Texas' new business tax is $1.2 billion short of what it was expected to bring into state coffers its first year, even after adding extension payments made so far, the comptroller's office said Tuesday.
The shortfall means lawmakers will have to rely more heavily on other revenue sources to help offset the cost of subsidizing a cut in local school property tax rates.
Officials said higher-than-anticipated sales, oil-and-gas and cigarette tax collections will more than make up the gap -- but lawmakers also face new demands, including costs associated with damage from Hurricane Ike and the impact on Texas from the national economic downturn.
"What we thought was a surplus very well may not be a surplus at all," said House Appropriations Committee Chairman Warren Chisum, R-Pampa, referring to $10.7 billion in unspent revenue that lawmakers have been expecting when they return in regular session in January.
Comptroller Susan Combs won't issue a new revenue estimate until Jan. 12, the day before the Legislature convenes, said her spokesman, R.J. DeSilva.
"I think we're pretty much on the verge of putting the first year to bed," said Dale Craymer, chief economist for the Texas Taxpayers and Research Association and a member of the state's Business Tax Advisory Committee.
"We'll know a lot more in year two," he said, when businesses are more familiar with the tax and transitional provisions expire.
Chisum and House Ways and Means Committee Chairman Jim Keffer, R-Eastland, agreed with Craymer that the tax's true yield won't be apparent until at least the second year.
"Really, we won't know till next cycle," said Keffer. "It's certainly not what some in the business community and some of the right-wingers were saying -- that we're going to be killing business" with higher-than-projected tax collections.
Chisum said it may take three years of tax collections "before you get a real good feeling of where you are."
Sen. Kirk Watson, D-Austin, however, voiced concern that lawmakers have so little information now, with the legislative session looming.
"It was supposed to be money that we could count on meeting a basic promise, but yet here we are on the eve of a session and we have so little data about why it may be failing to live up to the promise that was made," said Watson, a member of the state's Business Tax Advisory Committee.
He said the fact that it's a new tax can't be used to avoid action this session, because that means the Legislature could turn to "old practices of the past, which are to compromise already compromised programs," such as transportation and the Children's Health Insurance Program to bridge budget gaps.