cut in half.  And that would not be a wink and nod promise, it would be an iron-clad guarantee in the Texas Constitution.  Second, it protects employers from a kind of property tax cut that provides zero relief for employers, and that is an increase in the homestead exemption.  Third, it provides a way to reduce property taxes without putting a job killer in its place. 

 

In the infinite wisdom of this body, you are right to weigh the alternatives, such as sales tax hikes, eliminating sales tax exemptions, and broad business taxes.  But when you weigh the alternatives, be sure to also count the costs, and that means looking at the effects each alternative has on job creation.

 

Philosophically, I believe the best way to invest in education is to invest in job creation.  When you turn that on its head, and raise taxes on the existing job base in the name of education, you jeopardize the tax base that can sustain investments in education.  The new revenue options I have offered are not broad in nature, and they do not discourage activities government should encourage.  The tax code should not punish work, wages, and opportunity.  Instead, it should discourage activities that are viewed unhealthy and voluntary.

 

For most Texans, holding a job is not voluntary, it is necessary.  But holding a cigarette in their hands is voluntary.  This Legislature acted on that exact philosophy last year by funding $1 billion for trauma care with fees and penalties on drunk and dangerous drivers.  Does that mean you are encouraging that kind of activity?  Absolutely not. 

We have provided conservative revenue estimates for the revenue ideas contained in my plan, so it is a plan that will sustain itself.  Let me make one final point.  In our zeal to provide as much property tax relief as possible, we should not confuse the largest price tag with the best value for taxpayers.  

I have offered an approach that eliminates Robin Hood for roughly $1 billion and that improves the equity in our system, that provides real and sustained property tax relief, and that increases funding for public schools by an average of $375 per student, all at a fraction of the price of other proposals.  I have also offered future legislatures a means to continually cut property taxes and increase funding for public education.  I offer a comprehensive solution.  But I offer something more, and that is an open door to every member of this committee…every member of this Legislature…that enters in good faith and that will join me in checking party labels at the door to find common ground for our children and our taxpayers.

 

Let’s prove the pundits wrong, the cynics and skeptics who say it can’t be done.  Let’s show them that, like Texans past, we’re up to big challenges and even bigger solutions.  Let’s work together until the job is done. 

 

Thank you for your tireless efforts, your dedication to our children and our taxpayers, and your commitment to making a difference.  My sleeves are rolled up; I’m ready to get to work.

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