TSCPA Governmental Affairs

TSCPA Member named to Board of Accountancy

Donna Hugly, CPA and TSCPA member, has been appointed by Governor Perry to serve a 6-year term on the Texas State Board of Public Accountancy. TSCPA was proud to recommend Donna for this important position.

A partner in the Addison offices of Sanford, Baumeister and Frazier LLP, Donna has served on many of TSCPA's volunteer committees. She is a Past President of the Dallas Chapter.

TSCPA member Steve Pena of Georgetown has been re-appointed to the Board of Accountancy. Steve is a partner in Austin's Maxwell Locke & Ritter.

Governor Perry has appointed two public members to the Board as well. Click here for the press release.

Accounting and Licensing Bills Passed and Defeated

We’re done! The bills we wanted to pass have passed and the bills we opposed have died. While we are still watching a few bills along with the progress in franchise tax legislation, our primary objectives of the session have been met.

SB 228 by CPA Sen. Tommy Williams (R-The Woodlands), our primary legislative focus for this session should become law tomorrow with or without Gov. Perry’s signature, absent a veto, which we do not expect.

HB 1685 by Rep. Four Price (R-Amarillo) renewing the SDSI status for the Texas State Board of Public Accountancy (TSBPA), which we have also been actively supporting, passed the Senate yesterday and will be on its way to the governor shortly.

HB 1756 by CPA Rep. Phil Stephenson (R-Wharton) to eliminate peer review requirements for CPAs who prepare only compilation reports died in the House Licensing and Administrative Procedures committee Monday. We actively opposed this bill and are glad to see it rest in peace. It would have reduced quality controls and standards and place the public at risk for poor quality financial statements.

HB 1757, also by Stephenson, also died in the House Licensing committee. This bill never received a hearing because Stephenson agreed not to pursue the bill after we explained our concerns. The bill would have mandated that two solo practitioners be on the TSBPA at all times and would have eliminated the opportunity for CPAs in industry or academia from serving on the board.

HB 87 by Rep. Bill Callegari (R-Katy) died in the Calendars committee on Wednesday. While we tried to work with Callegari to modify the bill, the modifications did not eliminate all our concerns and we actively opposed the bill. This is the bill that would have weakened licensing enforcement, especially in the enforcement against the unauthorized practice of public accounting.

HB 2851 also by Callegari is the bill we suggested he pass instead of HB 87. We supported this innocuous change to agency rule development. The bill passed the House.

Another of our objectives was to be sure there was no sales tax on professional services enacted. No one even filed such a bill. I like it when it’s easy! This is one we will have to continue to watch in case there is a special session to deal with public school funding, or other revenue raising issues.

Proposal Would Tap Rainy Day Fund for $6 Billion

CPA Sen. Tommy Williams (R-The Woodlands), Senate Finance Committee Chairman, has offered SJR 1 to his committee today to establish constitutionally-dedicated funds for water and roads with initial funding of $6 billion from the Economic Stabilization Fund, commonly referred to as the Rainy Day Fund (RDF). The water fund would get $2.5 billion and roads $3.5 billion. Additional legislation would be needed to deal with the use of the funds.

HB 4 by Rep. Allan Ritter (R-Nederland) establishes a state water plan, and that bill is predicated on the $2.5 billion RDF funding. SJR 1 was voted unanimously from the committee, but some members indicated they might try to amend the resolution on the Senate floor to include public education funding. Sen. Royce West (D-Dallas) suggested that $2.5 billion be added, expressing the belief that public education was as important to the voters as water and roads.

Ever since Governor Perry suggested using the RDF for water and roads in his State of the State speech, legislators have embraced the idea. Then entered the budget cap dilemma. The Texas Constitution limits the growth of the state budget from one biennium to the next to the growth rate of the economy. The budget bill as passed by the House is about $600 million shy of the constitutional budget cap; the Senate version is a little over $1 billion below the cap. Expenditures from the RDF count towards the budget cap. By using a constitutional amendment, the budget cap issue is avoided. The proposal must be passed by a two-thirds majority in the legislature and must be approved by the voters.

CPA The Most Conservative Texan in Congress

TSCPA member U.S. Rep. Michael Conaway (R- Midland) has been recognized, along with Rep. Jeb Hensarling (R-Dallas), as the most conservative Texan in Congress according to the National Journal. “That places them in a five-way tie for fifth place in the whole 112th Congress,” according to the Houston Chronicle’s Texans on the Potomac blog.

What about the Senate? Sen. John Cornyn ranks as the second-most conservative senator. But remember, this is before Texas’ new Senator Ted Cruz was a member of Congress.

Would you favor franchise tax repeal?

Mention of the margin tax brings frowns to CPAs' faces. “It’s too complicated,” they bemoan.

TSCPA recommendations for simplification and consistency have been politely received by legislators but not enough of them have been interested in rocking the boat.

Small business taxpayers complain about the complexity, the inconsistency between taxpayers and the horror of paying the tax even when losing money. Big business, while not enamored with the tax, seem to be more content to leave it alone for fear of what might replace it.

Now that the tax has been declared constitutional and it is clear a business income tax would also be constitutional, some hope we could return to the “earned surplus” franchise tax model. This legislative session there is talk of reducing the tax and even repealing it; several bills have been filed to eliminate or phase out the franchise tax.

While meeting with a freshman legislator this week to talk about TSCPA’s recommendations for improving the tax, the legislator was more interested in repeal than in making changes. He wanted to know: “Would the TSCPA support franchise tax repeal?”

Would we? Would you? It’s a question that we have never discussed, and I’d like to get some feedback. Please enter your responses as a comment on the blog. Would you support repeal and perhaps a sentence or two about why or why not.

Are Tax Reductions in the Future?

In Gov. Perry’s remarks on the opening day of the session and in his State of the State address on Tuesday he suggested tax reductions were appropriate to return the excess revenues collected over the state’s budget expenditures. In the latest address he suggested returning $1.8 billion to taxpayers. He suggested that taxpayers go to a website he has created to opine as to which taxes should be reduced. The franchise tax (margin tax) is front and center among the considerations and the Texas Association of Business had made some specific tax reduction recommendations, most of which are related to the franchise tax.

Others suggest that there is no surplus in the state coffers, pointing to the need to restore education funding cuts, potential education funding required because of the school finance lawsuits underway, requirements to fund Medicaid for this year and the Medicaid enrollment growth anticipated over the next two years, not to mention funding needs for roads and water. Some argue that all of these needs overshadow any temporary over-collection of state revenues.

This environment will likely allow legislators to at least consider modifications to the franchise tax this session. Last session virtually all franchise tax legislation was DOA in the House Ways and Means committee; it appears that will not be the case this session. Will they do some broad strokes like making the $1 million revnue floor permanent or actually lowering the tax rate; or will they tweak the law to make it more understandable and consistent? They might look at the definition of cost of goods sold or consider allowing the deduction of payments to independent contractors as compensation. If they are open to suggestions, TSCPA has a list that includes changes in cost of goods sold, flow-through revenue exemptions and some changes that are specific to partnership taxation.

At least they are talking about franchise tax changes. We can hope for the best!

Federal Court Throws Out IRS Tax Preparer Regulation Program

The Federal District Court for the District of Columbia enjoined the IRS from enforcing its registered tax return preparer program. The program is being implemented in stages and includes testing, training and other regulations. The court said the IRS did not have statutory authority to implement the program.

The Journal of Accountancy has the details.

Lt. Gov. Dewhurst Appoints Senate Committees

Although Lt. Gov. David Dewhurst had already named Senate committee chairs before the session started, on Friday he completed the process by announcing the committee members.

Senators who had not been named as a committee chair were all named as a committee vice-chair. Three new senators were named as vice-chairs of some very significant committees: Larry Taylor (R-Friendswood) Business and Commerce, Kelly Hancock,(R-North Richland Hills) Economic Development, and Ken Paxton (R-McKinney) Transportation. The Education committee includes members who are more conservative than those serving last session, including new senators Campbell (R-New Braunfels), Paxton and Taylor.

So where does your senator serve?  Here’s the list.

Budgets Filed – Expenditures Reduced

Both the House and Senate announced their initial budgets which hold the line on spending. The budgets are substantially below the Comptroller's revenue estimates and the maximum expenditures allowed by the Texas Constitution. The budgets spend less money than the current biennium, clearly reflecting the conservative make-up of the legislature.

For more details read Despite Surplus, House and Senate Offer Lean Budgets in the Texas Tribune.

House Passes Rules

The House passed the rules for this session on Monday. There were a number of amendments offered by members but most did not pass.

Perhaps the most significant amendment that did pass was offered by Rep. Phil King (R-Weatherford). The amendment makes it more difficult for a bill to be killed on a non-substantive error. The amendment returned the House to a rule that was followed during former Speaker Pete Laney’s tenure who was last Speaker in 2009.

Other amendments were offered to make the House process more transparent. Some passed and some failed.

For a more thorough review of the process see House Rule Change Could Weaken Democratic Minority in the Texas Tribune.

Appropriations Bill to be Filed on Tuesday, Jan. 15

Rep. Jim Pitts (R-Waxahachie), House Appropriations Committee Chairman, announced he would file House Bill 1 on Tuesday. It's the first step for the House to “begin a discussion about Texas’ priorities,” said Pitts.

The numbers:

• $89.1 billion in general revenue; a total of $187.7 billion in all funds
• a $2.2 billion decrease from 2012-2013 levels
• it spends $3.7 billion less than the Constitutional Spending Limit and $5.5 billion less than is available under the Comptroller’s Biennial Revenue Estimate
• it covers the cost of projected enrollment increases in public and higher education for 2014-15
• it funds Medicaid for a full 24 months
• no money is appropriated for new grants to the Cancer Prevention and Research Institute of Texas

See the full press release here (PDF).

Senate unanimously adopts rules with no debate

The Senate adopted rules for the session on Wednesday by a 27-0 vote. The two-thirds rule was maintained without exception, so all Senate bills will need support from two-thirds of senators to reach the floor for debate. For the past two sessions there have been specific exceptions to the two-thirds rules called “Special Orders” to deal with voter ID legislation.

The new rules also changed how sunset bills will be assigned to committees this session. In past sessions all sunset bills have been assigned to the Government Organization Committee but this session they will be assigned to the appropriate subject matter committee.

Before the session started Lt. Gov. Dewhurst changed Sen. Judith Zaffirini’s chair responsibilities from Higher Education to Government Organization. This was described as a demotion by the press, but it was noted Zaffirini would still have significant influence because of the important sunset legislation scheduled for the session. Despite the new rule’s apparent dilution of Zaffirini’s influence, she supported the rule change according to a Texas Tribune article.

The House is not scheduled to take up session rules until next week.

Opening Day of the 83rd Texas Legislature

The 83rd Texas Legislature convened yesterday with appropriate pomp and circumstance. The so-called contest for the Speaker of the House was a non-event with challenger David Simpson (R-Longview) withdrawing and Joe Straus (R-San Antonio) being elected by acclamation. I only saw reports on one lawmaker who proudly and publicly announced he would have voted for Simpson had he not withdrawn. That doesn’t mean there weren’t others, but perhaps they saw no benefit in expressing opposition to the winner. Straus’s acceptance speech called for budget transparency and work on the state’s energy, water and transportation needs.

The Senate ceremony was mostly devoted to the selection and swearing in of Sen. Leticia Van de Putte (D-San Antonio) as the President Pro-Tempore of the Senate. In her acceptance speech Van de Putte called for restoration of education funding cuts and for a true spirit of compromise during the legislative session.

Both the Senate and the House will be adopting rules later this week. The Texas Tribune reports Lt. Gov. David Dewhurst stating that the Senate would retain the two-thirds rule (requiring two-thirds of senators to agree to bring a bill to the Senate floor) although some are still speculating that there may be some specific exceptions to the rule as there have been in the last two legislative sessions.

Gov. Rick Perry gave the same speech to both chambers in which he urged fiscal restraint and tax relief in light of the increased revenue estimates, pushed transparency in budgeting and suggested it was time to address infrastructure issues.

The trend of the session became a little clearer this morning when Perry, Dewhurst and Straus “announced in a press conference that they agree on maintaining an austere budget” according to the Dallas Morning News’ Trailblazer blog. Straus said work could still be done on the infrastructure needs while keeping fiscal discipline.

Comptroller Susan Combs estimates $101.4 billion in state revenue for the 2013-14 biennium

Just as articles appeared in the news today about how Comptroller Combs underestimated the revenue for the current biennium, Combs made her projections for the next biennium today. It breaks down like this:

• $101.4 billion available for general purpose spending
  • $8.8 billion will be the current year ending balance
  • $92.6 billion in net general revenue for the biennium
• $11.8 billion Rainy Day Fund balance
  • $8.2 billion balance at current year end
  • $3.6 billion added during the next biennium
• $208.2 billion total funds available for the next biennium, including estimated federal receipts of $112 billion

These estimates presume that the legislature does not use any of these funds in supplemental appropriations to fund the anticipated $5 billion Medicaid shortfall for the current year, or for anything else. The Rainy Day Fund balances are also predicated on the legislature leaving them alone. The Comptroller’s press release has more details, including a link to the actual revenue estimate report.

The Texas Constitution requires the legislature to appropriate no more spending than anticipated revenue, so the Comproller’s revenue estimate sets the maximum expenditures that can be budgeted for the 2013-14 biennium. Typically the Comptroller will revise the estimate later during the legislative session when she has a few more months of revenue collection data and more information to better project the Texas economic outlook.

NFIB Calls for Elimination of Margin Tax

The conservative makeup of the 83rd Texas Legislature seems to guarantee that there will be no new taxes or tax increases passed during the 2013 legislative session, but until now no one has suggested reducing taxes.

Three organizations are now talking about eliminating the much-maligned Margin Tax.  Sen. Craig Estes (R-Wichita Falls) has actually filed a bill (the only bill he has filed to date) to repeal the Margin Tax effective Jan. 1, 2014. The National Federation of Independent Businesses, the Texas Public Policy Foundation (TPPF) and the Texas Conservative Coalition Research Institute (TCCRI) are all calling for repeal of the tax.

Quitting cold turkey on Jan, 1, 2014 might be too ambitious for some. TPPF calls for a phase-out of the tax by 2018, starting by raising the minimum revenue exemption immediately from $1 million to $10 million. RCCRI suggests a seven- to ten-year phase out. The Texas Association of Business calls it a good idea, but questions whether the state can afford the $5 billion or more revenue loss.

For a more thorough discussion of the possibility, read the Austin American-Statesman’s article Eliminating business tax on the agenda?

A primer for legislative session

You can always count on the Texas Tribune for the latest state political news - that's why TSCPA is proud to be a sponsor.

The Trib just posted a solid analysis of what the legislative session - which starts tomorrow - might hold. Check it out here.

Legislative Dysfunction – Is Redistricting the Cause?

Thanks to Harvey Kronberg’s Quorum Report for calling attention to an article by Nate Silver, who according to Kronberg is “that rare breed of statistician who earned rock star status analyzing polls and predicting just about everything accurately in the last election.” While it seems improbable that even the most astute statistician can approach “rock star status”, it is clear that Silver’s analysis is once again astute and interesting. Harvey’s own description of Silver’s conclusions is that “redistricting has institutionalized legislative dysfunction.” This is not the first article ever written decrying the political polarization caused by redistricting. Anyone following politics closely is aware that redistricting pretty much determines which party will win which district for the majority of the legislative elections. Silver has the statistics to point out how bad it has become over the years.

For example, Silver points out that only 35 out of the 435 House of Representative districts were swing districts, that is districts where there might be a two party contest; that’s only eight percent! Harvey points out that in Texas it’s not the 7.9 million people that vote in the general election that count, but only the 1.1 million that vote in the Republican primary. That’s why there were only about a dozen genuine contested general election legislative races in Texas.

Polarization is likely the biggest factor in legislative dysfunction. The lack of genuine two-party elections leads to more and more polarization. Perhaps former Senator Jeff Wentworth’s continuous campaign for revising the redistricting process wasn’t such a bad idea after all. You can read Silver’s article here: As Swing Districts Dwindle, Can a Divided House Stand?

Broad Tax Relief Included in the American Taxpayer Relief Act - H.R. 8

While the headlines focused on the tax increases for the wealthiest taxpayers, the American Taxpayer Relief Act (probably named that because of the “relief” everyone felt when it was passed yesterday) is full of most of the tax provision extensions that many people wanted with hopeful anticipation. Texans will be glad to know that the federal tax deduction for sales taxes was extended, but just for two years through 2013. The Alternative Minimum Tax fix was made permanent, indexing the threshold income to inflation forever. The tax highlights:

• Top tax rates extended to 39.6% for taxpayers with taxable incomes over $400,000 ($450,000 for married couples filing jointly)
• Personal exemptions and itemized deductions are phased out for taxpayers with incomes starting at $250,000 ( ($300,000 for married couples filing jointly
• Capital gains and dividend tax rates are raised to 20% for those taxpayers with incomes above the top tax bracket threshold
• The estate and gift tax exclusion is set at $5 million, but the tax rate is increased to 40%

The Act also extends unemployment benefits for a year, but does not extend the payroll tax cuts. Physician reimbursement rates are once again saved from the automatic draconian cuts due to take affect yesterday. Sequestration, the supposedly automatic huge federal budget cuts were postponed until March.

There are numerous other tax provisions extended that were due to expire at the end of 2011 or 2012. For a more complete explanation of these changes, see this Journal of Accountancy article.

The Act also includes a provision that allows employees to convert 401(k) plans to Roth 401(k) plans. See the detail in this Investment News article.

Sunset Advisory Commission Recommends Renewal of SDSI

As previously reported, TSCPA representatives gave written and oral testimony to the Texas Legislature's Sunset Advisory Commission (SAC) supporting the renewal of SDSI (self-directed, semi-independent) legislation for the Texas State Board of Public Accountancy (TSBPA).   

TSBPA was one of the agencies that took part in the pilot project establishing SDSI, which allows a state agency to operate outside the legislative appropriations process. Since that time a number of other agencies have been approved for SDSI status. The removal of process redundancies and the legislative temptation to collect license fees without using those fees to administer the profession has proven successful. 

Today, the SAC approved the recommendation to renew SDSI legislation for TSBPA and the other two original agencies.  The next step will be to propose legislation to renew SDSI. The legislation must pass the full Texas Legislature and be approved by the governor for the renewal to become reality. TSCPA will support that legislation during the upcoming Legislative session which begins in January 2013.

TSCPA Member to Chair U.S. House Ethics Committee

Texas CPA Mike Conaway, U.S. Congressman serving the 11^th District centered in Midland was named chairman of the House Ethics Committee by Speaker John Boehner. 

In appointing Conaway, Boehner stated: “Mike has all the tools to be an effective Ethics Committee chairman: he is well-respected on both sides of the aisle; he’s led investigations of public officials in the past; and he understands the importance of both education and enforcement of the rules,” 

Conaway is not only a member of TSCPA, but is a former chairman of the Texas State Board of Public Accountancy and the National Association of State Board’s of Accountancy.  CPAs undergo continuing ethics training throughout their career so who better to chair Ethics than a CPA.  Congratulations to Congressman Conaway.  You can read more about the appointment in the Dallas Morning News and  Roll Call.

 

Texas Ranks as the Seventh Best State for Business

According to Forbes, Texas Ranks as the seventh best state for business activity. The Texas population is almost as large as the first six states combined. All other major population states rank lower than Texas, including New York #23, Florida #27, Ohio #33, New Jersey #36, Illinois #38, California #41 and Michigan #47. Virginia and North Carolina were the most populous states that ranked ahead of Texas at #2 and #4 respectively.

No Sales Tax Deductions for 2012?

In all the consternation over the federal fiscal cliff there hasn’t been much said about the deduction for sales taxes on individual tax returns. In case you have forgotten, the deduction expired in 2011. It has not been renewed for 2012, so as it stands today you can’t take the deduction on your 2012 federal income tax return.

Sen. Kay Bailey Hutchison has been the deduction’s champion for years, but if she can’t get it done by Dec. 31, 2012 it will be up to someone else. Brad Watson with WFAA reports that about 20% of Texans that filed income tax returns claimed the deduction in 2010 “across all income levels, especially the middle class.” Did you buy a new car this year? Were you counting on the sales tax deduction? You’d better call your congressperson. See Watson’s article here.

The Coming Legislative Session

Yesterday TSCPA sponsored a Grassroots Seminar in Austin for legislative volunteers. The program was to make CPAs aware of issues pertinent to the 2013 legislative session and provide suggestions and instructions on working with legislators. The program included presentations by two CPA legislators, Sen. Tommy Williams (R-The Woodlands), Senate Finance Committee Chair, and Rep. John Otto (R-Dayton), Vice-chair of the House Ways and Means Committee. TSCPA legislative consultants Jack Roberts and Rusty Kelley also provided insights into the November election and how its results might affect the upcoming session. Texas Tribune mavens Evan Smith, Editor-in-chief and CEO and Ross Ramsey, Executive Editor rounded out the session with a glimpse of both national and Texas politics.

Participants were treated to an excellent understanding of the state’s budget issues. You may have read that the growth in Medicaid could ultimately bankrupt the state and what we heard yesterday supported that concern. Over the last decade Texas budget growth has been in the 6-8% range while Medicaid growth has averaged 14%. That means all the state’s revenue growth is consumed by Medicaid expenditures. Reminds me of the Federal dilemma where all revenues are consumed by entitlement programs and the government has to borrow to pay for everything else.

Regardless of whether or not Texas participates in the Medicaid expansion of the Affordable Care Act, Medicaid is not sustainable on its present path. It was pointed out that although the feds promise to pay almost all the initial costs, the feds don’t have the money either, so they would have to borrow it. You can imagine how a group of CPAs reacted to all this good news.

State revenues are up in Texas thanks to economic recovery and a booming oil and gas industry. Gas severance taxes are 84% ahead of estimates and oil severance taxes are 48% ahead of estimates. Some even speculated that the Margin Tax might meet original expectations for the first time in 2012. Even so there are significant challenges. For example, enrollment growth in public education along with the Medicaid costs will consume 89% of the state’s revenues over the next two years. That leaves 11% to pay for everything else.

The good news for Texas, at least for the next biennium, is it appears the state is collecting sufficient revenues to be able to adopt a biennial budget without resorting to new taxes, which is a very good thing, especially since most of the legislators ran on tickets promising not to raise taxes. However, Texas revenues will have to increase or the state faces significant infrastructure failures in the not-so-distant future. We evidently have no money for new roads and barely enough to fix the old ones. We are facing some severe water shortages down the line if we don’t do something soon and the long range power generation outlook is questionable.

One proposal discussed yesterday was to increase vehicle registration fees by about $50. Evidently Texas has one of the lowest fees compared to other large states. This fee increase could raise enough funds to tackle most major city congestion problems. Another idea was to dedicate auto sales tax revenue to highway construction. It remains to be seen if this legislature will even consider such proposals.

What about education finance reform? There are six lawsuits underway against the state of Texas claiming the current education funding system is unconstitutional. Despite conventional wisdom that the courts will once again determine the system to be out of whack, some on the program yesterday thought this time it might be different. In any event, it is unlikely that the court’s decision, whatever it may be, will be rendered before the end of the 2013 session. School finance is so significant to the state budget, that it being in limbo is enough excuse for the legislature to not try to do any other major financial or budget reform. If the courts rule as expected by most, the question would be whether or not the governor calls a special session or they just wait until 2015 to reform the system.

The CPAs present were interested in potential tax legislation for 2013. Not much tax legislation is expected. Some thought there might be a few tweaks to the Margin Tax. With so many candidates winning election on a no-new-tax and no tax increase platform, most tax bills will be DOA. One bill has been filed to increase the franchise tax minimum revenue amount from $1 million to $5 million. That would exempt most (98%) Texas business from paying any franchise tax. While a number of legislators might like to lower taxes, the state’s fiscal picture makes that very difficult.

Governor Perry and Speaker Straus have both called for more budget transparency seeking to eliminate the time-honored practice of raising money for a specific purpose but not spending it, which helps balance the budget. There is about $5 billion in such funds (accumulated over about 20 years), so if transparency were restored all at one time the legislature would have to find another $5 billion to balance the budget. It was suggested that they might start with a bill that keeps the $5 billion from growing any larger.

On the operational side of the legislature, it was pointed out that half the House of Representatives will be freshmen or sophomore legislators and there will be six new senators out of 31, which is more at one time than anyone can remember. This means a lot of institutional knowledge on such difficult subjects as school finance reform has been lost and will likely result in some starts and stops throughout the session. All these new legislators also means a more conservative legislature.

Other than the budget (the only bill the legislature has to pass) what will be the hot buttons of the session? The items mentioned yesterday were Voter ID reprise, school vouchers, standardized testing, expansion of charter schools and higher education reform. Possible additional abortion control legislation is also a possibility.

Water concerns were mentioned above. One legislator is considering suggesting a tap tax: a small tax that would appear on your monthly water bill that might raise as much as $25 billion to be used to fund the existing water conservation plan. The water conservation plan was adopted a few sessions back but has never been funded. Another suggestion was to use some of the estimated $8 billion in the Rainy Day Fund to kick start the water plan.

Yesterday’s seminar was informative and entertaining. The presenters were knowledgeable and articulate. We will watch to see if they are also good prognosticators.

Where do you complain about train noise? Not to the Railroad Commission

I know all of our learned readers already know that the Texas Railroad Commission (RRC) has nothing to do with railroads, but instead regulates the Texas oil and gas industry. Evidently some Texans don’t realize this, and the Commission still gets complaints about train noise.

So why not just change the name to something like the Texas Energy Resources Commission? A similar name change has been suggested in several of the last legislative sessions, all to no avail. Utility companies complain that using the term “energy” would also confuse the public to think the RRC regulated public utility companies. One commissioner suggested tradition demands keeping the RRC moniker. Evidently there is more than tradition at stake as some sections of the Texas Constitution refer to the commission by name. Would we have to have constitutional amendments voted on by the public? Maybe the commission just has to put up with the train complaints.

Last session the Sunset Advisory Commission (SAC) recommended the name change along with a number of substantive changes, but the RRC sunset bill didn’t pass so the SAC has a new staff report out for this session. They have abandoned last session's recommendation that the commission be reorganized by eliminating the three elected commissioners and having one appointed regulator -- it’s that recommendation that likely caused the bill to stall last session. The current year staff report makes a number of recommendations, including:

• Limit political fundraising by commissioners: it's “hard to fully divorce contributions from decisions with tens of thousands of dollars donated every month,” said one witness
• Resign to run requirement
• Adopt recusal rules
• Require the use of the State Office of Administrative Hearings for contested cases
• Authorize a pipeline permit fee and ensure fees are sufficient to fund the Pipeline Safety Program
• Improve enforcement
• A better watch on oil pipelines and pipeline safety and construction
• End the commissioners marketing of propane
• More money for oil and gas clean-up

For more on the SAC report on the RRC check out this NPR article, which includes links to the full SAC staff RRC report.

iPads for Legislators

According to Chris Griesel, House parliamentarian, there were about 110 iPads in the House chamber by the end of the last session. This session House members will each receive 2 iPads and each committee one of their own.

The House website has also been upgraded so the public can track legislation on mobile devices. Griesel says this represents the next step in the Legislature’s technological development.

Read the full story in the Austin American-Statesman.

Governor Perry Appoints Chief of Staff to Supreme Court

Today Governor Perry announced the appointment of Jeffrey Boyd as Justice of the Texas Supreme Court effective Dec. 3, 2012. Boyd will serve the unexpired term of Justice Dale Wainwright who resigned at the end of September. Boyd currently serves as Perry’s Chief of Staff and previously served as the governor’s general counsel. Boyd as experience in both the Attorney General’s office and as a senior partner in the Austin office of Thompson and Knight LLP. Click here for the full press release.

Beware IRS Scam

Well, it’s not actually an IRS scam, but a scam that claims to be the IRS.

If you get an email from the IRS requesting personal or financial information, it’s a phishing expedition. According to the IRS “the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.”

Evidently the hackers and spammers are reaching to new heights with web sites that mimic the IRS website, and according to IRS “The phony web page looks almost identical to the real one.” The IRS has a whole web page devoted to warning taxpayers to beware of scammers and phony websites.

Check it out, I hope it’s real.

Legislative Budget Board Adopts $77.9 billion Spending Cap

This morning the Legislative Budget Board adopted a constitutional spending cap for the next biennium of $77.9 billion. The LBB accepted Comptroller Susan Combs projection that Texan’s personal income would grow at the rate of 10.7% over the next two years.

Budget Caps to be Set Today

The State of Texas has two constitutional limits on amounts that legislators may appropriate for the state’s biennial budget. The first, and usually most effective, limits the proposed budget to the estimated state revenue for the two-year period as determined by the State Comptroller. The second limits spending to the projected growth in the state’s economy, determined by the estimated growth in personal income. While it’s too early for the Comptroller’s revenue estimate, today the Legislative Budget Board (LBB) is meeting to set spending caps based on the estimated growth in personal income. Since the LBB uses estimates, it has a wide range to choose from.

According to the San Antonio Express News, “The Legislative Budget Board has received five estimates…ranging from 8.7 percent from the University of North Texas to 12.2 percent from Moody's Analytics. The state comptroller has offered a 10.7 percent growth rate.” With such a wide range the LBB has obvious flexibility in setting the limit. Various political factions are calling for lower or higher limits, and with the increased state revenues this limit might actually come into play this session. The last session the projected revenue limit was so low that the personal income growth limit was unimportant.

Governor Perry and some legislators think the constitutional limit needs to be revised, tying the limit to inflation and population growth rather than personal income growth. Evidently, at least in the past, this would result in lower spending limits. State Sen. Dan Patrick (R-Houston) has already filed a proposed constitutional amendment, SJR 10, to base the spending limit on inflation and population growth. Similar amendments have been filed in previous sessions, to no avail.

The current limit only applies to part of the state’s budget; it does not apply to federal funds nor to funds mandated by the state constitution. That means the limit only applies to about 41% of the total biennial budget of $173 billion. According to the Austin American-Statesman, Sen. Patrick would like to expand the limitation to all the budget funded by state revenues, but stops short of applying the limit to federal funds.

The budget battles are officially underway today.

TSCPA Testifies at Sunset Advisory Commission Hearing

A number of years ago the legislature initiated a pilot project designating the Texas State Board of Public Accountancy (TSBPA) a self-directed, semi-independent (SDSI) agency. This allows TSBPA to operate outside the legislative appropriations process, setting its own budget based on license and examination fees and requiring TSBPA to pay $700,000 per year into the state’s general revenue fund (GR). The state continues to exercise oversight through reporting, state audits and controling the funds through the State Comptroller’s office.

The pilot program authorizing SDSI is currently being reviewed by the Sunset Advisory Commission (SAC) to determine if the program should be renewed.  SAC staff recommended continuation of the program (PDF) with certain modifications, inlcuding some additional reporting to the state and the transfer of all administrative fines to GR. Since December 2011 all administrative fines levied by TSBPA have been transferred to the Fifth-year Accounting Scholarship fund.

TSCPA’s Chair, Fred Timmons and CEO John Sharbaugh sent a letter to SAC supporting the staff recommendations and immediate past-chair, Donna Wesling, testified on behalf of TSCPA supporting the SAC staff recommendations at a hearing in Austin yesterday.

The commission will be making a final determination on the proposal and will hold a decision-making hearing on December 18-19, 2012.