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Ratliff Wants Statewide Property Tax In Lieu of Local levy

BY Janet Elliot
by Janet Elliot on 4/4/02.

AUSTIN - Replacing local property taxes with a statewide levy would provide a more equitable means of funding public schools, Lt. Gov. Bill Ratliff said Wednesday.

"The reason it becomes more equitable is all taxpayers would pay the same state property tax rate," said Ratliff, author of the 1993 "share-the-wealth" school finance plan.

Ratliff would have the Legislature levy a statewide property tax of $ 1.40 per $ 100 of a property's assessed value. The money would be distributed to districts on a per-pupil basis.

School districts would be allowed to enact a local enrichment tax, not to exceed 10 cents per $ 100 assessed value.

Districts would retain the authority to levy bonds for debt service, and the state would continue to help districts pay off bonds for school facilities.

Ratliff also suggested that lawmakers levy an additional property tax to fund a teacher health insurance plan with benefits comparable to those enjoyed by state employees. Lawmakers enacted a limited teacher health plan last session.

Ratliff said that while his proposal wouldn't increase revenue available for public education, it would eliminate the most criticized aspect of the current system that requires wealthy districts to share property tax revenue with poorer districts.

The system is the subject of lawsuits by property-rich districts who are arguing that it creates an unconstitutional state property tax because it forces districts to set their tax rates at a certain level.

Lawmakers estimate that 40 percent of school districts will be taxing at the maximum rate of $ 1.50 per $ 100 assessed value by the time the Legislature convenes next January.

Ratliff said he made the proposal to move the debate forward. A committee of lawmakers and citizens has been studying the school finance issue since last summer.

If the committee doesn't like his plan, he suggested they stay with the current system.

Craig Foster, a school finance expert who serves on the committee, said the current system allows a $ 910-per-pupil funding gap between the richest and poorest districts. He said that gap would fall below $ 600 per student under Ratliff's plan.

"For all the wailing and moaning and whining about Robin Hood, those wealthy districts really have it better with Robin Hood than they would under a really equitable system," he said.

The plan also would eliminate local option homestead exemptions. The Houston Independent School District, which is classified as property poor under the current funding scheme, allows a 20 percent homestead exemption.

Ratliff is a Republican who was chosen by state senators to become lieutenant governor when Rick Perry left that post to replace George W. Bush as governor in January 2001. He is not seeking election as lieutenant governor, but is running to retain his Northeast Texas Senate seat.

Perry called Ratliff's proposal an "interesting concept" that needs further exploration.

"Questions surrounding the viability of this proposal and its impact on local school districts must still be addressed," said Perry.

Ratliff said that 64 districts would not be able to raise the same amount of money as they do under the current system. He said he did not yet know how many homeowners would see a property tax increase under his plan.

Democratic gubernatorial candidate Tony Sanchez will study the proposal before commenting, said his campaign.

An anti-tax group, Citizens for a Sound Economy, said the plan increases taxes and dilutes local control. Peggy Venable, state director of the 48,000-member organization, also criticized the suggestion to levy an additional statewide tax for teacher health insurance.

"The plan simply funnels more tax dollars into education without asking any questions regarding outcome," said Venable.

The proposal would require a constitutional amendment. It must be passed by two-thirds of the House and Senate, and then be presented to voters.

Rep. Scott Hochberg, a member of the Joint Select Committee on Public School Finance, said the plan would greatly simplify the finance system.

"It makes it a lot easier for taxpayers to understand where their dollars go, " said Hochberg, a Houston Democrat.

He said the proposal also would help school districts with their budgeting because they would know how much money they are going to receive from the state.

"So if Houston's values go up and North Forest's go down or vice versa, they 'd be insulated from that," said Hochberg.

Another benefit, he said, is that the plan would get the courts out of the school finance question. The current system was enacted in response to a series of rulings by the Texas Supreme Court concerning inequities in local property wealth.

Other members of the committee expressed concern about the practicality of getting the Legislature to set the property tax rate when it meets each biennium.

Rep. Paul Sadler, co-chairman of the committee, said the proposal doesn't address the need for a revenue source that would grow enough to meet the $ 1.4 billion the public school system needs each biennium just to serve student growth.

"The only way to raise more revenue is to enact more taxes or raise the ones you have now," said Ratliff.

He said lawmakers also could close tax loopholes such as the one that has allowed many major corporations to avoid paying the state's franchise tax.