Jason Embry had a good article about the budget conundrum we’re facing in Texas during the next budget cycle, Because of shrinking revenue, Texas may need $15 billion to balance budget. Embry does a great job of pointing out how we got here – the tax swap of 2006 has never produced the money that was projected and created a structural deficit. And what the GOP leaders priorities are. It’s starts out showing how Lt. Gov David Dewhurst is trying to finagle state agencies, except health and human services and public education, into cutting their spending.
As compared with a year earlier, sales tax collections were down 14.4 percent in November, and those kinds of returns have hastened budget-cutting talk. But what’s really driving the conversation is a decision that lawmakers made in wealthier times to put property tax cuts at the top of the state’s permanent priority list.In 2006, facing an order from the Texas Supreme Court, lawmakers passed a one-third reduction in school property taxes for operations, committing the state to spend $7.1 billion every year to hold those taxes down. But the tax increases that lawmakers passed at the same time to replace that money — most notably a revamped business tax — produce less than $3 billion per year.
So every two years, the state has to pull more than $8 billion away from other priorities, such as public schools, universities or prisons, to pay the rest of the cost of property tax cuts. Doing so wasn’t too difficult when the state had surpluses, but now that they’re gone, the property tax cuts threaten to eat up any revenue growth the state sees, even though many homeowners never saw much of a decrease in their tax bills.
To meet the state’s commitment to hold down property taxes, to pay for an increasing number of people enrolling in public schools and colleges and joining Medicaid rolls and to replace the stimulus dollars used to pay for the current budget, lawmakers in 2011 might have to come up with $15 billion or more to balance the budget, which now totals $182 billion over two years.
It appears that Dewhurst’s main goal with these cuts isn’t, first to make sure the state has enough money to operate, but to make sure there is enough money to operate while protecting the tax swap from 2006.
Because the cost of keeping down property taxes isn’t going anywhere — in fact, thanks to an additional tax cut for small businesses that lawmakers passed this year, it’s getting more expensive — Dewhurst wants to tell agencies to trim their spending so lawmakers will have some money left over for the budget that they’ll have to balance in 2013. He’d like to get House Speaker Joe Straus to sign on to a letter instructing them to do just that.
The lengths they will go to save the 206 tax swap, at all costs, is bordering on ridiculous.
And even though it is the state’s effort to restrain property taxes that is causing much of the projected shortfall, that effort could result in higher property tax bills because the state will have fewer dollars to help school districts, community colleges and other forms of local government cope with cost increases, she said.
While some of the Capitol’s best minds are already taking a hard look at the budget shortfall, it’s not getting much attention so far on the gubernatorial campaign trail.
That is the definition of “the elephant in the room”. The tax swap is sinking the budget, but it must be protected at all costs. It’s extremely interesting that a tax that Dewhurst trashed shortly after it passed, going so far as to call for it’s repeal, is now doing anything he can to protect it. It would seem that any tax swap, that insures the wealthy in Texas don’t pay their fair share of taxes is worth protecting.
Here’s what Dewhurst and Hutchison had to say about the 2006 tax swap back in June 2008, (many good links that still work and provide good context for the situation):
U.S. Senator Kay Bailey Hutchison called the margin tax “an abject failure” in what most reasonable observers would characterize as a campaign speech.
Dewhurst has weighed in on the issue too, telling the Greater Austin Chamber that we ought to throw the whole thing out and go back to the old franchise tax.
Our elected “leaders” should be trying to find a way to fund our state budget that is fair and equitable, not doing everything they can to perpetuate a flawed tax swap that they knew was flawed when it was enacted. As Embry so correctly points out, none of the members of the Texas GOP running for election want to talk about the budget shortfall or the 2006 tax swap, for good or bad. Which leaves us to assume that they have all accepted the tax swap of 2006 as sound public policy going forward. If not they should say something fast about what their alternative would be.
But this is what is facing the GOP as they try and keep a hold on all of the levers of government in Texas. They been in complete control of Texas since 2003, but have had control of the state since about the mid-1990′s. This has been a GOP plan all the way, and voters won’t allow them to blame Democrats for this mess. Just the people they see in the mirror. They only have one answer to any financial problem facing the state of Texas – cut taxes. Where will they cut taxes in 2011 to fix the budget shortfall?