Rolling out his state budget proposal in January, Gov. Rick Perry promised to be “the people’s voice” and secure taxpayers $1.8 billion in relief.
With six weeks left in the legislative session, it’s clear that small businesses will continue receiving a key tax break. And big businesses, particularly large industrial power users, are in line to get most of a $730 million rebate plan that could come up for a vote in the Texas Senate this week.
But so far, “the people” aren’t getting much.
“It’s hard to provide meaningful, substantial, noticeable tax relief for every Texan,” said Dale Craymer, president of the Texas Taxpayers and Research Association, who added that a lot can change in the session’s final six weeks.
Remember that $7 billion school property tax break in 2006? Most taxpayers don’t, because rising property values and local tax rates ate away the savings. And this time, legislators are playing with a lot less money.
Perry offered no specifics in January when he called for $1.8 billion in tax relief during his State of the State speech, nor did he explain how he arrived at that figure. A Perry spokeswoman said the governor will lay out a tax cut proposal on Monday, though people briefed on the plan say he will focus largely on the business tax.
The most broad-based opportunity for relief comes from a proposed rebate of electricity fees paid by residential and business customers. The money is sitting in the System Benefit Fund, created by lawmakers in 1999 as part of electricity market deregulation.
It’s intended to help low-income, elderly and disabled Texans pay their electric bills.
Most of the money has never been used, however, because legislators have held on to the cash to help balance the state’s books.
The fund has ballooned from $50 million in 2002 to $851 million this year as lawmakers allowed fees to accumulate.
In 2006, only 7 percent of the $140 million in fees collected that year was available to spend, which meant that no one received a discount on their electric rates, said Carol Biedrzycki of Texas Ratepayers’ Organization to Save Energy, which advocates for affordable electricity and efficiency.
The discount returned two years later, but the assistance was only available in the summer rather than year-round, which allowed the state to sock away the unspent fees. In 2012, about $70 million of the $149 million collected was spent on assistance.
“It has been a nightmare,” Biedrzycki said of how lawmakers have dealt with the fund. “It doesn’t deliver benefits to people who need them.”
Senate leaders want to reduce the fee and give a chunk of that money back to those who paid it. Voters will have approve the refund.
A typical Texas household would get a one-time refund of about $50, compared to the $3 million that a major industrial customer, such as a manufacturing plant, would receive, according to the Legislative Budget Board.
Most Austin residents and businesses, however, would get nothing because the fee is only levied in areas of the state where the electricity market has been deregulated.
“If we’re not going to use it for its intended purpose, we should give it back to the people who paid it in. And that’s what I’m doing,” said state Senate Finance Committee Chairman Tommy Williams, R-The Woodlands.
The System Benefit Fund is the largest of more than 200 so-called dedicated state accounts where about $5 billion has amassed from fines, fees and taxes collected for specific purposes but never spent. The money has been used to pad the state’s bottom line for accounting purposes only.
Weaning the state budget off those dedicated funds has been a priority for Williams.
But Democrats say there is an easy alternative: use the money for its intended purpose.
“It may be good politics to talk about sending this money back, but the better politics is living up to the initial promise made to the people of the state,” said state Sen. Kirk Watson, D-Austin. “A $52 rebate is nothing to sneeze at, but it pales in comparison to the benefit that was intended when the state started collecting this money and made a promise to people.”
Others see the rebate as reneging on the delicate legislative deal that was struck in 1999 with the big businesses that wanted a deregulated electric industry.
Those businesses agreed to the fund, which was key to winning enough support for the bill, and now they would get a windfall because the state never lived up to its end of the bargain for senior citizens and low-income Texans, said state Rep. Sylvester Turner, D-Houston.
“Look, if you’re an industrial company, you’re jumping up and down. What a big tax break,” Turner said.
Tony Bennett of the Texas Association of Manufacturers said all ratepayers, not just large industrial users, got the benefit of electricity deregulation in the state.
“If the state deems it appropriate for a refund, then obviously the industrial ratepayers should share in that refund because obviously we paid a great deal of money into those coffers in the first place,” Bennett said.
State Rep. Harvey Hilderbran, R-Kerrville, chairman of the House Ways and Means Committee, said he liked the idea of the fee rebate but agreed with Turner that it would be unfair for the businesses that benefited from the deregulation deal to get the bulk of the money back.
“I’m not saying they shouldn’t get some relief,” Hilderbran said. “I’m saying that if we … gave more of it to residential and a little less to commercial, I’m OK with that. And by the way, I think that is the only way you pass it.”
Kate Alexander has covered the state budget since 2008, writing extensively about taxes and spending. This is her third session chronicling the legislative debate over the budget.