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State sales tax revenues way down

The 2011 legislative session is going to be so much fun.

Sales tax revenues have taken double-digit dives for five months running; in each of those months, the state’s income from those taxes has been more than 10 percent lower than in the same month the year before. In a state where a steady rise in sales tax money has become almost a rule, the intake for the last 12 months is down more than 5 percent. And budgeteers assumed not only that they’d match the old numbers, but that they would exceed them.

Budgeteers used one-time federal stimulus money for ongoing expenses in the current budget — in Medicaid, for instance — that create holes to fill next time they write a budget. The programs will still be there even though the stimulus money probably won’t.

And an ongoing “structural deficit” — the kind of term that seems designed to scare people away from a conversation about money — creates an ongoing problem. In 2006, in an effort to lower property tax burdens, the state agreed to spend more on public education. Lawmakers created a new business tax, but it raises less than they agreed to spend on the property tax fix. The gap has to be filled every time they write a budget. Last time, the feds showed up like leprechauns with pots of stimulus money and kept Texas from choosing to use its Rainy Day Fund, raise taxes or make spending cuts. Next time, the stimulus money won’t be there, but the hole will be.

In 2007, that gap was filled by surplus general revenue funds. More surplus funds were put aside that year to pay for the shortfall in 2009. Needless to say, no such surplus will be available in 2011. The Rainy Day Fund, assuming the votes are there to use it, might be able to cover both the revenue shortage and this structural gap, but I wouldn’t be too optimistic about that. But sooner or later, which is to say this session or the following one, that great big unaffordable property tax cut is going to have to be dealt with. The only thing that sustains me when I contemplate the possibility of another term for Rick Perry is the knowledge that this reckoning would have to happen on his watch.

Of course, I’m sure he’ll defend the property tax cut to his last dying breath, and if he has to provoke a budgetary crisis or two to do that, he will. But his options may be limited this time around.

It’s been just a few years since Texas lawmakers, facing a court order, undertook a massive overhaul of the school funding system. But booming enrollment, higher costs on such necessities as utility bills and a public reluctance to pay higher taxes have left many districts in a fix.

“It looks like the state may be walking itself right into another lawsuit,” said David Hinojosa, an attorney for the Mexican-American Legal Defense and Educational Fund, which was part of the most recent school finance lawsuit against the state that resulted in the 2006 changes.


“It’s going to be a significant issue for the next governor. I just don’t see any way it can’t be,” said Richard Kouri, a lobbyist for the Texas State Teachers Association.

“It’s moving into the crisis phase.”

The good news is that the solution is obvious and staring everybody in the face. It’s getting enough of them to admit it that will be the challenge. Oh yeah, 2011 is going to be heaps of fun.

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  1. Baby Snooks says:

    I hope we make it to 2011. The reality is thanks to Congress and both parties in Congress although some agree with me that there is only one party in Congress we are in “deep doo-doo” as they say.

    You can juggle figures and cook books just so long. As Ken Lay found out.

  2. […] about the economic snowball that’s heading towards Texas in the next biennium and beyond, State sales tax revenues way down. This TexasTrib article he links to states: The people in government who look at spreadsheets — […]

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  4. […] sure to spend them would have provided a nice stimulus at a time when the state economy could have really used one. But that’s not the sort of thing we do around here, so I guess it would have upset the […]