The budget deal that House and Senate leaders stitched together last week began to fray Monday as legislators disagreed about what they had agreed to.
As a result, questions lingered all day whether the House would take up a must-pass measure asking voters to authorize a new water fund, which is a top priority for Gov. Rick Perry.
House Democrats, whose votes are needed for the water fund measure, first wanted proof from Senate Finance Committee Chairman Tommy Williams, R-The Woodlands, that he would come through on a promise to include an additional $200 million in education money in an emergency budget bill.
“We committed to being for (the water fund measure), but we’re not sure where we are right now,” state Rep. Yvonne Davis, D-Dallas, chairwoman of the House Democratic Caucus, said after the Democrats met mid-afternoon.
They were no clearer about where they stood Monday night as the vote was repeatedly delayed.
The two chambers also appear to disagree on how to provide the “significant tax relief” that Perry has demanded, a debate that could dominate the Capitol beginning Tuesday.
Tax bills come to the Texas Senate floor Tuesday and Wednesday amid a behind-the-scenes debate on what is a tax cut, what is a tax incentive and what is just repaying taxpayers for being overcharged.
Four tax bills account for about $1 billion, but three of the four could be considered new tax incentives to encourage investments in telecommunication services, data centers and research and development by companies. And the House and Senate are on a collision course over the fourth tax bill — about $650 million — dealing with the franchise tax, commonly called the margins tax.
Wednesday is the deadline for the Senate to act on the tax bills to keep the legislative process moving forward.
On Monday, there was confusion among the rank-and-file members on what Perry would find acceptable as “tax relief,” and there was speculation among some lobbyists that the tax issue could prompt a special session after the Legislature adjourns on Memorial Day.
With so much in flux, everyone seemed to be using slightly different math.
State Rep. John Otto, R-Dayton, vice chairman of the House Committee on Ways and Means, estimated that various tax bills on the Senate agenda would be closer to $1.2 billion, not counting $631 million in refunds of a utility fee.
On Friday, Williams said the utility fee refund was an essential piece of the budget deal, but his House counterpart on Monday disputed that they had come to agreement on that issue.
“It is a deal that he made with two House members that were not on (the negotiating committee),” House Appropriations Chairman Jim Pitts, R-Waxahachie, told reporters. “It wasn’t us.”
Democrats object strongly to the rebate because it is taken out of a fund intended to help low-income Texans pay their electric bills.
Williams declined to comment on negotiations on the tax issue, but Ken Armbrister, the governor’s legislative director, sounded an optimistic note.
“We’re pretty close,” said Armbrister, shuttling between the House and Senate.
There is at least one fight ahead on the franchise tax.
State Sen. Glenn Hegar, R-Katy, is offering a 5 percent rate reduction across-the-board, while the House passed a much more complicated bill that targeted specific industries.
“I know one thing. I’m not accepting their bill the way it is,” said state Rep. Harvey Hilderbran, R-Kerrville and chairman of the House Committee on Ways and Means.
Hilderbran said House Bill 500 tried to address inequities between taxpayers, while Hegar said the legislation didn’t address all the problems with the franchise tax.
“I appreciate all the work the House did, but it’s about 30 different bills put into one,” Hegar said. “There’s a whole lot of groups that would like their own tax break that wasn’t in the bill.”
He said an across-the-board cut would be more equitable.
“It would apply equally regardless of whether you are a small business, a large business; regardless of the class, sector or type of business,” Hegar said. “It applies to everybody.”
Hilderbran said a 5 percent rate cut, by itself, is too small to be significant for many small businesses.
Hegar said time was a factor in the simplified approach.
“Seven days to pass a bill out of the Senate, this seemed the way to do it,” Hegar said.
Both chambers will have to resolve the differences, and then take an up-or-down vote on the conference committee’s compromise budget.
“They act like we’ll get it all worked out in conference,” Hilderbran said. “But we don’t have much time.”