09.29.11

2012 revenue estimate for Texas will be “Flattish, dedicated funds trickery

Posted in 82nd Legislature, Around The State, Bad Government Republicans, Commentary, Had Enough Yet?, The Economy, The Lege at 11:09 am by wcnews

“Flattish”, that is the word used by a member of Texas Comptroller Susan Combs staff used at a House Ways and Means Committee hearing yesterday, State revenues through August will be ‘flattish,’ official says.

Some experts say Texas tax revenues must zoom far above forecasts, if we’re to escape another miserable budget session in 2013. But the state’s leading forecaster on Wednesday offered little hope that will happen.

“The year of ’12 is not going to be a great recovery year,” John Heleman, chief revenue estimator for the Texas comptroller’s office, testified at the House Ways and Means Committee. He was referring to the fiscal year that began this month and ends Aug. 31, while answering a question from Kerrville GOP Rep. Harvey Hilderbran, the panel’s chairman.

“It’s still going to be flattish [and] soft,” Heleman said.

That could mean, if you check out the bottom half of this post I had earlier this month, that we’re sailing into fiscal headwinds in trying to keep up with the education, health care and transportation needs of a growing state. True, as Hilderbran pointed out, recent revenue numbers have looked good. Final but unofficial figures for fiscal 2011 show sales tax receipts increased by 9.4 percent over the previous year, which was — in a word — ugly. Fiscal 2010 included December 2009, which “marked the low point in Texas employment” during the Great Recession, Heleman said in a written presentation. In the just-ended fiscal year, Texas consumers and diners spent about 5.5 percent more on retail and restaurant purchases, he testified. The reason overall sales tax receipts leapt by 9.4 percent was “supercharging” from a burst of oil and gas drilling activity, some decent manufacturing growth and a bit of an uptick in at least parts of the construction industry, said Heleman. [Emphasis added]

This fiscal year, though, he sees “probably a little bit less than” 5.5 percent growth in retail and restaurant sales. As for the energy exploration and production sector’s purchasing, “it’s actually just going to flatten out — at higher levels,” he said. But that won’t grow, in percentage terms, the way it did last year.

In other words the Texas economy is doing better then it did in 2010, but it’s still nowhere near where it was before our current economic woes started, or where it needs to be to keep from a replay on 2011 in 2013. Texas budget director to quit in April, before next flood of red ink.

In the 2013 session, the budget gap may very well turn out to be as large. The economy’s recovery is slow, and lawmakers this year exhausted many of the available, one-time-only fiscal remedies — such as delaying state payments and speeding up tax collections. They also punted a $4.8 billion Medicaid IOU to next session. Yes, this time they could do that because they left about $6 billion in the rainy day fund. But next time? Probably a non-starter.

If revenue doesn’t run well ahead of forecasts for the next two years, and keep growing strongly for the two years after that, then “2013 will pretty much be a re-run of the 2011 revenue shortfall – with a 24 percent gap, instead of 27 percent,” said Eva DeLuna Castro, budget expert at the center-left Austin think tank the Center for Public Policy Priorities. That’s “back of the envelope,” but still pretty alarming, she said. [Empahsis added]

The Texas economy also isn’t close to where it needs to be to keep up with the state’s population growth, and Texas still has a record high unemployment rate.

Jason Embry in his latest column gives the details of a recent report released by Comptroller Susan Combs which shows, Budget trickery worsens in shortfall year.

In a report released this week, Comptroller Susan Combs illustrates the trickery that legislators and Gov. Rick Perry used to get there. That’s because lawmakers assess fees under the guise that they will be used for a specific purpose — to help low-income residents pay electric bills, for instance — but then leave much of that money unspent to balance the state budget.

Combs’ report shows the problem is getting worse. The state will leave $4.9 billion unspent in its dedicated accounts over the next two years, up from about $4.1 billion in the previous budget.

The unspent balances include $851 million that comes from fees on electric customers and is supposed to help low-income Texans defray their utility costs, $654 million meant to improve air quality and $388 million in an account for improving trauma facilities and emergency medical services. Technically, these dollars don’t get spent on other programs. But by sitting there unspent, they allow the state to show on paper that it has enough money to pay for the amount it budgets for education, health care and other high-cost programs. [Emphasis added]

[...]

So at least for now, the Combs report reminds us of the game state leaders play when they write a budget. And this isn’t the only game. Lawmakers intentionally left the state Medicaid program underfunded by about $5 bil?lion over the next two years, severely weakening claims that the state has $7 billion sitting in its rainy day fund. Lawmakers will either have to spend most of the rainy day money to keep the Medicaid program operating in early 2013 or pray that the Texas economy performs considerably better than projected over the next two years so that revenue from current taxes will increase.

Our governor is running for president, and our lieutenant governor is running for the U.S. Senate — and both will count the state’s balanced, no-new-taxes budget among their successes. Just remember that they used a few multibillion-?dollar tricks to get there.

See the Comptrollers report here. Here’s the section of Texas Government Code that allows this, Sec. 403.095. USE OF DEDICATED REVENUE. It looks like this nearly $5 billion of taxes collected for specific uses – helping the elderly with their electic bills in the hot Summer months, clean air, and funding for trauma centers – has been set aside instead to keep the GOP from having to raise taxes on their wealthy donors, and allow them to mendaciously states that they “protected” the Rainy Day Fund.

In other words all the recent praising of retiring state legislators that have such awesome budget prowess was bunk. All The Lege did this year was move money from one account to another, and are hoping the economy recovers before the bills come due – which looks extremely unlikely. But they don’t really care because they’ll likely be gone and it will be someone else’s problem.

1 Comment »

  1. Eye on Williamson » Texas Blog Round Up (October 3, 2011) said,

    October 3, 2011 at 10:12 am

    [...] WCNews at Eye On Williamson points out that while Gov. Perry and the Texas GOP think all is well with the Texas economy that’s far from reality, 2012 revenue estimate for Texas will be “Flattish”, dedicated funds trickery. [...]

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