Taxing small tobacco; liquidating part of a trust

Sen. Jeff Wentworth’s concealed-handgun amendment got all the attention, but there were a couple of other noteworthy additions to Senate Bill 1581, the education-related fiscal measure that’s meant to generate revenue and savings to help fund the state budget for the next two years.
Senate Bill 1581 by Sen. Steve Ogden, R-Bryan, initially would have freed up about $30 million through the next two years by limiting advanced placement program fee subsidies and ending the award of early high school graduation scholarships. Students who’ve already been awarded the scholarships would have six years to use them from the date they were awarded.

But the Senate went further, adding a levy on smaller tobacco companies that Sen. Juan Hinojosa, D-McAllen, said would raise $50 million through the next two years. The levy would apply to products of companies that weren’t part of the state’s tobacco lawsuit settlement with large tobacco companies.

Hinojosa was careful to call the levy a “fee,” since tax measures must originate in the House. But Ron Hinkle, representing the Small Tobacco Coalition, said the proposal wouldn’t raise as much as Hinojosa suggested and that it wouldn’t pass constitutional muster because it would amount to a tax on just one segment of the industry. The vote was 24-7.

Proceeds from the levy would go to a tobacco endowment set up by lawsuit proceeds that supports health-related higher education institutions. Senators on Monday agreed to liquidate $100 million of the $420 million fund and distribute $10 million apiece to each institution.

That’s a scaled-down version of a proposal Ogden originally had that would have liquidated the entire endowment and allowed each institution to use the money as they see fit. The original proposal met with resistance because lawmakers said the endowment was meant to be a permanent method of generating income for the institutions.

The $100 million would help offset a proposed $320 million cut to health science centers’funding through the next two years.

“My opinion is it’s their money. We ought to just let them do what they want with it,” Ogden said, but he added, . “This was a good compromise.”

Sen. Judith Zaffirini, D-Laredo, who had objected to liquidating the fund, said, “That’s a much better alternative. I still would have preferred to provide $100 million more in” state general revenue instead.

The $100 million is what the institutions said was the bare minimum increase they needed to get by, according to the senators.