Sine Die. The legislative session is over. Now, Governor Rick Perry has called a Special Session to deal with adopting the federal redistricting maps as Attorney General Greg Abbott had requested.

So far the Governor has not opened the call to additional issues not completed, but he could add other topics like transportation funding.

The vast majority of the Chamber's joint legislative agenda with the City of McKinney was approved during the session, but the one significant disappointment is the lack of a long-term solution to create a funding stream for TxDOT to build and maintain roads. This issue should continue to be a major focus in the interim and leading into the next session. Transportation funding will remain a top priority of the next legislature.

The House resumed meeting for the special session on Monday, June 3 and the Senate resumed Thursday, June 6. The House Committee on Redistricting held public hearings on Friday, May 31, and Saturday, June 1.

The Select Committee on Redistricting has posted hearings for June 6 and June 12. Amendments are to be considered in Committee on June 12 and the bill could be considered on the Floor June 14.

Highlights from the session that relate to our legislative priorities:

STATE BUDGET

■  SB1 (Budget Bill) – The Legislature approved the $94.6 Billion 2014-2015 budget bill. Including federal dollars the budget is $197 Billion. A 3.7% increase over the previous budget.

■  It was sent to the Comptroller for certification and will be headed to Governor Perry’s Desk. The budget bill is the only bill that needed to pass the session and it was approved by a large majority of Texas legislators. The bill was part of a complicated budget compromise that involved a variety of bills including HB 1025 - a supplemental budget bill that includes $2 Billion from the Rainy Day Fund for a water infrastructure fund upon voter approval in November. The Rainy Day Fund is expected to have $8 billion remaining after legislators appropriate $4 Billion from the fund for water, the West explosion, the Bastrop Wildfires and other one-time uses.

WATER

■  One of our top legislative priorities is funding the state water plan. The combination of passage of HB4, SJR1 and HB 1025 will address our water issues and provide funding for water projects. SJR1 will go to voters in November.

■  Gov. Rick Perry has signed House Bill 4, which lays the foundation for meeting Texas' future water needs. HB4 provides for active, full-time governance at the Texas Water Development Board; creates a new funding mechanism to support water-supply project implementation over the next 50 years; and directs local, regional and state officials to prioritize projects to ensure efficient use of available resources.

 

TAX RELIEF FOR BUSINESS

■  We supported HB 500, the major piece of tax relief legislation. House Bill 500 offers $630 million in business tax relief to over 800,000 businesses in Texas subject to the franchise tax.

■  The bill permanently exempts businesses with gross revenues of $1 million or less from paying the margin tax. The current exemption is set to expire next year. The bill will help ensure that more than 143,000 small businesses will be free from any tax obligation regarding the franchise tax and won't have to depend on the legislature to renew the exemption every two years.

■  The bill also provides tax relief for all businesses subject to the franchise tax. For the next two years, all businesses subject to the franchise tax will benefit from a 5% tax rate reduction. This tax relief will be delivered without regard to the size of the business, industry class or number of employees.

■  Together, this proposal delivers $630 million dollars in tax relief back to businesses that employ hard-working Texans and makes our state a premier business destination.

■  Its biggest change, championed by state Rep. Harvey Hilderbran, R-Kerrville, allows businesses to deduct up to $1 million in expenses once they pass $1 million in gross receipts.

■  “It’s an extra plus for small business,” said Sen. Glenn Hegar, R-Katy, the Senate sponsor. “It really targets businesses with less than $3 million in gross receipts.”

■  Under the current law, the full tax takes effect once a company grosses more than $1 million. The new provision, in effect, phases in the tax for companies making more than $1 million in gross receipts.

■  The legislation also includes $81 million in targeted cuts for businesses treated differently than their competitors under current law.

■  The Legislature also approved $239 million in tax incentives for research and development. Companies may claim deductions against either their franchise or sales taxes.

■  Other incentives included $100 million to encourage investment in cable TV, Internet services and telecommunication equipment and $14.6 million for large data centers.

■  HB 800 authored by Jim Murphy passed both houses. It provides a Research and Development Tax Credit.

 

This will allow qualifying companies engaged in R&D in the state to claim either a sales tax exemption or a franchise tax credit (but not both) for equipment and materials used in research and development activities. With regard to the first option, a company would be able to take a franchise tax credit for 5% of the difference between the qualified research and development expenses incurred in the tax year on which the report is based and 50% of the average amount of qualified research expenses incurred in Texas during the previous three tax years (or 2.5% if the company has no research in the base period) up to 50% of the company's overall franchise tax liability, with an unlimited carry forward of unused credit. If a company elects the sales tax alternative, it could take an exemption on tangible personal property directly used or consumed in qualified research.

RENEWAL OF THE ECONOMIC DEVELOPMENT ACT

■  The legislature passed renewal of the SB 1647/HB 3390 act for eight years. This law provides local school districts the opportunity to offer tax breaks to businesses that provide jobs in a community.

■  HB 7 will allow many Texans to get a tax break on their electric bills after the Texas Legislature eliminated an $800 million dollar fund that was created to help low-income Texans pay for their electricity bills. Texans, who are a part of an electric co-op or a municipal electric provider never paid the fee, so would not receive the break.

■  Ensuring continued funding for the Enterprise Fund and the Emerging Technology Fund was another top priority. The legislature has approved continued funding for both programs.

TRANSPORTATION

■  Despite TxDOT’s request for $4 Billion to meet the growing demand for new road projects, budget writers only dedicated $850 million extra for TxDOT, with $450 million of that dedicated to counties affected by energy development.

EDUCATION AND WORKFORCE

■  Restoring Education Cuts from last session is one of our top legislative priorities. Nearly $4 Billion was dedicated to the Public Education Budget.

■  HB 5 – the major education reform bill also passed. Three major areas of HB5 include: graduation plans, assessment, and accountability.

■  There will be three graduation plans: Foundation (22 credit hours), Endorsement (24 credit hours), and Distinguished (26 credit hours).

The "Foundation" credits will include four English/Language Arts, three Math, three Science, three Social Studies, two Foreign Language, one Fine Art, one PE, and five electives.

Students will be allowed to earn "Endorsements" in one of five areas: Arts and Humanities, Science/Technology/Engineering/Math (STEM), Business and Industry, and Public Service.

 

The "distinguished" academic plan can basically be described as keeping closely in line with current law.

■  In terms of assessment, HB5 will reduce the number of required end-of-course exams from fifteen to five, provide transparency by requiring STAAR exams to be released to the public and Advanced Placement exams (SAT, ACT) can be used to meet graduation requirements.

Additionally, end-of-course exams will no longer count as 15% of a student's course grade – a direct response to concerns expressed from parents, teachers, and administrators.

Campus and district accountability will change with the implementation of HB5. Schools will be evaluated on more than just state standardized assessments. Now there will be at least three additional indicators of academic performance, including, but are not limited to: percentage of students graduating with endorsements or a distinguished level of performance; the number of students earning college credit; and the number of students earning workforce certificates.

Furthermore, HB5 will establish a three-category rating system which will evaluate schools on academic performance, financial performance, and community and student engagement. Local communities will be able to engage in the accountability process by requiring their districts to set goals and evaluate performance locally.

A key component to HB5 allows all high school graduates to be eligible to receive a TEXAS Grant and apply for admission to our public four-year universities. Importantly, current ninth and 10th grade students will benefit from this new public education structure.

For more information or to become engaged with our advocacy efforts, consider joining us at the Chamber's Government and Legislative Issues committee meeting on Friday, June 14 at the Chamber office at 8:15 a.m.