[Lt. Governor of Texas]
Post Office Box 12068
Austin, Texas 78711
David Dewhurst

FOR IMMEDIATE RELEASE                            
May 12, 2005  

Senate Passes School Finance Reform Package
Legislation to Put Education of Texas Children First, Reduce Local School Property Taxes
AUSTIN—Lt. Gov. David Dewhurst praised the Texas Senate today for its passage of a school finance plan that will dramatically improve the quality of education while reducing local school property taxes and closing loopholes in the business franchise tax. The Senate approved both HB 2, the education reform component of the package, and HB 3, the finance reform component, on Wednesday.
"After two years of hard work, the Senate's goal to dramatically improve our public schools, increase academic and financial accountability in education, increase teacher pay, and provide meaningful property task relief for hardworking Texans will soon become a reality.
I want to compliment the Senate for the productive debate we had, and most of all, Senator Steve Ogden, our Senate Finance Chair, and Senator Florence Shapiro, our Senate Education Chair, for their invaluable leadership in ushering forth reform," Lt. Gov. Dewhurst said.
HB 3, approved by the Senate in the pre-dawn hours of Wednesday, restructures the way that Texas pays for public education. Faced with a court order to increase funding for education, and a current system that relies too heavily on local school property taxes and a business franchise tax riddled with loopholes, the Senate crafted a bill that will close the Delaware and Geoffrey loopholes in the franchise tax and reduce local school property taxes by 27%. By closing loopholes, the plan broadens the franchise tax base, and extends a lower rate to all Texas businesses—effectively treating all businesses equally under state tax law. Texas businesses will have a choice of paying either a low-rate revised franchise tax or a payroll tax. To protect small businesses, the bill maintains the current $150,000 no tax due threshold and will exempt sole proprietorships.
Through the Senate's reforms, businesses and homeowners will see their local school property taxes reduced from $1.50 per $100 valuation to $1.15 in 2006 and $1.10 in 2007. The plan swaps high property taxes for a half cent increase in the state sales tax rate. To protect the neediest Texans, the bill offers a 20% sales tax rebate to Lone Star Card holders. As approved by the Senate, HB 3 will increase taxes on alcoholic beverages by 25%, and increase taxes on cigarettes by 75 cents per pack.
After approving HB 3, the Senate returned Wednesday afternoon to pass a bill aimed at dramatically improving the quality of education in Texas schools. The plan calls for adding nearly $3 billion more to public education, while increasing financial and academic accountability, and raising standards for students to achieve. To help recruit and retain top-quality teachers, the package increases teachers salaries, restores a $1000 health insurance stipend for teachers, and introduces incentives to not only attract teachers to high-demand subject areas, but to encourage best practices in Texas classrooms.
A primary objective of the Senate education reform bill is to better prepare Texas students for college and to compete in an increasingly-global economy. HB 2 introduces new accountability standards that will for the first time measure schools on their ability to prepare students for post-secondary success. By providing school districts with greater choice in choosing textbooks or technology, the bill works to further integrate the tools of the 21st century into the classroom.
Addressing Texas' large Hispanic population, HB 2 increases funding for students with Limited English Proficiency and bilingual teacher certification. To help Texas' struggling schools, the bill provides additional assistance to help failing schools achieve higher standards. If a school fails to reach adequate standards, HB 2 calls for the Texas Education Agency to take over the school and allow students to transfer to another school.
"In the days leading to the House-Senate Conference Committee, I look forward to working with the House leadership to ensure the Senate's priorities reflected in HB 2 and HB 3 remain intact in the final bill we pass," Lt. Gov. Dewhurst said.
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