Latest Legislative Updates
78TH LEGISLATIVE SESSION OVERVIEW
This session will be remarkable if for no other reason than, for the first time since reconstruction, Republicans have a majority both Houses of the Legislature. In addition Republicans also hold every state-wide elected office. How this will impact the legislative process remains to be seen, but at least on the highest profile issue the Republicans have made their position clear, in dealing with a major budget shortfall they do not intend on resorting to a tax increase. The following is an overview of the issues facing the legislature which may have an impact on the restaurant industry. The last two issues are specific to TRA’s legislative agenda.
APPROPRIATIONS. According to the state comptroller's estimate, the 78th Legislature will face a 9.9 billion budget shortfall for fiscal 2004-05, representing the differences between available revenues and the amount needed to continue to pay for existing programs. As in prior sessions, the main budget drivers will be education and health and human services (HHS) spending. Growth in the number of Medicaid recipients and in the costs of program elements such as prescription drugs will drive the HHS budget, along with Children's Health Insurance Program (CHIP) costs. Other big-ticket appropriations issues may include continuing funding for the school employees' health insurance program created in 2001, paying for the state plan for reducing air emissions, and funding Gov. Rick Perry's proposal for a trans-Texas network of transportation corridors. The Legislature also may consider tightening constitutional limitations on the growth of state spending and changing the Constitution to require a larger majority to enact new or increased taxes.
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TAXES. The Legislature likely will consider modifying the Tax Code to bring Texas into compliance with the recent multistate agreement on simplifying and standardizing administration of state sales and use taxes, aimed at increasing collection of use taxes by out-of-state businesses, especially for Internet transactions. Lawmakers also may consider applying the sales tax to real estate transactions or broadening the sales-tax base to include more professional services. Some may propose increasing taxes on cigarettes and other tobacco products, liquor, soft drinks, snack foods, and/or motor fuels, and possibly dedicating the revenue to specific programs. Expansion of the tax-exempt items sold during the August sales-tax holiday also may receive consideration.
Proposals may arise to amend the law that allows Texas corporations to create out-of-state subsidiaries and form partnerships with them in order to minimize corporate franchise-tax liability. Some also may propose expanding the tax base to include entities such as partnerships, proprietorships, and associations.
In regard to local property taxes, lawmakers may consider requiring companies that fail to report or "render" their business personal property to county appraisal districts (CADs) to pay a percentage of the unreported value of that property. Some may propose requiring disclosure of real estate sales prices to CADs; changing the composition and selection of CAD boards of directors and appraisal review boards; changing the conduct of the comptroller's annual Property Value Study; expanding property-tax exemptions for the elderly and disabled; and modifying the tax exemption for travel trailers. Proposals also may arise to establish state oversight of local economic development sales taxes or to restrict use of the funds.
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SUNSET. The Sunset Advisory Commission has proposed restructuring the Texas Department of Economic Development (TDED) by eliminating its governing board and transforming the agency into a business and tourism promotion program within the Governor's Office. Related proposals may involve transferring TDED's business incentives program to the Comptroller's Office and establishing a council to coordinate tourism efforts across state agencies. Sunset review of the Texas Workforce Commission (TWC) may involve proposals to change the structure of the three-member commission, create an Office of Employer Initiatives, and require TWC oversight to correspond more closely to the needs of local workforce development boards. Lawmakers also may consider specifying the duties of agencies that are members of the Texas Council on Workforce and Economic Competitivenes.
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SCHOOL FINANCE. A major issue will be whether the Legislature should attempt to modify the public school finance system that requires property-wealthy school districts to share part of their revenue. Lawsuits filed in 2001 by school districts and taxpayers alleged that because so many districts have reached the statutory cap on local maintenance and operations (M & O) taxes, the current system imposes an unconstitutional state property tax. As more districts reach the cap, many say they have little choice but to cut programs, reduce staffing, and eliminate local tax exemptions. Solutions could involve a significant infusion of new state dollars into the public school system; increasing local taxing capacity by raising the M & O cap above the current level of $1.50 per $100 of property value; and/or increasing local borrowing capacity by raising the limit on the Permanent School Fund's bond guarantee program. Some may propose automatically rolling forward the state's allotment to help pay local debt for school facilities rather than leaving those funds contingent on the biennial appropriations process.
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SMOKING. The Legislature may consider imposing state-level restrictions on smoking in public areas that would preempt local regulations, possibly resulting in less stringent regulations in some areas.
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DWI. Some lawmakers may push to establish sobriety checkpoints at which law enforcement officers could check motorists for sign of intoxication. Other proposals could include creating stiffer penalties for motorists who refuse to take breath tests when asked to do so by law enforcement officers and changing the system that allows a driver whose license has been revoked for driving while intoxicated to receive an occupational license to drive under restricted conditions.
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GAMBLING. The Legislature may consider revising the laws governing electronic gambling machines, often called eight-liners, and legalizing casino-type gambling centers run by Texas Native American tribes.
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UNIFORM APPLICATION OF THE MINIMUM WAGE. The state minimum wage applies only to those persons who are not covered under the federal minimum wage provisions of the Fair Labor Standards Act. The state’s policy of acceding to the federal minimum wage when a person is subject to the Fair Labor Standards Act insures stability in employment, provides uniform application of the minimum wage and secures the competitive position of the Texas relative to other states.. Local regulation of wage rates in private employment, unrelated to public contracts, which applies to persons subject to the federal minimum wage, frustrates uniform application of the minimum wage.
A few years ago in Houston, a proposal to increase the minimum wage to $6.50 failed by a three to one margin. Austin and San Antonio have debated the issue, but have taken no action on raising the minimum wage. While no local minimum wage proposal has yet passed in Texas, the potential ramifications of local minimum wages varying from place to place throughout the state are profound.
For example, the salary of any minimum wage employee who works in various locations, such as landscapers, janitorial workers and delivery drivers, would have a wage computation requiring differing rates for the time spent in each jurisdiction. Restaurants, dry cleaners and retailers on one side of a jurisdictional line would be at a competitive disadvantage to those on the other. Businesses seeking to locate in Texas would have to consider the possibility of a local wage rate; and, if a jurisdiction did adopt a different rate, further economic expansion from job producing activities would be stifled.
The minimum wage should be uniform across the state, for reasons of simplicity and basic competitiveness. TRA will attempt to pass legislation to provide for the uniform application of the federal minimum wage in private employment, unrelated to public contracts, at both the state and local level
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LOCAL OPTION ELECTIONS. In 1843 the Republic of Texas had passed what may have been the first local-option measure in North America. In 1895, fifty-three of the 239 counties were dry, and another seventy-nine counties were partly dry under local option. There are now 254 counties in this state with more than 1000 JP precincts within those counties and 1200 incorporated cities of which 105 are located in more than one county. Partly dry counties can be wet for some products categories and not others and can be wet or dry for off-premises or on-premises sales. They can also be "wet" in some parts and completely "dry" in others.
Since much of Texas is dry for on-premise consumption, private clubs have proliferated in the dry areas as people seek a means to provide for the service of alcohol. These clubs are cumbersome and expensive to operate, however the only alternative is to conduct a local option election to make the area “wet.”
The words cumbersome and expensive apply equally well to local option elections. The statutes governing these elections are different from those governing any other type of election process in Texas. The code seems to work on the philosophy that it should be as difficult as possible to allow the people to vote on this issue.
For example, the Alcoholic Beverage Code requires that all the elements of the petition be in the actual handwriting of the signer (i.e. name, address, voter registration number) while the Election Code only requires that the signature be in writing. The time limit for collecting signatures is 30 days, as compared to 180 in the Election Code. The number of signatures required (35% of registered voters) is virtually impossible to collect in 30 days. And people living in cities that lie in multiple counties cannot even hold an election except on mixed beverages sales in restaurants.
We have attempted, sometimes successfully, sometimes not, to petition for local option elections in a few small cities. The cost ran over $100,000 for each attempt. The cost in a high population area, like Dallas, would be astronomical. If the local option election provisions of the Alcoholic Beverage Code were conformed to the provisions of the Election Code it would make it possible to petition for an election in most areas of the state.
The U.S. Constitution protects the right to petition government. Recent Federal Court opinions have made it clear that the state may not make petitioning government so difficult as the be impractical. Some of the burdensome requirements contained in the Alcoholic Beverage Code, such as needing a voter registration number to sign a petition, have specifically been stuck down in cases dealing with the Election Code. In light of these past decisions, TRA has filed suit challenging the constitutionality of the burdens placed on petitioning for a local option election.
In addition to the court challenge, TRA’s government affairs staff has drafted legislation which would conform the process for local option petitions to those in the Election Code, making that process the same as it is for virtually all other petitions in the state. If this legislation is passed, it will mean that ordinary citizens could undertake the petition process without needing to expend hundreds of thousands of dollars just to place the issue on the ballot.
This reform is especially important as suburban residents take over rural areas that have been dry, but whose residents now wish to go wet. It is ironic that the very population growth that brings about the need for an election also makes it more difficult. Past efforts at reforming the petition process have been met with resistance by entrenched liquor interests who prefer that customers in these dry areas come to them at their current locations rather than opening themselves to competition in newly wet areas.
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