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Houston representative says GOP tax tricks robbing state’s poor, needy

Friday, March 11, 2011 by Kimberly Reeves

The House is considering a lot of ways to close the budget gap in the current biennium, and Rep. Sylvester Turner is not a big fan of some of them.


Local Rep. Dawnna Dukes (D-Austin) joined the long-time Houston Democrat in his objections to cutting electric assistance to the poor and the elderly in order to close a $4.3 billion budget gap in the current biennium. According to the Legislative leadership, that gap must be closed in the next couple of weeks, with some combination of cuts, deferrals or the use of some portion of the state’s so-called rainy day funds – no new taxes allowed.


Just to make the point clear, this is not the budget gap of the next biennium, which has been estimated to be anywhere from $15 billion to $27 billion. Instead, it’s the money that the state must find to close out the current budget, and members of a House committee are expected to do just that on Monday.


When the electric market was de-regulated in 1999, Turner added a provision that created the System Benefit Fund. Each month, electric utility users pay a fee that goes into a fund that supplements the utility bills of low-income and elderly residents of Texas. That fund raises approximately $144 million a year, far more than it ever spends, mainly due to its statute-driven funding formula.


What Republicans have done in the intervening decade is to use the fund as a cash cow to certify sufficient funding in various budgets, Turner said. With the assistance of Dukes and Rep. Craig Eiland (D-Galveston), Turner was able to point out that everyone with an electric bill pays a fee, that the fund is a healthy $650 million, and that cuts passed by the Public Utility Commission last month carved $76 million out of the fund, even beyond current required agency cuts.


Choices like that – shifting a fee to fund a budget deficit – was just another way for Republicans to dodge budget woes and keep their no-tax pledge, while still raking in money that belonged to the poor, Turner said. In short, they found a way to cut the deficit without ever labeling the revenue’s expected purpose.


“If it walks like a tax, if it functions like a tax, it is a tax,” Turner said.


Such a decision violates the budget principles Republicans and many of their colleagues pledged to follow when they entered the session, Turner said. It’s neither transparent nor honest nor is it the intended use of the money.


Turner has had emotional and angry moments in most recent Appropriations Committee meetings, but the System Benefit Fund has been near and dear to his heart for a number of sessions, and he is its frequent advocate. Turner told his colleagues that Republicans had come up with ways, session after session, to roll back the benefits of the fund and send less out the door to the poor. First, by cutting the program from year-round to five months a year, then by rolling back the percentage relief under the fund, from 17 percent to 10 percent.


Turner blamed Gov. Rick Perry for the loss of the $76 million in revenue, noting Perry appointed all three members of the commission that directed the decision to cut benefits last month. Perry’s top aides at the meeting, Ken Armbrister and Michael Morrissey, however, denied any such thing had occurred, speculating that PUC’s decision to roll back benefits was probably a board decision, based on input from agency staff on the issue.


PUC officials noted that the payout from the fund is generated from a formula that included current electric rates, the number of people affected, and the percentage of relief picked by the commission.


Because of that formula, only $31 million of the $76 million actually would fail to go out to the elderly and low-income residents this summer. The rest would have been raked back into the fund anyway under the formula. Turner told PUC officials at the meeting he was not impressed.


“You tell the governor I know the difference between rain and ‘other things,’ ” Turner said.


During discussion, Turner aligned himself as a “no” vote on the bill next week, if only for the System Benefit Fund issue.


“It’s a distortion, and I’m not going to let the PUC get away with it,” he said with his voice rising. “I may be outvoted, but I’m not going to sit here silently and act like it’s not going to hurt people out there on the street.”


Rep. Scott Hochberg (D-Houston) noted that a budget rider, shifting the percentage payment from 10 percent to 17 percent, was at the discretion of legislators. That option was confirmed as viable by staff from the Legislative Budget Board, giving Hochberg and Turner a way to restore funding.


Turner and the governor’s office also wrangled over the margins tax during the hearing. Turner said it was time to address the loophole in the current franchise tax, specifically the $1 billion a year the tax failed to bring in each year. Each year the tax fails to fund schools, it adds to the state’s deficit.


Rep. John Otto (R-Dayton) pointed out that wasn’t a loophole, per se. No one was getting away with anything that might be perceived as circumventing some aspect of state statute. Instead, it was a performance issue. Ken Armbrister, the Governor’s legislative director, agreed, saying the margins tax had underperformed just like every other tax in the state.

Turner angrily denied that claim, saying that lawmakers knew when they passed the margins tax in 2006 that it didn’t generate enough revenue.


“We knew, when we passed this, that essentially this was a hot check on Texans in this state,” Turner said. “The check that we wrote in 2006 was a hot check.”


Perry, Armbrister insisted, had no intention of signing a tax bill this session under any circumstances. New tax revenue would not happen. Without new revenue, the state is expected to carry a recurring $10 billion deficit into the next biennium, according to the Comptroller’s office.

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