April 18, 2006
So long, surplus, it was nice to know you

Once the news that the current budget surplus was bigger than first projected hit the streets, it was just a matter of time before this happened.

Gov. Rick Perry says a new, higher budget surplus can be used partly to cut local school property taxes more than he originally proposed in a tax overhaul.

School taxes could drop from the maximum $1.50 per $100 valuation to 90 cents, rather than $1, for maintenance and operations, Perry said today.

Am I the only one who remembers that we had a $10 billion shortfall in 2003, and that we cut services to the bone to make up for that? Do we think that the good days we're experiencing now will last forever? And what happens when the Lege convenes next year, at its normally scheduled time, and has to come up with a new budget? Here's one scenario to consider:

The CPPP notes that $3 billion of the surplus will be needed to replenish the state's Rainy Day Fund and that at least $4 billion will be needed to cover budget growth driven by inflation and population increases in the next budget cycle. The think tank also holds that there are nearly $1 billion in likely expenses for the current budget period the Comptroller cannot include in her spending estimate including $444 million owed to the Federal Government that Texas is contesting in court and up to $100 million in Katrina related expenses.

I've already pointed out that the recent Executive Order on hurricane preparedness contained a number of one-time expenses that should be paid for out of this surplus. Greg reminds us that a relatively measly $143 million would restore CHIP funding to pre-2003-budget-cut levels, and would bring in much more than that in federal matching funds to boot. Why are we so eager to blow this all now?

And if you think that's bad, read this:

The conservative think tank Texas Public Policy Foundation released a statement from its President, Brooke Rollins, today suggesting that the new surplus figures released by the Comptroller make it possible to provide property tax relief without imposing the governor's new tax. The Austin newsletter Quorum Report is reporting that GOP kingmaker Steve Hotze is bottonholing GOP lawmakers to tell them if they vote for the governor's tax bill they will be defeated in 2008.

My favorite part is from Rollins' statement: "Surpluses will obviously continue, as they have been a long-standing feature in Texas’ economy, and should be dedicated into the future to reducing tax burdens." Apparently, I am the only person in this state whose memory stretches back to 2003. (And forget about 1991 - talk about your truly ancient history!)

I can only presume that the two proposals to implement a state income tax, while unlikely to ever see the light of day on the floor, might nonetheless cause Rollins' head to explode.

One question has been answered: AG Greg Abbott has declared the TTRC plan to be constitutional. That doesn't mean it wouldn't get challenged in court, of course.

Other links of interest: Here's Aaron Pena's opening thoughts. Vince has an exhaustive summary of all the legislation filed so far this session and his perception of their chances to pass. South Texas Chisme has reactions from the Valley and El Paso, while Carlos Guerra reviews the bidding so far (link via Stace.

All this, and it's only Day Two...

Posted by Charles Kuffner on April 18, 2006 to Budget ballyhoo | TrackBack

Am I the only one who remembers that we had a $10 billion shortfall in 2003, and that we cut services to the bone to make up for that? Do we think that the good days we're experiencing now will last forever?

According to Clay Robison, Gov. Perry is proposing to use up to $2 billion of the surplus instead of the $1 billion he proposed when the surplus was thought to be half the latest estimate.

I don't think the good days will last forever, but I think you might be overreacting.

Even if Gov. Perry gets what he wants, there should be plenty of surplus left over for all sorts of progressive wealth redistribution during the regular session. Be happy! The money catapult is about to be turned loose! :)

Posted by: Kevin Whited on April 18, 2006 7:38 PM

Umm, somehow I doubt the surplus will last. Our tax system is pretty much set up such that revenue grows slower than the rest of the economy (that's what happens when you have your sales and property taxes). And state government spending over the last twenty years or so seems to have grown faster than the rest of the economy.

Basically, I suspect that either (a) government spending is going to get cut so low we're going to regret it or (b) we're going to have to raise taxes in a big and painful way in the next ten years.

Maybe Kuff and I are being pessimistic. But my gut says we're playing Russian roulette with the future of our state economy.

Posted by: Jim D on April 18, 2006 8:54 PM