Rick Perry, last year:
"Betting the economy will pick up to solve our budget challenges, rather than making the hard decisions needed, is a recipe for an eventual tax hike," he warned.
"If you remember the cartoon Popeye, then surely you will understand what I mean when I say using budgetary sleights of hand is something like ol' Wimpy would have done," Perry said. "It's the same as saying, `I will gladly pay you Tuesday for a hamburger today.' "
To pay for the $7.1 billion in tax cuts and education spending increases that Perry envisions for the 2006-07 fiscal years, the governor would reach back into fiscal 2005 and ahead into fiscal 2008 for almost 37 percent of the money. The upshot is that without that one-time windfall in budget cycles to come, that money would have to be generated some other way.
"You'll be back on the biennium schedule" after the one-time money shift, Sen. Florence Shapiro, R-Plano and chairman of the Senate Education Committee, said Thursday. "And then, you're stuck."
Kathy Walt, the governor's spokeswoman, said time and a recovering Texas economy would solve any such problem.
"The economic expansion will more than fill that," she said.
Perry wants to cut property taxes by $3.4 billion and increase education spending by $3.7 billion in that 2006-07 cycle. To pay for it, he proposes, among other measures, to raise cigarette taxes by a dollar a pack, legalize and tax video lottery terminals, levy a $5 surcharge on admission to strip clubs and close some loopholes that allow many businesses (including the American-Statesman) to avoid paying the state franchise tax.
But according to Perry's own figures, those changes would generate only $4.5 billion during 2006-07, leaving the $2.6 billion shortfall. To fill that hole, Perry's plan contemplates starting several of the revenue-raising strategies in the 2005 fiscal year to stockpile $1.44 billion for use during the following two years. In addition, Perry suggests shifting sales tax revenue for the first month of the 2008-09 biennium to 2006-07.
That 25th month of sales tax revenue would bring in another $600 million -- but the next biennium would once again have just 24 months of sales tax. Perry would bring in another $600 million by doing a similar acceleration of collection on the franchise tax.
Ogden asked Perry about all this when the governor testified Monday before the Joint Select Committee on Public School Finance.
"It looks to me like there's two one-time measures," Ogden said. "How are you going to replace that $2.6 billion in the future?"
Perry said the accelerated tax collections could be continued indefinitely. "That will never catch up to you," he said.
"Yeah, but you can only spend it once," Ogden said.
Perry ended the dialogue by suggesting that "rather than dig a big hole here," his budget chief Mike Morrissey would explain it all to the committee later that day. Morrissey, when he appeared, acknowledged the one-time nature of the $2.6 billion in revenue.
But he told the committee that the revenue estimates were conservative. The video lottery tax and closure of the franchise tax loopholes, he said, likely would raise much more than appears in the governor's estimates. And other economic growth, and the resultant healthier tax receipts, would also help make up the difference, he said.
And just for good measure, here's how people who would be affected by one aspect of the sin taxes respond to it:
Patrons, for the most part, accept the $5 entry fee idea, but only if it truly is in the name of school financing.
"I'm a mom, so I support it if it does go to education," said Cyndi Rice, who was enjoying the show at Hardbodies Male Dancers on St. Mary's Street. "I don't know that it would affect my decision to come here. It's our favorite club."
A bartender questioned why the governor's plan singles out adult entertainment clubs.
"I'm all for helping education. I definitely think the teachers need to get paid more," Hardbodies bartender Sheldon Cantrell said. "But where is the lottery going? Why can't that fund education? It's hypocritical — they're singling out one business to tax instead of taxing all businesses."
For his part, Hardbodies dancer Mariano-Chris R. Perez, said he wouldn't mind the tax.
"It's going toward schools, I say go for it," he said shortly after stepping down from the club's main stage. "It would let us know the kind of clients we have here. We could see if they're willing to spend money or if they're just trying to spectate."
Perry, lunching with reporters on the second day of a special legislative session, said an executive told him businesses mindful of the terror attacks of Sept. 11, 2001, must be ready to move personnel on short notice.
According to Perry, the official, who later was identified as USAA Chairman and CEO Bob Davis, said: "Companies have the ability to move very quickly today. ... A business activity tax as I hear it is being talked about in Austin, Texas. We've got 9,000 employees; it's not hard for us to shift those out of this state."
Davis, whose company actually employs more than 13,000 people in San Antonio, confirmed the conversation with Perry. He described his comments as "supportive" of Perry's "efforts to maintain Texas as a business-friendly state."
"To be competitive," Davis said, "companies must be very sensitive to all of the costs of doing business. If Texas, or any state, increases costs to uncompetitive levels, companies will be forced to evaluate alternatives. Alternatives, flexibility, and mobility have become particularly important to businesses since Sept. 11, 2001."
It was not the first time USAA has indicated its future in Texas was contingent on business conditions.
(Note: the first half of this post is part of this previous post, but I didn't want it to get lost in the shuffle.)Posted by Charles Kuffner on April 23, 2004 to Budget ballyhoo | TrackBack