05.13.11

We’re still paying for the GOP tax swap scheme of 2006 – An 18 month budget & proration

Posted in 82nd Legislature, Around The State, Bad Government Republicans, Commentary, Education, Had Enough Yet?, Health Care, Public Schools, The Budget, The Lege at 11:11 am by wcnews

Yesterday, as several needed House bills were postponed/killed, the situation with our state’s budget added a few new wrinkles. Peggy Fikac does a good job of explaining part of it here, Texas schools, Medicaid broke by 2013? (Notice that the “past budget decisions” is the 2006 GOP/Perry tax swap scheme that created our state’s structural budget shortfall).

Cuts are planned because of the recession and past budget decisions that have left the state facing a shortfall of as much as $27 billion through the next two years. In addition to agreeing on a funding level for the overall budget – and finding the revenue to pay for it – lawmakers must agree on a school finance plan that would allow them to spend billions of dollars less through the next two years.

Otherwise, current school funding formulas would entitle school districts to existing spending levels, Pitts said. At those levels, under the House budget proposal, Pitts said the money would run out by February 2013 or, perhaps, months earlier.

“That means the schools cannot operate. The teachers will not be paid,” Pitts said.

The House proposal would give schools $8 billion less through the next two years than they would get under current funding formulas. The Senate proposal’s cutback would be half that.

A Legislative Budget Board staffer said in a memo that if education were underfunded and formulas were not changed, the LBB would propose spending money from the rainy-day fund for fiscal year 2013 to meet the gap. If the Legislature did not do so, the education commissioner would pro-rate state aid.

The House bill only would fund Medicaid through March 2013, Pitts said, falling $5 billion to $6 billion short in general revenue of covering caseload growth for the two-year fiscal period and slashing rates to health care providers, including nursing homes. Those facilities have said such drastic cuts would result in closures.

“So, when you come back next session, there will be no more funds as of March to fund Medicaid. And that is not just funding for medical services to people. … It will stop funding to your local nursing homes, to your local doctors and other medical providers of Medicaid services,” Pitts said. [Emphasis added]

The tax swap that created the structural deficit is the key to our current budget shortfall.  The House wants to defund public education by around $8 billion. Again, from what Lt. Gov. David Dewhurst said – “Dewhurst said the tax is underperforming expectations by about $4 billion per biennium, that gap is at the heart of the current budget shortfall” – we can deduce that Texas is at least $12 billion short since 2006. (We will have been through 3 bienniums, once the 2012-2013 budget is done,  since the schemes enactment).  More than enough to cover the $8 billion.

The other thing we must remember is that the GOP in Texas purposefully did this – defunded public education. Everyone knew this tax was bad in 2006, especially Lt. Gov. David Dewhurst.

In a visit with the Chronicle editorial board this week, Texas Lt. Gov. David Dewhurst devoted much of his presentation to touting the improvements to public education to be funded by the new state school finance plan, which includes an expanded business tax and reductions in school property taxes.

Dewhurst acknowledged the predictions of Comptroller Carole Keeton Strayhorn and the Legislative Budget Board that the revamped business tax and one-dollar hike in the levy on cigarettes may leave the state confronting shortfalls of nearly $25 billion over five years. According to the lieutenant governor, the plan will consume the current state surplus of $8 billion.

A plan he had called “revolutionary” shortly before that.

The worst part of this, obviously, is what will  happen to public education and Medicare if this “18 month” budget is passed.  Students, ISD’s, teachers, parents, sick people, the elderly will all be put in limbo until the next legislative session.  And we learn a new term “proration”, School finance bills are stalled in Texas Legislature.

If attempts to add school finance legislation as amendments fail, schools could receive their funding based on a proration provision, which means schools would maintain their current level of funding next year and into the following year until the state runs out of appropriated money, which some legislators estimate to be February 2013.

Schools would then have to make up the deficit locally — by using taxes, fund balances or other means — and would be repaid by the state when the Legislature meets again in two years.

“Districts need to know with some kind of certainty what their funding levels will be,” said Dax Gonzalez, spokesman for the Texas Association of School Boards. “You can’t staff and run a school with a promise like that.”

Ray Freeman, deputy director of the Equity Center, which advocates for poorer districts, said that the situation is not ideal but that the proration option could be better than the proposed school finance legislation, which he said would not fairly apply cuts to districts.

He said proration would at least maintain funding levels for districts temporarily while giving the Legislature time to meet in a special session to address funding issues properly.

“There are several issues that make people nervous about this and rightfully so,” Freeman said. “But if it could be done in such a way where those concerns are addressed before the second year, that could help.” [Emphasis added]

(Here’s a link to some Proration Issues.)  There are several problems with this latest scheme the Texas GOP is floating.  First of all who would believe any of the current elected Republicans would actually come back and approve continuing to fund education – at current levels – 18 months from now?  They won’t even spend the Economic Stabilization Fund, aka the Rainy Day Fund.

It’s hard to believe that after all the GOP has done this session to defund public education that they would continue to fund education at current levels.   It would certainly give the opposition, meaning Democrats, an easy issue to hammer the GOP with in 2012.  How serious the GOP is about an 18 month budget and proration we’ll find out in short order.

What we do know is that the GOP can’t figure our a way, amongst themselves, do fund their austerity budget. And they keep ignoring the easy money.  The truth is, it is because of  the failed leadership of this state over the last decade that we are in this mess in the first place.

12 Comments »

  1. Eye on Williamson » Held hostage said,

    May 16, 2011 at 11:00 am

    [...] for Texas.  It has devolved into an ideological battle inside the Texas GOP.  Which is why the 18-month budget that will keep current funding levels is likely not palatable for the GOP ideologues.  Late last [...]

  2. Eye on Williamson » Special Session caused by Perry, no more excuses for GOP, and an opportunity for Democrats said,

    June 5, 2011 at 2:04 pm

    [...] to sanction the use of the ESF to cover the massive budget hole created by his plan – the GOP tax swap scheme of 2006.  If the ESF would have been available many of the most brutal cuts could have been avoided.  The [...]

  3. Eye on Williamson » The results of the GOP’s austerity plan is becoming a reality at the local level – higher taxes or withering public education said,

    September 3, 2011 at 12:49 pm

    [...] This is the direct of result of all the legislative and executive officials (Perry, Dewhurst, Ogden, Gonzalez) that were overwhelmingly elected in 2010.  Of course the structural shortfall in our state budget was caused by the GOP tax swap scheme on 2006. [...]

  4. Eye on Williamson » Taylor and Hutto join lawsuit said,

    September 15, 2011 at 12:18 pm

    [...] Perry and the GOP passed a tax swap scheme in 2006 that is defending public education in Texas.  The GOP scheme created a multi-billion dollar annual structural budget shortfall.  And to cover for that in this past legislative session the GOP dominated legislature cut $4 billion from public education.  But Texas and Texans have never made fuding public education fair or a priority.  It’s reflected in the politicians that are elected, it’s reflected in the fact that public education has never been fully funded, and that we’ve never created a statewide finance system. [...]

  5. Eye on Williamson » Ogden to retire (again) said,

    September 20, 2011 at 10:38 am

    [...] the Senate Finance Committee include creating an ongoing structural budget shortfall as part of the Perry/GOP tax swap scheme of 2006. And shorting public education by $4 billion in the just passed, GOP diversions & austerity [...]

  6. Eye on Williamson » The surplus is tied to the revenue estimate said,

    October 6, 2011 at 11:06 am

    [...] during the 82nd regular session legislators were struggling to get through the budget process, the House and Senate were haggling over $8 billion. Now we find out we have a $7 billion surplus. Think about how much different the budget process [...]

  7. Eye on Williamson » Vote No on Prop 4 – the latest transportation scheme said,

    October 19, 2011 at 11:44 am

    [...] 2006, one of the recent tax schemes in Texas, statewide property taxes were lowered only to have property taxes increased at the local level. [...]

  8. Eye on Williamson » We have a revenue problem said,

    February 9, 2012 at 1:39 pm

    [...] problem at the national level. Texas has a revenue problem too. And it was created 5 years ago by a disastrous GOP tax swap scheme. This recently released policy page from the CPPP tells what happened, How to Fill the Hole in the [...]

  9. Eye on Williamson » Here comes the next wave in the assault on health care & publi education in Texas said,

    June 15, 2012 at 2:13 pm

    [...] only are privatization schemes like the TTC coming, there’s more.  Another tax swap scheme, like the one in 2006 that created an annual structural budget deficit, to finish filling up the bathtub. State Lawmaker [...]

  10. Eye on Williamson » Democratic success in Texas is tied to voters seeing government as on their side said,

    October 11, 2012 at 1:39 pm

    [...] is now seen as radical and a disqualifying stance for public office.  This was way before the 2006 GOP tax swap scheme that created an annual $5 billion structural shortfall and, n o matter how the GOP tries to spin it, before they cut $5 billion from public education in [...]

  11. Eye on Williamson » Do you remember how we got here? said,

    January 9, 2013 at 8:44 pm

    [...] 2006 The Lege, and Gov. Rick Perry, implemented a tax swap scheme that created a structural budget deficit in Texas.  They were able to paper over it until 2011, [...]

  12. Eye on Williamson » Big news on public education and health care said,

    February 4, 2013 at 5:56 pm

    [...] scheme current GOP leadership put into place in 2006 did absolutely nothing to fix the school finance problems. And, in all likelihood, only made them [...]

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