Unnecessary austerity

Posted in Around The State, Commentary, Taxes, The Budget at 12:31 pm by wcnews

There’s been quite a bit of good news lately regarding the budgetary outlook for the next biennium, (2 year budget cycle), in Texas.  It’s pretty clear that we’re likely to have at leas a $5 billion surplus and bulging Economic Stabilization Fund, aka Rainy Day Fund.  Last sessions austerity budget, and the Comptroller’s suspect budget projections, are some of the reason for this. The rest is just because of ideology and greed.

But to understand the budgetary mess in Texas one has to understand the Texas revenue structure.  Texas gets the largest percentage of its revenue from the state sales tax and the federal government.  It also gets some from a flailing, if not failing, “margins tax” created by the great GOP tax swap scheme of 2006.  Where Texas does not get revenue from is a state property tax or a state income tax.  All property taxes are levied at the local level.

What’s key to remember is that if it wasn’t for the disastrous tax swap scheme of 2006 much of the austerity forced on education and social services by the legislature and Gov. Rick Perry could have been avoided. Via the CPPP.

The $27 billion revenue shortfall faced by the Legislature in 2011 was not solely the result of the national recession and the needs of a growing population. Roughly a third of this gap was due to decisions made five years before, when the Legislature required school districts to cut their property taxes, but failed to create new sources of state revenue to fully replace the foregone revenue, creating a $10 billion hole or structural deficit. This hole will appear in every state budget until the Legislature fills it with additional revenue.

What Happened?
In 2006 the Legislature required school districts to reduce their school property tax rates by one-third, but committed to replacing the foregone property tax revenue so that the school districts would maintain their total state/local revenue. To fund this commitment, the state reformed the franchise tax (now popularly known as the “margins tax,” for reasons explained below) and increased the cigarette tax. However, the new state revenue raised by these changes falls some $10 billion short in each biennium of replacing the property tax revenue given up by the school districts.

The reason it’s important to know all of this is because once this is understood it’s easy to see that what happened last session was not caused by any economic downturn but by ideology and was not done out of necessity.

And they might even have one more trick up their sleeve to try and get rid of the “margins tax” and continue harming the state of Texas. Texas could face new budget woes.

The Texas Supreme Court could blow a hole in the state’s budget if it finds the business tax unconstitutional, as pressed Tuesday in a lawsuit led by food giant Nestlé USA.


If the Supreme Court throws out the law, the scope of the court’s decision will determine if the state needs to quickly find another way to come up with some $4.5 billion annually or more.


Dick Lavine, senior fiscal analyst with the Center for Public Policy Priorities, said an adverse ruling would affect money “necessary to fund essential state services.”

No one knows how the Texas Supreme Court will rule on this. But if they did throw the tax swap out, it certainly would be a convenient excuse for the regressives in Texas to keep from re-funding public education next session.

According to a recent study there is an excellent opportunity to cut the number of uninsured Texans in half by 2014.

If Texas fully implemented the Affordable Care Act (ACA), including expanding Medicaid, the state’s uninsured rate could decrease by half or more in 2014, according to a study commissioned by Methodist Healthcare Ministries of South Texas, Inc. and authored by Dr. Michael Cline, associate director of the Hobby Center for the Study of Texas at Rice University, and Dr. Steve Murdock, former Texas state demographer and former U.S. Bureau of the Census director. The researchers found that every Texas county would see a drop in their uninsured rates and as many as 4.4 million Texans would gain health coverage.

In their study, summarized by the Center for Public Policy Priorities in a policy brief titled Choices and Challenges, Cline and Murdock used the 2010 U.S. Census American Community Survey to estimate the uninsured populations of Texas counties and then estimated three levels of potential impact the Affordable Care Act would have on Texas counties.

The benefits from that to Texas would be enormous. We have to start judging policies and proposals in Texas on how they will benefit poor, working, and middle class Texans first. Instead of through the prism of not hurting those at the top, like has been the case for far too long.

1 Comment »

  1. Eye on Williamson » It is almost 10 years since the GOP takeover of Texas said,

    October 24, 2012 at 2:24 pm

    […] list goes on and on. The Trans-Texas Corridor. The GOP tax swap scheme of 2006. In 2011, for the first time ever, enrollment growth was not funded in public education. They Cut […]

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