The McKinney Chamber of Commerce and City of McKinney have a legislative partnership to address common interests of the City and business community to positively impact the future growth and development of the City of McKinney and its business environment. As part of the partnership, a joint legislative agenda is adopted and a legislative consultant is employed in Austin to manage priorities. The legislative partnership provides oversight by a committee made up of a subset of the City Council and Chamber Board of Directors. Current committee members include: Mayor Brian Loughmiller, Council member Ray Ricchi, Immediate Past Chamber Board Chair Raj Bhargava, Chamber Advocacy Sector Chair Michael Puhl, City Manager Jason Gray and Chamber President Jodi Ann LaFreniere Ray.
We are pleased to report that a vast majority of our joint legislative agenda has been approved by the legislature this session. One disappointment however, is the lack of a long-term solution to create a funding stream for TxDOT to build and maintain roads. This issue needs to continue as a major focus during Special Session 2 and leading into the next session to push transportation funding as the top priority. The legislature filed over 6,000 bills this session with 1,400 measures becoming law.
BUDGET – The Legislature approved SB 1, the $94.6 billion 2014-2015 budget bill, with federal dollars the budget is $197 billion budget which means a 3.7% increase over the previous budget. 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.
REPORT ON OUR JOINT LEGISLATIVE PRIORITIES
One of our top legislative priorities is funding the state water plan. The combination of passage of HB 4, SJR1 and HB 1025 will address our water issues and provide funding for water projects. SJR1 will go to voters Nov. 5. H201 TEXAS, a coalition that will include chambers of commerce, energy companies, business and others – along with a push from the state’s top leaders in a campaign to win voter approval for the measure.
Gov. Rick Perry has signed House Bill 4, which lays the foundation for meeting Texas' future water needs. HB 4 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.
STATEMENT BY GOVERNOR PERRY ON WATER FUNDING
"Water is an essential part of everyone's life, and ensuring adequate supplies means continued job creation, stronger communities and healthier families for decades to come," Gov. Perry said. "HB 4 will help secure our water supplies for generations, even through rapid population and economic growth, by creating new funds that will support local and regional projects and lower the cost of issuing bonds for much-needed water projects."
HB 4 will ensure Texas has a reliable water supply for the next 50 years by promoting conservation and innovative reuse. With voter approval of SJR 1 this fall, this $2 billion investment will fund up to $30 billion in projects over the next 50 years. These measures will help address the increased demand that population growth will have on our water needs now and into the future.
HB 500 – Franchise 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 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 tax 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. The committee substitute for House Bill 500 offers business tax relief by making permanent the small business tax exemption, reducing the rate by 5%, and limiting the tax’s impact in upcoming years.
Together, this proposal delivers $630 million in tax relief back to businesses that employ hard-working Texans and makes our state a premier business destination. HB 500 would cut the tax rate for the franchise tax, commonly called the margins tax, by 2.5 % in 2014 and 5 percent in 2015. The second year tax cut depends on the availability of state funds. The bill also makes permanent a $1 million exemption for small businesses that have less than $1 million in gross receipts. Its biggest change allows businesses to deduct up to $1 million in expenses once they pass $1 million in gross receipts. 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.
Research and Development Tax Credit – This bill is part of our legislative agenda for R&D tax relief.
HB 800 authored by Representative Jim Murphy passed both houses and is related to a sales and use tax exemption and a franchise tax credit related to certain research and development activities. HB 800 allows qualifying companies engaged in research and development, in the state, to claim either a sales tax exemption or a franchise tax credit (but not both) for equipment and materials used in R&D activities. Regarding the first option, a company would be able to take a franchise tax credit for 5% of the difference between the qualified R&D 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.
SB 1647/HB 3390 – Renewal of the Economic Development Act – The legislature passed renewal of the Economic Development Act for 8 years. This law provides local school districts the opportunity to offer tax breaks to businesses that provide jobs in a community.
HB 7 – Many are calling this tax relief as part of the Perry tax relief package. HB 7 will allow many Texans to get a tax break on their electric bills after the Texas Legislature eliminated an $800 million fund that was created to help low-income Texans pay for their electricity bills. They money was never used for its intended purpose and has been used to balance the budget in previous years in what some call an accounting gimmick. Texans, who are a part of an electric co-op or a municipal electric provider never paid the fee and would not receive a refund.
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. No bills were passed that would significantly hinder the definition or use of 4A/4B sales tax revenue.
Despite TxDOT’s request for $ 4 billion to meet the growing demand for new road projects, budget writers only dedicated $850 million in additional revenue for TxDOT, with $450 million of that dedicated to counties affected by energy development.
SJR2 – The legislature will try to pass this again in the second Special Session. In order to address the need for transportation funding, lawmakers will again consider a proposal that asks voters to approve an amendment to the state constitution. This amendment would allocate money, from oil and gas production taxes above the net amount received in 1987, to both the State Highway Fund and the Economic Stabilization Fund (Rainy Day Fund). Currently 25% of the money from those taxes goes into General Revenue, while 75% is allocated to the Rainy Day Fund. Under the new proposal, 25% would still go to General Revenue, but the remaining funds would be split between the Rainy Day Fund and the State Highway Fund. This diversion of funding to the State Highway Fund would only occur if the amount in the Rainy Day Fund remains above a certain level.
Restoring Education Cuts from last session was one of our top legislative, nearly $4 billion was restored 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 is best described as keeping closely in line with current law.
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 Advanced Placement exams (SAT, ACT) 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. There will be at least three additional indicators of academic performance including, but 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. Current ninth and tenth grade students will benefit from this new public education structure.
Additionally, more money was dedicated to higher education this session.
The topic of charter schools was not addressed in our legislative agenda, however, for the first time since charter schools were authorized in 1995, there will be new room for the privately managed public schools to expand in Texas. Legislators also gave the Texas Education Agency greater authority to crack down on low-performing charters.
Healthcare remains a major source of confusion for Texans and Americans alike. The full impact of the federal legislation is not yet known. The Texas Legislature decided against any Medicaid expansion and passed legislation requiring drug screening for unemployment benefits.
AFTER THE SPECIAL SESSION:
A state district judge in Austin found that the state’s financing scheme for public schools is unconstitutional. His final ruling has not been issued, and attorneys on both sides expect an appeal to the Texas Supreme Court. Depending on the content and timing of the high court’s ruling, lawmakers could be forced to return for a special session before their regular session in 2015 to revise the budget.
About the McKinney Chamber of Commerce
The McKinney Chamber of Commerce is an advocate for the McKinney business community and proudly serves as the unified business voice of McKinney. The McKinney Chamber of Commerce proudly serves over 1,200 member businesses representing over 39,000 employees throughout the North Texas region. With a rich heritage of leadership and collaboration, the Chamber works in concert with the City of McKinney, community partners and the corporate community to promote, advocate for and expand business, and earned its four-star accreditation with the U.S. Chamber of Commerce. As publisher of McKinney Magazine, McKinneyOnline and McKinneyChamber.com, the McKinney Chamber markets the community’s advantages as the foremost location for doing business.
McKinney, Texas, is unique by nature. As one of the fastest-growing cities in the U.S., McKinney has a current population of nearly 141,000. Incorporated in 1848, the city is located 30 miles north of Dallas and is the county seat of Collin County. McKinney offers rolling hills, lush trees, a historic downtown square and unique neighborhoods and developments. The city ranks No. 2 on the Money Magazine Best Places to Live list for 2012. Visit the city’s website at mckinneytexas.org.