Texas' legislative budget board wants the state's school districts to give up their power to grant property tax abatements in favor of a statewide system run by the comptroller's office.
This proposal has many wind supporters concerned because they see the budget board's proposal as an attempt to curtail wind development in Texas – the state ranks as the top wind energy producer in the country – as part of a strategy to curry favor with Texas' oil and gas interests, and to appease the state's biggest energy users, who see wind as too costly to their bottom lines.
‘This is a purely political agenda,’ says Greg Wortham, executive director of the West Texas Wind Clearinghouse. ‘You certainly aren't going to see this being done with any other industries in the state.’
The budget board, a standing committee of the legislature, develops budget policy for the state House and Senate and analyzes the fiscal impact of proposed legislation. The 82nd session of the Texas Legislature begins today, and lawmakers will use the budget board report as a blueprint for state spending. The legislature, which meets every two years, has 180 days to decide on the measure.
The property tax proposal should negotiate school property tax breaks to businesses in order to attract large-scale investments such as manufacturing plants or wind farms, according to the Texas' comptroller, the state's chief financial officer.
Currently, school boards negotiate the deals, and the state reviews them. The budget board wants to reverse that process, letting the comptroller negotiate and giving school districts a veto.
In addition, the budget board suggested creating a separate incentive program for renewable energy projects because it said these programs create fewer jobs than manufacturing or research projects.
This would significantly alter the 2001 Texas Economic Development Act, which tried to find a way around the state's heavy reliance on local property taxes. Texas does not have a state income tax or state property tax, so giving local governments the ability to grant abatements and exemptions was supposed to help them attract large industrial projects.
The budget board's premise is that wind development has not been worth the tax breaks and that ‘school districts should not be made responsible for economic development.’ The budget board also questioned whether school officials are verifying that companies meet the job and wage standards as required under the law.
The November elections returned an increased Republican majority to the legislature. Industry observers, such as Wortham, see the newly elected members as more hostile toward wind than their predecessors. Many of these newly elected members see wind as an extravagance that the state, facing a $27 billion budget deficit, can ill afford.
However, wind proponents say this is baseless and that local control has played a key role in wind development in Texas. The state had just 1,100 MW of installed wind in 2001 and more than 10,000 installed and under construction at the end of 2010, resulting in approximately 10,000 jobs.
‘What the budget board doesn't understand is that Texas doesn't do economic development like other states,’ says Wortham, who is also mayor of Sweetwater in Nolan County. ‘It has always been decentralized. So when you hear that another state gets a Toyota plant with 7,500 jobs, you have to compare that with what's happening with 10,000 jobs in Texas over 40 counties.’
Politically, the budget board proposal may have more to do with the state's fiscal crisis than with opposition to wind, says former state Rep. Allen Vaught, D-Dallas. Because Texas is a low-tax state, there are few ways to raise revenue to cut the $24 billion deficit, short of a sales-tax hike or the addition of a state income tax. Neither of those, Vaught says, is politically feasible.
That means the budget board is probably looking for ways to trim expenses in order to balance the budget, and it saw the school board property tax law as one way to do that. The state has to reimburse school districts that grant tax breaks for development. Texas spent $158 million from 2003 to 2009 and is responsible for another $1.9 billion for over the next two decades.
Dominick Giarratani, assistant director for government relations at the Texas Association of School Boards, hopes that the legislature will not adopt this proposal. The state's school districts are fiercely protective of their independence, he says, and the key roles that they play in their communities.
‘The property tax is a local function, and if school boards levy the property tax, they're in a better position to know how to spend it than the state,’ says Giarratani. ‘Besides, school boards don't tell the state how to spend sales-tax money.’
Also working against the budget board's proposal is a crowded legislative docket. The House and Senate have to not only close the budget gap, but also redistrict the state's congressional delegation, find a way to boost the state's underfunded transportation system and decide whether to legalize casino gambling. And they have to do it just 180 days before adjourning for two years.
‘Traditionally, this would be very hard to get passed,’ says Vaught. ‘It's the kind of thing that would be hung up in committee.’
Jeff Siegel is a freelance writer living in Dallas.
