By Corrie MacLaggan
AUSTIN, Texas (Reuters) - Texas lawmakers sent Governor Rick Perry more than $1 billion in proposed business tax cuts shortly before the end of the biennial legislative session on Monday and the governor called a special session to address redistricting.
The tax-cut package - the final piece of which was approved by the Republican-majority legislature late on Sunday - includes an extension of a business franchise tax exemption for small businesses and a rate cut for businesses of all sizes.
Perry, a Republican, had called on lawmakers to pass tax relief for businesses. Thirty-five states are taking up tax reform in their current legislative sessions, according to a recent survey by the National Conference of State Legislatures.
On Monday, as lawmakers were wrapping up a session that began in January, Perry announced that a special session would begin Monday evening to consider adopting as permanent the interim redistricting plan ordered by a federal district court for elections for the Texas House and Senate as well as the U.S. House of Representatives.
"We can all be proud of the responsible steps made this session to invest in our citizens, fund water infrastructure, and build an even stronger foundation for the future of our economy and Texas families," Perry said in a statement. "However, there is still work to be done on behalf of the citizens of Texas."
Lieutenant Governor David Dewhurst, a Republican, said passing the franchise tax proposal "sends a clear message that we are committed to sustaining the country's best climate for job creation and economic growth here in Texas."
The legislation removes inequities and lowers the tax rate for more than 800,000 businesses, Dewhurst said.
Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities, criticized the tax cuts, in particular a sales tax exemption for businesses buying equipment for research and development.
"As always, it didn't matter what the question was. The answer was, ‘Let's cut taxes,'" said Lavine, whose organization advocates for low-income Texans. "It's well known that the best return on investment comes from pre-kindergarten through higher education. Who's going to be doing the research and development if we don't train our students?"
In addition to the business tax cuts, the legislature also approved about $300 million in electricity rebates.
The regular legislative session had a decidedly different tone than two years ago, when lawmakers faced a budget crunch and slashed spending.
This year, as the legislature convened, the state comptroller announced that lawmakers would have more revenue to spend than they did in the previous cycle thanks to higher-than-expected tax collections boosted by economic growth.
Texas lawmakers this year passed a two-year budget that restores cuts made to schools in 2011.
They also decided to ask voters this fall to approve $2 billion from the state's rainy-day fund to pay for a loan program for water infrastructure and reduced the number of standardized tests students would have to pass to graduate from high school.
Lawmakers did not pass a proposal pushed by Perry to ban late-term abortions, and conservative groups are asking the governor to add that and other anti-abortion measures to the special-session agenda.
The governor had called for the legislature to pass measures requiring drug tests for applicants for unemployment benefits - which lawmakers did pass - and for welfare, which they did not. The special session gives the author of the welfare measure, Republican Senator Jane Nelson, another shot at that proposal, she said on Monday.
A special session lasts no longer than 30 days and is limited to issues on the governor's agenda.
Before the end of the regular session, lawmakers sent the governor a bill that says students and teachers are allowed to say "Merry Christmas" and "Happy Hanukkah." They also sent him a sweet piece of legislation - a proposal to make the pecan pie the state pie of Texas.
(Reporting by Corrie MacLaggan; Editing by Ellen Wulfhorst, Philip Barbara, Barbara Goldberg and Bill Trott)