Candidates must address coming budget shortfall in Texas

Posted in Around The State, Commentary, Election 2010, Public Schools, Taxes, The Budget, The Economy at 11:55 am by wcnews

Kuff has a post today with links to a couple of articles about the economic snowball that’s heading towards Texas in the next biennium and beyond, State sales tax revenues way down. This TexasTrib article he links to states:

The people in government who look at spreadsheets — so the rest of us don’t have to — are getting nervous about the state’s finances.

Sales tax revenues have taken double-digit dives for five months running; in each of those months, the state’s income from those taxes has been more than 10 percent lower than in the same month the year before. In a state where a steady rise in sales tax money has become almost a rule, the intake for the last 12 months is down more than 5 percent. And budgeteers assumed not only that they’d match the old numbers, but that they would exceed them.

And an ongoing “structural deficit” — the kind of term that seems designed to scare people away from a conversation about money — creates an ongoing problem. In 2006, in an effort to lower property tax burdens, the state agreed to spend more on public education. Lawmakers created a new business tax, but it raises less than they agreed to spend on the property tax fix. The gap has to be filled every time they write a budget. Last time, the feds showed up like leprechauns with pots of stimulus money and kept Texas from choosing to use its Rainy Day Fund, raise taxes or make spending cuts. Next time, the stimulus money won’t be there, but the hole will be.

It’s impossible to see how that does not mean trouble for Texas, a state without an income tax that relies heavily on a statewide sales tax. And an ongoing, or structural deficit, means that the Perry/GOP tax shift of 2006 will cost middle class and poor Texas - because that’s who pays - even more money in the long run. As Kuff goes on to point out the other problem this creates is it will, again, put Texas public education back in the forefront.

In 2007, that gap was filled by surplus general revenue funds. More surplus funds were put aside that year to pay for the shortfall in 2009. Needless to say, no such surplus will be available in 2011. The Rainy Day Fund, assuming the votes are there to use it, might be able to cover both the revenue shortage and this structural gap, but I wouldn’t be too optimistic about that. But sooner or later, which is to say this session or the following one, that great big unaffordable property tax cut is going to have to be dealt with. The only thing that sustains me when I contemplate the possibility of another term for Rick Perry is the knowledge that this reckoning would have to happen on his watch.

Of course, I’m sure he’ll defend the property tax cut to his last dying breath, and if he has to provoke a budgetary crisis or two to do that, he will. But his options may be limited this time around.

We knew it back when the tax shift was passed in 2006 that it was only “kicking the can down the road”, so this should surprise no one. And for all of the credit Perry has taken for Texas’ economy doing so well, he’ll definitely be more than willing to take the blame for this….right?

These issues will continue to become bigger as we continue to move forward toward the 2010 primary and general election, and all candidates running for office need to be able to speak about how they will tackle them.

[UPDATE]: Unemployment numbers continue to rise in the state and Austin area. TWC press release.

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