When Texas Cares

The most touching moment in the Senate Finance Committee hearing on the emergency relief bill soon to be signed into law occurred toward the end of the morning — when Democrat Mike Moncrief finished a sentence begun by Republican Buster Brown. Referring to the victims, Brown said that by providing $45 million in immediate relief, the Senate would be saying, “Hang in there. We’re with you.”

Moncrief added soberly, “And that Texas cares.”

“That’s right,” concluded Brown. “That’s right.”

Travis County Democrat Gonzalo Barrientos had just delivered the only speech during the forty-five-minute hearing, describing the relief bill as “a hand-up and not a hand-out,” and (perhaps too cleverly) comparing it to “a fine example of affirmative action … just like scholarships for underprivileged children, A.F.D.C. benefits to needy families, H.U.B. [historically underutilized businesses] and minority hiring programs in state government.” For a moment, it seemed that the first piece of legislation to hit the floor this session was lifted directly off the legislative template prepared for Lyndon Johnson’s War on Poverty.

This is a different war, led by George Bush and fought in the oil field. In truth, it is hard to argue that $45 million in tax relief is not needed “for the little guys” in the state’s oil patch. The industry is in a protracted recession and operators of marginally productive wells are shutting down because the combined cost of extracting and moving the oil is higher than the current market price. As wells are shut down, pumpers are laid off, jobs are lost in the oilfield service industry, and even the Wal-Marts that have displaced Main Street in rural Texas begin to feel the pain —as do school districts, which derive some of their ad valorem taxes from mineral wealth.

Prices fell 40 percent in 1998 and 25,000 jobs were lost statewide, said Railroad Commissioner Charles Matthews (who added the contradictory testimony that the comptroller reported 5,400 jobs lost last year). Matthews reported that 202 of Texas’ 254 counties have oil and gas wealth on their tax rolls, and that two-thirds of the state’s school districts derive some of their operating revenue from that taxation. When wells are shut down, Matthews warned the Finance Committee, “the minerals count at zero and they tax only the pumpjacks.” The Legislature had to act fast and the Governor had declared the bill an emergency item — precisely to allow the Lege to move quickly. And while the Governor wasn’t present, the entire Railroad Commission was there, to buck up two industry lobbyists who didn’t even need to testify to make their case.

As Senator Barrientos implied, in his attempt to compare this corporate bailout to programs that provide relief for working people, when the Texas Legislature moves to do the bidding of business, that movement can be wondrous to behold. At a time when legislators are barely settled into new committee assignments, the Governor speaks one day, meets with “the Lieutenant Governor, the Speaker, the railroad commissioners, and the appropriation and finance chairs,” and on the following morning a bill is laid out before the Finance Committee.

“It’s really tough for people in the oil patch of Texas,” Bush said. “There’s a lot of people hurting.” To ease the pain, Senator Brown proposed a seven-month tax holiday, during which operators of stripper wells (marginal units that pump fewer than fifteen barrels per day) pay no severance taxes any time the price of oil falls below $15 per barrel. (The current price is $13.75.) Low-volume natural gas wells would get the same tax relief if the price of gas falls below a fixed trigger price. On August 31, the final day of the fiscal year, oil and gas producers will again begin to pay the 4.6 percent severance tax, ending the short-term tax fix.

Before Chairman Ratliff could push the vote through, however, there were a few questions and one difficult witness to dispose of.

“Is there a tax equity note?” Dallas Senator Royce West asked the committee chair.

“No, not yet,” said Ratliff.

“Will there be one?” West persisted.

Tax equity notes, which identify who wins and who loses when tax bills are passed, became routine last session when the Legislature dedicated most of its energy to tax reform; and a rule put in place last session by Austin Representative Glen Maxey requires equity notes for all tax bills considered by the House. Yet here was the first tax bill of the session with no tax equity note. Ratliff promised one by the time the bill gets to the floor.

Dick Lavine is a lobbyist for the Center for Public Policy Priorities, an Austin-based think tank and advocacy group initially founded and funded by a group of Benedictine nuns (known to a few Capitol observers as the “Twisted Sisters”). Over the past three sessions, the C.P.P.P. has developed a reputation for solid economic analysis and dogged defense of the interests of poor and working-class Texans.

Although it was clear that the deal was done, Lavine seemed determined to bring a moment of deliberation to the deliberative process. He inverted a comptroller’s report illustrating who pays taxes on natural gas, and explained that if you can determine who pays taxes you can determine who benefits when those taxes are not paid. “One third of the benefits proposed by Senate Bill 290,” Lavine told the committee, “would go to taxpayers with an income of over $107,600 a year.” (Finance Committee Chair Bill Ratliff, usually obsessive about detail, interrupted Lavine to say that the report was two years old and had nothing to do with current conditions in the oilfield. On the contrary, Levine responded, it had been released on the first day of the current session.)

Lavine didn’t take a stand against the tax bill, but he did suggest an alternative. Why, he asked, couldn’t taxes be deferred — to be paid in August 2001, before the final day of the next fiscal biennium? Everyone would come out ahead: the industry gets its break and the taxpayers get their money. “The money would be available for the next biennium budget, which this committee will be writing,” Lavine said, suggesting that committee members might have some good use for $45 million later in the session. Lavine also expressed his concern about the lack of a tax equity note.

Comptroller’s reports — packed with distribution deciles and graphs tracking revenue flow, the possibility of additional revenue at appropriations time, and a double-entry accounting trick that allows a committee to spend money it does not have in hand — usually command a lot of attention at the Finance Committee. But the Chairman was impatient. “I want to take a vote so we can get this to the floor,” Ratliff said.

He prevailed, with nine members of the eleven-member committee voting “yes.” Well owners Mike Moncrief and Steve Ogden voted “present.” Six days later, the bill passed by a 26–1 margin. Only Eliot Shapleigh voted against it, and four senators abstained.

Surplus Value

Don’t expect too much legislative largesse when it comes time to select programs on which to spend the $2-billion surplus. The Governor has plans for it; he intends to return it to “the hands that earned it” — in other words, the taxpayers of Texas. If the Governor has his way, the surplus will be returned through a reduction of the ad valorem tax. (The C.P.P.P. describes the ad valorem as one of the fairer taxes in the state; it is based on accumulated wealth in real estate, so those who have more pay more. Bush’s proposed tax cut will require greater dependence on the sales tax, one of the most regressive taxes.)

Doing some of the pre-legislative groundwork for the Governor’s plan was Grover Norquist, the national anti-tax guru, who was brought in by the Texas Public Policy Foundation, Dr. James Leininger’s right wing-think tank and pressure group.

Meeting at the Four Seasons Hotel in Austin, Norquist was joined by the Governor’s Budget Director Al Hawkins, Deputy Comptroller Billy Hamilton, and Republican Representatives Tom Craddick and Carl Isett, on a panel that made the case for returning the surplus to taxpayers.

The sales tax is not always regressive, said Norquist. Consider two families, each earning $50,000 per year. “Through prudent, virtuous saving,” Norquist said, “one family sets aside $10,000. That’s money that family doesn’t pay taxes on.”

Norquist and other panel members also pitched “dynamic analysis” of taxation — as compared to the commonly used “static analysis.” In theory, dynamic analysis considers the consequences of not enacting a new tax or increasing taxes, thus calculating all potential of increased business activity that will occur without the burden of taxation. If it sounds like a rationalization for returning the surplus through a tax cut, rather than using it on underfunded programs, it probably is.

“I’ll say about tax cuts what Mae West said about sex,” Norquist told the panel. “There’s no such thing as a bad tax cut.”

“The surplus is going to be at the center of legislative debate this session,” Hawkins said.