For Texas business leaders, there might be a “Groundhog Day” feel to the just-started legislative session.
In that 1993 movie, Bill Murray’s character lived the same day over and over again. And in this session — just like in 2015 — the state’s business sector finds itself focused on the same priorities it went to battle over in the last session: the state’s franchise tax, property taxes, workforce development and economic incentive programs.
The decisions might be even tougher this time around now that Texas Comptroller Glenn Hegar announced this month that the biennial revenue estimate of $104.9 billion for 2018-2019 is 2.6 percent below the revenue estimate for the current two-year budget.
“There’s a smaller budget this time around, we are aware of that,” said Sarah Tober, communications director for the Texas chapter of the National Federation of Independent Businesses.
But that’s not stopping business groups from fighting for their interests. For Tober’s group, which advocates for small businesses, one of the main issues is fighting for a repeal of the state’s franchise tax which creates a significant burden to their member’s success.The franchise tax, sometimes known as the margins tax, is the state’s primary tax on businesses.
During the last session, the group succeeded in lobbying the legislature to reduce the franchise tax rate for their businesses. But with a shrunken budget, additional cuts to the franchise tax — or an outright repeal of the tax — could be less likely. Gov. Greg Abbott expressed support for doing away with the tax and several senators had filed bills to cut or repeal it.
There has been less talk on the issue since Hegar’s announcement, although several legislators expressed their support for phasing out the tax at a Texas Public Policy Foundation event on Thursday.
“The franchise tax,” said state Sen. Van Taylor, R-Plano, “is on a glide path to death.”
But not all businesses support doing away with the tax.
“A majority of my members say there should be some sort of business tax that is collected and used to support the obvious things that the state of Texas has to have to have a good business infrastructure,” said Tony Bennett, president of the Texas Manufacturers Association. “If you continue to dwindle down revenue to just a few sources more and more state programs get mandated to the lower level and so there’s no wonder we have a property tax problem.”
Several of the big business groups in the state will be watching for property tax legislation. Bennett’s group said it will look to oppose shifting more of the state’s tax burden to larger businesses as legislators consider providing tax relief for residential homes and small businesses.
In its legislative priorities, the Texas Association of Business said it will keep an eye out for any attempts to split the property tax rolls by rate or by making one statewide tax, and will also be on the look out for attempts to treat businesses differently than homeowners.
Business groups will also be on the defensive when it comes to economic incentive programs like the Texas Enterprise Fund and the property tax abatement programs for businesses. Those programs, ushered in during the early to mid-2000s under the tenure of then Gov. Rick Perry, have recently fallen out of favor with some more fiscally conservative members of the legislature.
Abbott has said he does not like the “specter of picking winners and losers” and has already scrapped the state’s Emerging Technology Fund. But he secured $90 million for the enterprise fund in the last session, from a Legislature that had proposed putting in as little as $30 million.
Numerous business groups will lobby legislators for a $200 million balance in the fund, which may be optimistic given the current budget. But Drew Scheberle, senior vice president of policy and advocacy for the Greater Austin Chamber of Commerce, said the enterprise fund is crucial for the state to convince companies to set up shop in Texas.
“As our job creation has been slowing the last quarter, we need to be particularly aggressive about explaining why companies can be successful if they locate here,” he said.
Bennett said any conversation about doing away with incentive programs — like property tax abatement for businesses — is a setback for diversifying the state’s economy. Without such programs to attract companies here, he said, the state won’t be as competitive with others that do offer these incentives.
“There will be projects that will be totally disregarded and we won’t even know we were a possible candidate,” he said.
Businesses will also look to enhance workforce development by pushing for legislation or funding that focuses on training workers for Texas industries that have labor shortages.
“There is a push for a traditional education that everyone should go to college and when people sometimes don’t meet the criteria for that they fall off,” Tober said. “But in reality, there are trades they can go into. Our purpose is breaking that gap and having educational opportunities for folks who may not want to take a college route.”
As the outlook for the Texas oil and gas sector improves, industry leaders in that area will push legislators to keep their growth on track by passing a sunset bill for the Texas Railroad Commission, keeping a low-tax environment and investing in infrastructure.
Todd Staples, president of the Texas Oil & Gas Association, said in his announcement of the group’s top legislative priorities that lawmakers should hold fast to policies that have “attracted unprecedented oil and natural gas investments” in the state.
But with a tight budget, many business groups and advocates will be left prioritizing their priorities.
“Because it’s going to be a session where less money is available than the biennium before, some of our priorities aren’t going to see an opportunity,” Bennett said. “We’ve done this many times and we know some of our priorities will have much more difficult time before the Legislature… That’s the reality. You do not get everything you ask for from Santa Claus.”