February 09, 2006
Surplus sniping

In the last post I mentioned the state's budget surplus, which now stands at $4.3 billion.

Of that amount, $1.9 billion is earmarked for education and tax reform. The rest of it is "free money" that lawmakers can use as they see fit, Deputy Comptroller Billy Hamilton said.

State programs that were not fully funded in the current state budget are hoping for their share of the budget surplus. A pharmacy school that has been built but has no operating funds and nursing homes top a list of priorities issued by Gov. Rick Perry.

Of the surplus, $473 million can be spent anytime by the Legislative Budget Board. Other expenditures must be approved by lawmakers during a legislative session.

I believe that $473 million represents funds that were earmarked in bills that got vetoed. That's down from $655 million in October, so either some it has been spent already or there's a discrepancy somewhere.

The surplus is the largest in Texas in several years. In contrast, lawmakers wrote the 2004-05 budget in the face of a $10 billion revenue shortfall. Current projections indicate that the surplus will grow even larger over the biennium as the result of larger-than-expected tax revenue from consumer spending and higher oil and gas prices.

"We've had an uptick in the economy," Strayhorn said, noting 28 consecutive months of increased sales tax revenues.

Quite a difference from three years ago, when several consecutive months of declining sales tax revenue turned a $5 billion projected deficit into a $10 billion one. Keep that in mind as you read this:

Some conservatives are calling for the Legislature to use the surplus for property tax relief.

"They should give it back to the people from whom they took it," said Michael Quinn Sullivan, vice president of the Austin think-tank Texas Public Policy Foundation. The surplus would be enough to reduce property taxes by about 17 percent.


The surplus "reaffirms to us the need for the Legislature to use that surplus to buy down property taxes, an easy solution to the situation that we find ourselves in with the June 1 deadline looming," Sullivan said. "There's no need to do economically dangerous things."

Funny, I don't recall this guy advocating tax increases to help cover that $10 billion deficit back in 2003. "Easy" does not equal "responsible". What happens when tax revenues level off or decline? How quickly some people forget.

Meanwhile, you can't have a story like this without some posturing. That's Governor Perry's cue:

Taking a swipe at Comptroller Carole Keeton Strayhorn over more than $2 billion in uncollected taxes, Gov. Rick Perry said Wednesday that he will oppose any legislative effort this spring to significantly boost education spending with new taxes.


Perry said it won't be necessary to raise taxes to increase education spending if lawmakers adopt a broad-based business tax because it will raise more money for education as the economy grows.

"Second," he added, "we just need the comptroller to collect the nearly $3 billion that is out there and owed her office today by deadbeats and tax cheats. Do the job!"

The governor's office later said Perry's comments were based on a 2-month-old news report on KHOU-TV in Houston.

Strayhorn, running against fellow Republican Perry as an independent, adamantly defended her tax collection efforts and said the governor was trying to mislead Texans with a "partisan political attack."

"The governor of the state of Texas has a responsibility to know the facts and to tell the people of Texas the truth," she said.

Strayhorn said the uncollected taxes total $2.6 billion, stretching over as long as 10 years, and already have been turned over to the attorney general's office for possible legal action after the comptroller's office had exhausted all collection alternatives.

Some of the taxes, she said, are tied up in bankruptcy, and others are owed by "fly-by-night" operators no longer in business.

Actually, that's an interesting question, and I'd like to know more about it. Unfortunately, there's not a quote from AG Greg Abbott as to how much of that uncollected boodle is on his to-do list. I can't take either Perry or Strayhorn's word for it on this, given their histories and the obvious politics at play here. Unlike a lot of other situations, though, this is one that ought to have an objective answer. Who wants to dig deeper on this?

Perry also confirmed earlier reports that he wants the Legislature to focus on cutting property taxes in a special session and, if necessary, leave any additional educational changes until next year.


Legislative leaders have said they want to consider other educational changes this spring, including merit pay for teachers, which Perry supports. But the governor said it would be better to wait.

"I'm for reform. ... But I understand what the Supreme Court told us," he told reporters after his speech.

"Do we have to eat this (education) pie at one sitting? And I think the answer is 'no.' We can eat it one slice at a time and enjoy it and actually keep it down," he added, apparently recalling the rancor that plagued two unsuccessful education sessions last summer.

I don't know about you, but I could have lived without a binge-and-purge analogy from Rick Perry.

Perry said only one in 16 businesses now pays the franchise tax, which he criticized as a "very unreliable source of revenue for our schools."

"I think it makes more sense to have a broader tax that captures more of the economy at a very low rate," he said.

Well, yeah. So why did it take you so long to realize this? Why didn't you say things like that in the earlier sessions? I mean, welcome to the table and all, but why did it have to be this hard?

Posted by Charles Kuffner on February 09, 2006 to Budget ballyhoo | TrackBack

The best thing to do with a surplus is to save it, so when the economy inevitably declines in the future you don't have to raise taxes or cut services at the worst possible time to do either one.

But that's not "delivering" anything to special interest groups or the tax cuts crowd, so it will never be done even though it's prudent.

Posted by: Tim on February 9, 2006 5:48 PM

With this winter 9 degrees warmer than average and the hottest on record, the surplus should be saved for drought and fire mitigation and for Hurricane season.

Posted by: Support Science to Reverse Global Warming, if still possible on February 10, 2006 12:03 PM