Final Edition - Last Week in the Legislature
May 31, 2019 | Issue #20
By John Sharbaugh, CAE
Managing Director of Government Affairs
All good things must come to an end and the end for the Texas Legislature happened on Monday when the House and Senate adjourned “Sine Die,” meaning they do not plan to meet again any time soon. And Gov. Greg Abbott seems to agree, as he does not intend to call a special session. So, for this session, the work is done, at least for bills that made it through the process. Stats read as follows: 7,324 House and Senate bills introduced and 1,429 passed. That’s a pass rate of 19.5 percent, which is in keeping with what we have seen over the past several sessions.
Sunset – It’s Finally a Done Deal – Thanks to Our Volunteers
Abbott took his entire 10 days to do it, but he finally did sign the Sunset bill (HB 1520) last Friday evening. Thus, the Texas State Board of Public Accountancy (TSBPA) and the Texas Public Accountancy Act (TPAA) will continue for another 12 years. The licensed CPA profession continues in Texas unabated, at least until 2031. The odds of TSBPA and the TPAA not being renewed were slim, but in the legislature, you never know. More on that in a minute.
In addition to continuing TSBPA for another 12 years, the new TPAA includes several changes that TXCPA lobbied for as the process played out. The TPAA now conforms with the AICPA/NASBA Uniform Accountancy Act (UAA) and most other states on the issues of CPA firm mobility and the Resident Manager requirement for CPA firms.
TXCPA was also successful in having the new fingerprint-based background check requirement modified to exempt retired and disabled CPAs. And we were able to convince the Sunset Commission to defer on reducing the number of CPAs on TSBPA and going to a majority public member board. In the end, the Sunset Commission recommended, and the legislature adopted, another way to deal with the possible loss of the state exemption under the federal anti-trust laws. A new division within the governor’s office will provide the “active state supervision” that will help solve this issue for Texas and all its licensing boards that may have a majority of licensees serving on them.
All of this was possible because TXCPA has an effective advocacy program that is supported by many members who help us engage in the political process. To all our TXCPA Key Persons and Chapter Legislative Coordinators, thanks for your service and for engaging with your legislators and your chapters when we called on you.
To our CPA-PAC contributors: thanks for your donations. It’s your financial support that makes it possible for TXCPA and its chapters to contribute to the campaigns of candidates for the House, Senate and statewide offices. By supporting candidates who are business-oriented and who support the CPA profession, we strengthen our ability to tell our story on your behalf.
To our members who volunteer on our Legislative Advisory Committee and those who help us analyze legislation, thanks for your time and talent. While staff members can do a lot of the review work, it’s the technical expertise of our volunteers that helps us stay on top of tax, accounting and other issues that could affect our members or their clients.
Finally, to those of you reading this newsletter, thank you for taking the time. I know you all have busy professional and personal lives. Your commitment to staying informed on the legislative and political issues that are facing your profession is important. We need members who are willing to get involved and help us communicate our message on behalf of the profession. I hope I have been able to convey what was happening in Austin and what TXCPA was trying to do for its members. Thanks for reading.
Plumbers No More
I mentioned above that when it comes to the legislature, you never know what can happen. A vivid example of this took place this past week when the legislature failed to pass the Sunset legislation for the Texas State Board of Plumbing Examiners. The board will begin the process of winding down its operations, as its abolition is scheduled for 2020. The Sunset Commission had recommended that the board’s responsibilities be transferred to the Texas Department of Licensing and Regulation. Some legislators did not agree with that idea and in the process of arguing and disagreeing between the House and Senate on the right answer, the board was eventually discontinued when no legislation at all was passed.
And unfortunately, the Plumbing Board was not included in the Sunset “safety net” bill that the legislature normally passes, so that meant the Plumbing Board is headed to abolition unless the governor calls a special session to save it. Since the governor had to do that two years ago to keep the Texas Medical Board from being abolished, it didn’t seem likely he would make that call again for the plumbers.
On Monday, after the legislature ended, the governor tweeted out a note of thanks to the House and Senate saying that they had passed “legacy legislation that will improve the lives of every generation. See you in 2 years.” It sounds like the plumbers are probably out of luck. The door will soon be wide open for anyone who wants to call themselves a plumber, whether they know anything about the trade or not!
Some legislators are already encouraging local governments to take over the regulation of plumbing, since the state won’t be doing it any time soon. We may see cities and counties take this on to protect their citizens, but I doubt it will be covered uniformly across the state. So, now you will have to be observant about whether you live in an area where there are plumbing regulations or not. If you live in a community that doesn’t provide oversight, then you are on your own to try and figure out your plumber’s competency. And it is a little ironic that the same legislature that is regularly taking away authority from local governments would turn around and ask the locals to take on yet another responsibility.
It’s these kinds of things that make most lobbyists paranoid. As I said before, you never know what can happen in the legislative process. Sometimes even the best laid plans do not work out.
Part of the issue with the renewal of the Plumbing Board relates to the anti-licensing issue I have discussed before in this newsletter. There is a growing movement against licensing in this country. There are several organized groups that have made this issue their reason for being and licensing is popping up in states around the country, not just in Texas. While it wasn’t the only problem, the plumbers also faced that kind of opposition as they went through the Sunset process. The pendulum of opinion on this issue is swinging away from licensing and toward the market. This is a common trend within the legislative and political process. We go through periods where the public wants to eliminate government regulation and oversight … that is, until there is a major problem or catastrophe and then they want the government to step in and solve the problem. It’s not a new phenomenon. This is just the latest iteration.
That means organized professions like CPAs must remain vigilant to protect the license and the regulatory process that stands behind it. No one should assume that our current status is permanent. The licensed profession in Texas is now over 100 years old, but that doesn’t mean it will live forever. It must be nurtured and protected, and TXCPA plays a central role in that process on behalf of its members.
Today, they come for the plumbers. The question is who is next? Let’s make sure it is not CPAs.
The Big Three Celebrate
The “earmark” of this session compared to the last was the unity among the state’s “big three” of Governor Abbott, Lt. Governor Dan Patrick and Speaker Dennis Bonnen. The group set the new standard at the start of the session and by most observers’ accounts, they scored a success.
That doesn’t mean there weren’t any skirmishes this go around (the Plumbing Board fiasco described above being one example), but compared to the last legislature, the leadership was able to resolve their differences on the big stuff with a minimum of major warfare. We’ll just slide over that recommendation for an increase in the sales tax to offset property taxes that went nowhere in the legislature. But otherwise, it was by many accounts, a boring, but successful session.
The Big Stuff
The only bill the legislature must pass each session is the budget. This session, the House and Senate were able to negotiate a bill (HB 1) they both could support and they passed it last Sunday. It calls for spending $250.7 billion over the next two-year period. This marks a 16 percent spending increase over the 2017 budget the legislature adopted.
The House approved the legislation with one negative vote – by Rep. No – Jonathan Stickland (R- Bedford). The Senate approved the same measure unanimously.
Lawmakers expect to have an additional $10 billion to spend over the next two years compared with the previous budget cycle. Both chambers agreed to allocate $6.5 billion in new state funding for schools and $5.1 billion to buy down property taxes. State dollars supplement those local property taxes to pay for public school funding, so the state will be picking up a larger portion in this new budget.
Lawmakers did not spend any money from the Rainy Day Fund in this new budget, but they did authorize a record-breaking $6.1 billion from it to help fund the supplemental budget that they also adopted to cover underfunded expenses from the 2018-19 budget. Much of that allocation from the Rainy Day Fund will go to pay for large-scale infrastructure projects and Hurricane Harvey recovery costs. The balance will cover the traditional shortfall on Medicaid expenses. Once you factor in those additional monies in the supplemental budget, the increase from budget to budget drops from a 16 percent increase to around 11 percent. And then if you just look at the general revenue spending, the part that comes strictly from state taxes and does not include any federal dollars, the budget-to-budget increase drops to 11.4 percent and by adding in the supplemental budget, we are then down to 4.9 percent.
Who said legislators don’t know how to do creative accounting? Whatever numbers you use, this is a big increase from just a few years ago when Texas and the country were dealing with the effects of the financial crisis.
On the property tax reform front, the legislature ended up adopting a smaller limit on local taxing authorities than what they started the session promoting. The legislation adopted will limit local governments to a 3.5 percent increase before an automatic referendum of the voters would be required. For school districts, the limit is 2.5 percent. This issue is likely to come back in the next session.
The drum beat against property taxes has not ended. The challenge is to find a replacement. The idea of increasing the sales tax to lower property taxes didn’t fly this session. But if you don’t have a state income tax, your options are severely limited. Stay tuned for future developments on this front. Legislators will continue to hear from their constituents on this issue, so it will be hard for them to ignore it.
For a good overview of the new budget (HB 1), as well as the supplemental budget (SB 500), you can go to the Legislative Budget Board website for all the details. Here is their summary of the new budget (PDF).
Freedom for Lemonade Stands
My final “humorous” legislative issue of the session is the “Save Our Lemonade Stands Bill” (HB 234) that was passed last weekend. The Senate unanimously passed the conference committee version on Saturday. HB 234 blocks cities and counties in Texas from enforcing or adopting ordinances that stop children from selling lemonade, or other non-alcoholic beverages, while on private property or in public parks. The bill was sponsored by Rep. Matt Krause (R-Fort Worth) and makes it illegal to require kids under 18 to get a license or pay a fee to occasionally sell lemonade. To me, this is a perfect example of how the legislative process can work and be used to correct a problem. I don’t really know the back-story, but my guess is a constituent or interested party brought the issue to the attention of Krause, who then made it his goal to fix.
We tend to get hung up on the deficiencies of the legislative process over the debate about the major issues. But a lot of the legislating that goes on in Austin really relates to the “little stuff” that citizens, including businesspeople, have problems with and then ask their legislators to find a solution. These are the kinds of bills that redeem your faith in the system!