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Texas manufacturers oppose gutting franchise tax

At Weir SPM in White Settlement, machinist Martin Ramos in 2011 worked to manufacture one of the powerful pumps used in the hydraulic fracturing process of gas and oil wells. (Tom Fox/Staff photographer)

Jockeying over tax cuts intensified Wednesday when the Texas Association of Manufacturers came out against repealing the state’s franchise tax on businesses.

In its top 10 priorities list, the group said lawmakers instead should concentrate on property tax relief and spending more on infrastructure, such as roads and water supplies.

“TAM believes the Texas Franchise Tax is a fair system that provides necessary revenue while allowing all businesses to share in the cost of running our state,” the group said in a separate position paper on the franchise tax.

As I reported in this story in Wednesday’s paper, Gov.-elect Greg Abbott is interested in trimming, and perhaps eliminating, the franchise or “margins tax.”

Tony Bennett, president of the Texas Association of Manufacturers (2013 courtesy photo)

Lt. Gov.-elect Dan Patrick has stressed reducing property taxes, though in the past he has championed measures that exempt a lot of small businesses from having to pay franchise tax.

As the manufacturers group pointed out, the small businesses paid six percent of all franchise taxes collected before 2006, when a massive tax swap was passed to allow the state to escape a school finance lawsuit. Today, the smallest businesses are off the hook. And there has been other relief granted, the manufacturers group noted.

But it warns that increasing property tax bills “will soon scare away future business and industry growth.” That is in its position paper on property tax.

The old franchise tax zapped manufacturers and refineries because it taxed assets. They have lots of assets. The 2006 changes, by contrast, not only reached out to bring under the tax limited partnerships and professional associations, it shifted some of the burden away from capital-intensive industries. Some of that fell on the retail and service sectors of the Texas economy. So the manufacturers association is quite happy, thank you. Please, refrain from further nibbling around the edges of the margins tax, it all but said Wednesday.

For those following the early tax-cut posturing, there are two lessons here: 1) It’s not about personality. While at first blush the manufacturers might appear to favor Patrick’s emphasis over Abbott’s, they actually don’t like some of Patrick’s ideas, either. For instance, their paper warned of a “split tax roll,” where either homeowners or businesses are treated differently. Patrick has strongly backed tighter caps on growth in home appraisals, which industry fears would shift more of the local property tax burden on it. 2) It’s about the bottom line. That varies by sector and by individual company. Which is what makes tax fights so much fun.

“Texas is the No. 1 state to do business,” said association president Tony Bennett. “We look forward to working with Texas lawmakers to keep Texas on top.”

Of course, everyone has a different prescription on how to do that.

Top leaders endorse streamlining of Texas social services

Kyle Janek, Texas health and human services executive commissioner, speaks at Oct. 17 news conference to discuss Texas’ Ebola prevention efforts, as Gov. Rick Perry listens. (AP Photo/Eric Gay)

A key lawmaker and a top appointee of Gov. Rick Perry agree with an efficiency review recommending that Texas’ five existing social services agencies should be merged into one.

Senate Finance Committee Chairwoman Jane Nelson, who also is chairwoman of the Sunset Advisory Commission, and social services czar Kyle Janek said Wednesday that they see merit in the argument of commission staff that currently, there is too much fragmentation in programs such as Medicaid, mental health and women’s health.

Nelson appointed a work group to fine-tune the proposal to consolidate the five agencies. The sunset commission, which periodically looks at whether state agencies deserve to be continued, won’t vote on a final recommendation until Dec. 10.

Still, Nelson and Janek’s comments were a boost for the plan. As I reported in this story last month, when sunset recommendations on the Health and Human Services Commission were released, a veteran Democratic lawmaker said the streamlining proposal “lends itself to more political decisions,” because it would consolidate more power under the governor.

On Wednesday, though, Janek said the proposal would clarify lines of authority and make it easier for Texas families to find the services they need without having to approach multiple departments.

“We can move some of the barriers out of the way,” he said.

Nelson, a Flower Mound Republican, also was supportive.

“Overall, sunset [staff] has made a very good case for consolidation,” she said.

Rep. Richard Peña Raymond, D-Brownsville, asked Janek if he would be around to make things go smoothly, if lawmakers buy into the consolidation plan. As Raymond noted, that depends on Gov.-elect Greg Abbott’s keeping Janek as executive commissioner of the Health and Human Services Commission.

Janek said he hasn’t “had a conversation with Gov.-elect Abbott on this subject so far.”

But he added, “If so honored, yes, I’ll stick around in this job.”

Raymond later asked a similar question of Family and Protective Services Commissioner John Specia, whose department would be downgraded to a division if the consolidation plan is embraced.

Specia, a former Bexar County family court judge, said consolidation would reduce fragmentation — and wouldn’t run him off.

“It doesn’t matter what you call me, I’m still just called judge,” he joked.

For the new first couple of Texas, Thursday is doubly special

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Gov.-elect Greg Abbott turns 57 on Thursday.

It’s also the birthday of his wife, Cecilia, the lady in the white jacket in the photo above. She turns 55.

When a reporter on Tuesday yelled to ask Greg Abbott what he planned to do on his birthday this week, Cecilia, who was standing behind him, quipped, “I’d like to know.”

Having the same birthday as his wife does put pressure on him to make it special, Greg Abbott acknowledged.

Presumably, it’s even more pressure now, as she prepares for life in the fishbowl as Texas’ soon-to-be first lady.

“I will spend my birthday taking my wife out to some place where I will not see any of you all,” he told reporters gathered in the historic Texas Supreme Court chambers in the state Capitol.

At his just-concluded news conference in that grand room, Abbott repeated his campaign vow that he will unite a geographically and ethnically diverse state.

As governor-elect, he noted, his first huddle with lawmakers was with the legislative black caucus (on Sunday). His first trip was to the Rio Grande Valley (on Tuesday). And his first nomination was Cameron County Judge Carlos Cascos as Texas secretary of state (also Tuesday). Cascos came to this country from Mexico at age 7. He became a U.S. citizen as an adolescent and went on to a successful career as a certified public accountant and rising South Texas politico.

Abbott also fielded a reporter’s question on immigration, warning President Barack Obama not to assume “dictatorial powers” with an overreaching executive order in coming weeks. Perhaps Abbott’s most interesting comments, though, came in response to a query about whether he favors repeal or changes to the state franchise or “margins tax.”

The short answer: He’d sure like to. But the nuances are important, especially in light of Lt. Gov.-elect Dan Patrick’s apparent determination to make property tax relief his top priority.

In Wednesday’s paper, I had this story about Abbott’s tax-cut comments.

Analyst: Set aside 2006 school property tax cut, and Texas already obeys spending cap sought by fiscal hawks

Peggy Venable, Texas director of Americans for Prosperity, speaks at budget discussion at Texas Capitol on Thursday, as Talmadge Heflin (center) and Eva DeLuna Castro listen. (Robert T. Garrett)

A conservative think tank loves to say that Texas’ spending has been profligate for a decade, even under Republican rule.

Three speakers saluted the notion at a conference sponsored by the Texas Public Policy Foundation on Thursday.

But then things got interesting when the token liberal on the panel, budget analyst Eva DeLuna Castro of the center-left group the Center for Public Policy Priorities, started reminding people of recent history.

It turns out that the next big thing many staunch conservatives are clamoring for, a tighter constitutional cap on growth in state spending, has been Texas’ practice, if not its law, for the past decade, provided one lays aside the school property tax cuts the Legislature passed in 2006, DeLuna Castro said.

It’s only by ignoring those tax-rate reductions, which the state bought down with state money, that groups such as the foundation can produce scary numbers showing a 63-percent increase in state all funds spending since 2004, she said.

The background: For years, Gov. Rick Perry and various fiscal hawk groups have said that the Texas Constitution should be amended to impose a tighter spending cap on lawmakers. Since the late 1970s, the Constitution has said spending of non-dedicated tax revenues can’t grow faster than the state economy. By statute, the measuring stick is personal income growth.

That’s generally a looser constraint than the alternative pressed by staunch conservatives — a sum of the rate of household inflation and the percentage growth in state population.

In June, to much fanfare, the Texas Public Policy Foundation released a document called “The Real Texas Budget.”

It said that between September 2003 and next August, Texas will have managed to spend $1 trillion, if federal funds are counted.

“Spending in Texas during this period not only increased in absolute numbers, but also increased when taking into account population and inflation,” it said. “The total population/inflation adjusted increase in biennial spending since [fiscal] 2004 is $16.3 billion. This means that an average family of four pays $1,200 a year to support the growth of Texas government since 2004.”

Talmadge Heflin, director of the foundation's Center for Fiscal Policy (Courtesy)

Former state Rep. Talmadge Heflin, the foundation’s fiscal policy chief, made a big deal of that $1,200 per household figure. He said if spending growth had been limited to population growth and inflation since the 2003 session, which was his last as a lawmaker, then the current two-year budget would be $186 billion instead of $202 billion.

DeLuna Castro, though, noted that the 2006 decision to reduce school property-tax rates by one-third added $7 billion a year to state spending. When fully phased in two years later, the state population was 24.3 million — meaning the tax cut added $287 a person to state spending, she said. If you run $287 in 2008 through the Bureau of Labor Statistics’ CPI Calculator — click here and play with it; it’s fun — you get a current price tag for the tax cut of $317.30 per Texan per year.

“That’s the $1,200 increase that you see,” she said, referring to Heflin’s average family of four.

“Think about it as, you’re paying that much more through the state budget so your local property taxes can be lowered by that amount,” she said.

No one applauded. But hey, it was a pretty conservative lunch-time audience of 100 or more people. They were probably looking for some affirmation of what they’d heard about “The Real Texas Budget” — on Time Warner Cable Austin, on national tax crusader Grover Norquist’s website, on Breitbart Texas and on Forbes.com.

Who wants a history lesson when you can have breathless excitement like that?

Patrick names transition team

Lt. Gov.-elect Dan Patrick, during his victory speech in Houston Tuesday (AP Photo/Pat Sullivan)

Lt. Gov.-elect Dan Patrick has named his long-time aide Logan Spence as head of his transition team, which will include Dallas insurance executive Roy Bailey.

“After 15 months of arduous campaigning, the hard work has only begun,” Patrick said in a statement.

He said Bailey, who signed on last fall as one of his top campaign money men, “will bring his business acumen and perspective to the transition team.”

Dallas businessman Roy Bailey (2002 photo by Richard Michael Pruitt/Staff photographer)

The team “will help me carry our conservative vision to the lieutenant governor’s office in January,” Patrick said.

Patrick, now a state senator from Houston, quickly ticked off his priorities of border security, property tax cuts and “making our schools the best in the country.”

Houston GOP campaign guru Allen Blakemore, who was chief strategist for Patrick’s first statewide race, will assist the effort, along with San Francisco GOP media consultant Bob Wickers and Texans for Lawsuit Reform publicist Sherry Sylvester, Patrick said.

He said people interested in working for him in the lieutenant governor’s office can apply here for jobs. That’s part of Patrick’s new website, www.PatrickTransition.com.

Switching hats, Staples says leave fracking to state regulators

Texas Agriculture Commissioner Todd Staples, who resigned Friday, played his last ceremonial role as a politician Thursday, presiding over a Family Land Heritage event in the House chamber. (Robert T. Garrett)

The new top lobbyist for the Texas oil and gas industry, just-resigned state Agriculture Commissioner Todd Staples, says local referendums such as Denton’s ban on hydraulic fracturing this week are not the answer.

“That’s not the way to craft public policy,” Staples said in an interview Thursday, his fourth day on the job as president of the Texas Oil and Gas Association. The association has sued to block the ordinance from taking effect in 30 days.

“Our thought is that the Railroad Commission has the authority to govern oil and gas activities,” Staples said. He said the commission, whose Chairwoman Christi Craddick said Thursday should keep giving permits to companies that seek to drill in Denton, must balance local community concerns with the need for uniform policies, “where we can grow and have capital attracted to Texas.”

Staples, who resigned as agriculture commissioner on Friday, said he would register as a legislative lobbyist next year but play a mostly behind-the-scenes role as a strategist for the trade group’s existing lobbyists.

“I’ll obviously help coordinate those activities,” he said. Staples ran unsuccessfully for lieutenant governor in this year’s GOP primary.

So who’s minding the store at the Texas Department of Agriculture? The answer is Drew DeBerry, Staples’ long-time deputy.

While Republican former state Rep. Sid Miller has been elected to the post, state law puts the deputy agriculture commissioner in charge if the commissioner has “a necessary and unavoidable absence” or an “inability to act.”

Miller will be sworn in a few minutes after midnight on Dec. 31, said Todd M. Smith, his campaign consultant. At a second event later on New Year’s Day, Miller will have a purely ceremonial oath-taking, Smith said.

Administering the oath will be Gov. Rick Perry, a former agriculture commissioner, he said.

Texas sales tax posts biggest single-month jump in two years

Comptroller Susan Combs, explaining her biennial revenue estimate in January 2013 (AP Photo/Eric Gay)

Texas has logged the biggest single-month percentage increase in sales tax receipts in nearly two years — 12.9 percent.

Last month’s sales tax revenue was $2.41 billion, up from $2.14 billion in October 2013, Comptroller Susan Combs announced Wednesday.

The last time monthly growth pressed into double-digit territory was November 2012, when collections grew by 13.1 percent.

“Strong growth in sales tax receipts was apparent across all major economic sectors,” said Combs, who leaves office in January.

She said “notable increases from retail trade and the oil and natural gas-related sectors led the growth,” signaling “increased spending by both consumers and businesses.”

For the fiscal year that began Sept. 1, Combs has forecast just 3.3 percent growth in revenue from Texas’ 6-1/4-cent sales tax. (Click here, see Table A-13.) September’s receipts were 7.9 percent higher than a year earlier. So as has frequently happened, her projection is looking very conservative.

The news probably will do little to cool the ardor for tax cuts among incoming GOP lawmakers and leaders such as Lt. Gov.-elect Dan Patrick and Gov.-elect Greg Abbott.

In election day interviews, Patrick pledged “serious property tax relief.” Abbott said more vaguely in his Tuesday night victory speech that he would keep Texas No. 1 in job creation by, among other things, “lowering the tax burden.”

But a host of considerations will complicate their effort, including a low-balling of entitlements such as Medicaid by about $1 billion in the current two-year budget cycle; lawmakers’ continued reliance on budget-balancing tricks, such as hoarding $4.2 billion in fees levied for specific purposes; road needs; and the looming threat of a court decision ordering a costly overhaul of school finance.

Poll: Patrick entered Tuesday losing Hispanic vote by 39 points — so he won landslide among non-Hispanics?

Texas GOP lieutenant governor candidate Dan Patrick speaks to the media before his watch party in Houston Tuesday. (AP Photo/Pat Sullivan)

An election eve poll sponsored by national Hispanic groups suggests — at least, by inference — that Republican Dan Patrick captured a towering percentage of Tuesday’s non-Hispanic vote in the race for lieutenant governor. And that Hispanics probably didn’t vote in increased numbers, as Democratic diehards hoped.

The Latino Decisions pollshowed Hispanics in Texas broke decisively in favor of Patrick’s Democratic rival, fellow state Sen. Leticia Van de Putte. She had 68 percent to his 29 percent, in the poll sponsored by the Latino Victory Project, National Council of La Raza and America’s Voice.

The poll was conducted Thursday through Monday among Hispanics who had already voted or were certain to vote. Texas was among 10 states in which pollsters interviewed a larger number of Hispanic voters, to obtain a statistically reliable sample. The margin of error was plus or minus 4.9 percentage points.

So Van de Putte’s 39-point margin among Hispanics theoretically could have been as small as 29 percent.

Meanwhile, with three quarters of precincts reporting Tuesday, Patrick was beating Van de Putte by 21 points — 59 percent to 38 percent.

Updated: Lieutenant governor-elect Patrick says liberals “picked wrong battleground”

Dan Patrick and Leticia Van de Putte, Texas Senate colleagues and rivals for lieutenant governor (AP pool photo, Sept. 29 KLRU debate)

Update at 9:45 p.m.: Dan Patrick said his election reaffirms the state’s conservative tilt.

“Texas voters sent a powerful message to the rest of the country – the liberal, Washington-style agenda my opponent so proudly boasted simply has no place in Texas,” he said in a written statement. “Tonight’s decisive victory proves they picked the wrong battleground.”

Van de Putte told supporters that she called Patrick and offered “sincere congratulations on a well-disciplined campaign.” Van de Putte, who didn’t have to give up her Senate seat to run statewide, added that she assured Patrick “I would continue in my public service.”

Update at 8:28 p.m.: Van de Putte has conceded, congratulating Patrick for “running a disciplined campaign.”

In a statement, she thanked supporters and said she looks “forward to continuing to serve my community and this great state.” See note below about how she retains her Texas Senate seat.

“This campaign and my service have always been about securing the future for the next generation, para mis hijos y nietos,” Van de Putte concluded.

Update at 8:16 p.m.: AP has called the race for Patrick.

Original item at 8:08 p.m.: Republican and tea party darling Dan Patrick established a solid lead over Democrat Leticia Van de Putte in Tuesday’s tally of the early vote for lieutenant governor.

With more than 2.1 million early votes counted, Patrick is leading Van de Putte with 56 percent to her 41 percent.

Playing rope-a-dope in the fall contest, Patrick avoided gaffes and lowered his public profile. This was after he ran a highly combative campaign to capture the GOP nomination earlier this year.

But while Patrick coasted through the general election, he didn’t tone down his staunchly conservative views.

Au contraire.

Seizing full advantage of the summer’s influx of unaccompanied children from Central America, the rise of the Islamic State in the Middle East and the arrival of Ebola in Dallas, Patrick hewed to his hard line on immigration and border security.

He raised the prospect of Islamic terrorists crossing the Texas-Mexico border in his fall TV ads.

In other ads and his single televised debate with Van de Putte, he also stood firm against abortion, under any circumstance; and for school voucher-like proposals to shake up public schools.

Van de Putte, not well-known beyond her San Antonio base, didn’t raise the big money that fellow state Sen. Wendy Davis did in the governor’s race.

But as Patrick’s senior colleague in the Texas Senate, Van de Putte soon could be in an interesting position: Last year, she drew a four-year Senate term and thus did not have to give up her seat to run for lieutenant governor. If she loses to Patrick, she can sit back and watch him preside — and offer critiques, if she chooses.

Simmons’ widow, daughter split picks for lieutenant governor

Serena Simmons Connelly, center, is a major Democratic donor, despite being the daughter of the late GOP uber donor Harold Simmons. (2008 photo by Lara Solt/Staff photographer)

The late Dallas billionaire Harold Simmons may have been a Republican mega donor but his family is splitting its political bets this fall.

In checks written on the eve of the election, Simmons’ widow, Annette, gave Republican lieutenant governor hopeful Dan Patrick $25,000, while his daughter, Serena Simmons Connelly, gave Democrat Leticia Van de Putte $10,000. For the year, that brought Serena’s financial backing of Van de Putte to $17,500, according to Texas Ethics Commission records.

In this election cycle, Annette Simons has given Republican candidates $120,000, the commission’s records show. Half went to unsuccessful attorney general candidate Dan Branch of Dallas.

Since January 2013, Serena Connelly has given more than $358,000 to state Democratic causes, according to commission records. Of that, more than $120,000 went to gubernatorial nominee Wendy Davis and the Texas Victory Committee, the Davis campaign’s joint project with voter-organizing Battleground Texas; more than $90,000 to ActBlue, the Democratic internet fundraising tool; and $25,000 each to the Planned Parenthood Texas Votes PAC and the Texas Organizing Project.

Annette Simmons, shown with her late husband Harold at a Dallas ball in 2013. (Kelly Alexander)

Her sister, Lisa Simmons, also has supported Democrats, though without as many zeroes on her checks.

Lisa Simmons, president of the Harold Simmons Foundation, has given Davis and Battleground Texas $4,000 since May. Serena Connelly is the foundation’s executive vice president.

The sometimes surprising “left turns” of the foundation and Simmons’ daughters were chronicled last year in this piece by the Center for Public Integrity. Among them was its donation of $600,000 to Planned Parenthood and its North Texas affiliate.

Serena Connelly and Lisa Simmons together control nearly 94 percent of Dallas-based Contran Corp., a closely held company with subsidiaries producing a chemical used in house paint and rayon clothing as well as manufacturing security products and recreational marine components, according to this February story by Bloomberg BusinessWeek.

Since Oct. 25, when candidates filed their last detailed reports on contributions and expenditures, Patrick has raised about $330,000 in late money, to Van de Putte’s $211,000. That’s not out of line with their overall financial effort. Though Patrick has outraised and outspent her, Van de Putte has kept it relatively close. And while Patrick aides complain she’s received major in-kind donations from Planned Parenthood, TOP and Battleground Texas, it was a major gift from one conservative PAC, $125,000 from Texans for Lawsuit Reform, that kept Patrick ahead in the “telegram” reports on last-minute contributions.