Our oldest daughter is one of three finalists for the "Top First-Year Teacher" award in her large school district. Yet she anxiously awaits word on whether she will lose her job because of budget cuts in Texas. At risk as well are people with disabilities, librarians, etc.
This article was sent to me by a friend...
Houston Chronicle - March 27, 2011, 7:32PM
Tax cut comes at 'high cost'
By PATRICIA KILDAY HART Staff writer .
Imagine $1 billion vanishing overnight from the state treasury. That's essentially what happened in September — just as Texas lawmakers learned they would face a $27 billion shortfall - when the oil and gas industry reaped a windfall from legislation quietly passed in 2003. Poof! About $1.2 billion in potential tax revenues disappeared from the books, leaving less money for hospitals, schools, roads and all the other worthy things the state budget supports. .
The story of the vanishing billion dollars provides some useful insight if you've been wondering why our prosperous state has a budget crisis. The state of Texas enjoys enormous bounty from "severance" taxes, paid by the oil and gas industry for the right to "sever" minerals from Texas lands. .
But in 1989, the Legislature created an exemption for "high-cost" gas - as a temporary measure, mind you - to encourage expensive and technically difficult gas production. .
Lawmakers extended the exemption in 1995 and 1999, when it was promoted by state Rep. Tom Craddick, R-Midland. Then, in 2003, when Craddick became speaker of the House, the Legislature passed a complicated bill with dozens of "technical corrections" to the state tax code. Tucked inside was a single line that struck the expiration date of the high-cost gas exemption. .
As a result, the tax break became permanent, instead of expiring last September. With that tiny "technical" change, the state lost the ability to collect about $1.2 billion a year in additional taxes. Why would the Legislature give such an enormous permanent tax break to a single industry? .
No one seems to know, even the bill sponsors, former State Rep. Brian McCall and former State Sen. Ken Armbrister. "I can guarantee you that nobody in the Legislature knew that was in the bill," laughed Armbrister, now a senior adviser to Gov. Rick Perry. His mirth was an acknowledgement of an open secret in the Legislature: There are some bills - particularly those relating to arcane tax minutiae - that no one reads. .
The bill received even less scrutiny because of the unusual parliamentary journey it took on its path to easy passage. In the Texas House, the bill was approved with no objections by the Ways and Means committee and sent to the Local and Consent calendar. .
As its name implies, the calendar is intended to quickly dispense of proposals that have only local impact, or consent of all members. A little distracted If no one objected when the Texas House passed House Bill 2424 on the Local and Consent calendar on May 16, 2003, we'll have to forgive them. They were, shall we say, a little distracted. You may recall that May 2003 was a particularly acrimonious period for the Texas House. On May 12, Democrats fled to Oklahoma to dodge a vote on a congressional redistricting plan advocated by then-U.S. Rep. Tom Delay. They returned May 16, still groggy from an overnight bus trip. "None of the Democrats were paying close enough attention," State Rep. Lon Burnam, D-Fort Worth, said this week. .
A chagrined Burnam is sponsoring a bill to end the exemption, which he argues skews the Texas tax system to burden the middle class. He has an unlikely ally in a powerful Republican lawmaker, Senate Finance Committee Chairman Steve Ogden. "I don't think much of the exemption," Ogden said. "I don't think it makes a lot of difference to whether gas is drilled or not." Craddick did not respond to numerous requests for an interview. In 2010, the Permian Basin Petroleum Association awarded him its "Top Hand" award. "For the past four decades, there have been very few, if any, bills related to the oil and gas industry and passed by the Texas Legislature they don't have Tom Craddick's fingerprints," the association's magazine noted. .
Kelli Way, a spokeswoman for the Texas Independent Producers and Royalty Owners argued this week that the tax exemption "has successfully encouraged natural gas exploration and production in Texas, particularly in those areas that are difficult and expensive to develop." Definition varies Way also said that in 1990, high-cost gas production was only 5.5 percent of total statewide gas production. .
However, by 2009, high-cost production accounted for 56 percent of total statewide production (in large part because of the incentives provided from the high-cost gas investment tax credit). "It was during this time Texas was the only producing state to offset production declines and increase natural gas production," she said. .
But an analysis by the Legislative Budget Board suggests that the Texas Railroad Commission has applied the "high-cost" definition liberally - certifying whole regions of the state as high-cost regardless of the actual expense involved in drilling. .
During 2009, the gas operations certified as high-cost actually had drilling costs ranging from $14.7 million to as low as $24,000, the report noted. Does the oil and gas industry, which creates jobs and pays other taxes, deserve this exemption? Or has it outlasted its usefulness? For whatever reason - partisan distractions or shrewd advocacy - the Legislature in 2003 chiseled the high-cost gas exemption in stone without adequate debate. .
Ogden said he believed that lawmakers should examine high-cost gas, in a broader debate about the tax burden in Texas. It's a long-overdue conversation. When someone with powerful friends gets a tax break, someone else is stuck with the tab.