March 06, 2003
Just when you thought it couldn't get any worse

Stop me if you've heard this one before: State Comptroller Carole Keeton Strayhorn says that revenue projections are worse than she originally thought.

With layoffs of state employees and potential cuts in services to thousands of Texans already looming, Strayhorn announced that collections of state sales taxes -- state government's primary revenue source -- continued a steady decline in February.

Collections for the month were down 4.7 percent, or $59.4 million, compared to February 2002, she reported. Year-to-date totals since the Sept. 1 start of fiscal year 2003 were down by 2.5 percent, or $184.3 million.

"I believe we may have a historic unfortunate first in Texas. If collections don't improve quickly we are going to have losses in sales tax revenues for two consecutive years for the first time in our state's history," Strayhorn said.

The comptroller said that 2002 was only the second year in Texas history that the state experienced a reduction in sales tax revenue. The first was 1983.

Remember, Strayhorn insisted for months that state revenue would grow enough to result in a budget shortfall of only $5.1 billion, then after the election she changed her tune and admitted that the deficit would really be $9.9 billion. Now we see that revenues are actually shrinking and have been shrinking for over a year. At what point will the powers that be admit that maybe we can't fix things by only considering spending?

Strayhorn, who has made some cost-savings recommendations to the Legislature, has opposed higher taxes and continued with that message on Wednesday.

"Like countless hard-working Texas families, we may be forced to tighten our belts another notch," she said.

Perry spokeswoman Kathy Walt said the governor's office was informed of Strayhorn's announcement. But she said she didn't know if the comptroller was going to lower her revenue projections, which determine how big a budget lawmakers can write without increasing taxes.

"The governor still believes in tough economic times it is not the time to raise the cost of government," Walt said.

She said the comptroller's warning reinforces even more the need to "get spending under control."

Apparently, the answer is "never". If you'll pardon me for a moment, I'm going to go find a wall to bang my head on.

Posted by Charles Kuffner on March 06, 2003 to Budget ballyhoo | TrackBack

Charles, I am not real bright when it comes to numbers, so please forgive my naivete in regards to the state budget. But I can't help thinking it might be a 'good' thing to go through this, in that it will reveal just where the unnecessary spending is. I think everyone can agree that it is impossible to 'balance the budget' and keep everyone happy, and have the numbers magically work themselves out without any negatives at all. Just predicting a budget shortfall doesn't mean its set in stone, nor does it mean that everything's going to be okay anyway?

Just my worthless two cents. I haven't read your blog long enough to get a feel for what you wish to say, but I couldn't resist.

Best regards,

Posted by: Sharon Ferguson on March 6, 2003 8:37 AM

Hi, Sharon. I don't have time to go through all this right now, but I can touch on the highlights. My Budget Ballyhoo archive has all of my postings on this topic.

My belief is as follows:

1. We can't balance this budget by making cuts alone. Even if we could in this Legislative session, we'll face the same thing next time around because of population growth. Further, I believe that the kind of deep cuts that are being tossed around will wind up costing us in the future, since the two biggest state expenditures are education and health care. It's classic penny wise and pound foolish.

2. The revenue streams that we depend on - mostly sales taxes, franchise taxes, some energy taxes, and federal funds - are volatile and in the case of sales taxes, not growing enough to keep up with our state's rapidly growing population. Our sales tax focuses mostly on goods, but the real money (and economic expansion) is in services.

3. Texas ranks dead last or close to it in per-capita spending in nearly every category (corrections is the one place where we're "above average"). I've no doubt that there's waste in our budget, and that there are efficiencies to be found, but we're starting from a pretty tight spot to begin with. BTW, Comptroller Strayhorn has made recommendations for streamlining services (I blogged about it here), and the savings she came up with would recover less than half of the projected deficit.

Personally, I'd rather see a state income tax accompanied by some reductions in sales tax. At the very least, I could deduct state income taxes from my federal taxes. I have no illusions that this will happen any time soon, but there it is. I certainly agree that any real solution will make some people unhappy.

That's it in a nutshell. Hope that helps.

Posted by: Charles Kuffner on March 6, 2003 4:38 PM