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The budget mess that awaits the next Governor

We already know that the next Legislative session will be a whole lot of no fun thanks to declining revenue estimates and our structural deficits. Here’s a further illustration of the problem.

The current state budget is financed with $12 billion of one-time money (add to the stimulus money several billion the Legislature wisely socked away two years earlier). Some refer to this as our “structural gap.” That gap will have to be filled. On top of that, add several billion for Medicaid growth (and perhaps much more depending on what happens with national health care reform), a couple hundred million for prisons, and a few hundred million more for employee health insurance and retirement. Higher education won’t be left empty handed, either, so throw in another half billion dollars.

Add another billion to public education to pay for the promises in last session’s education bill, and maybe even more. Since the state bought into a system of equalized funding, state aid rises and falls as local property values change. With the economy now suffering, property values will likely stagnate or fall (although your local chief appraiser may disagree). School districts won’t be as wealthy. The demands on state aid may actually increase, driving up the state’s public school budget even more.

Granted, there should be some revenue growth, but with most economists projecting a slow, jobless recovery, it may be muted. If so, revenue growth at best may cover spending growth. That leaves the nagging problem of how to deal with that “structural gap.”

Tax hikes? Not likely.

A simple rollback of the budget-busting property tax cuts from the 2006 special session would suffice. Heck, you probably wouldn’t have to roll it all the way back – the business margins tax does take in some money, just not nearly enough. That’s not likely, either, but it is the simplest and most straightforward solution. Remember, the billions that the Lege “wisely socked away” earlier was general revenue surplus whose sole purpose was paying for those tax cuts. No surplus, no money to pay for those tax cuts. Seems to me anyone who wants to call themselves “fiscally responsible” would demand deficit neutrality from the actions taken in 2006 by the Lege. The alternatives are unacceptable. I sure hope we have a nice, long debate about this as part of the gubernatorial campaign. As of right this minute, we have just barely enough revenue to cover all our expenditures. It’s time to start talking about what the plan is for if and when that is no longer the case.

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  1. John says:

    CASINOS, that would make a nice dent and imagine how it might help certain cities (assuming you just do Atlantic City style and have just one or two zones where it is legal) like our own Galveston. I know people have moral problems with them but just go look at all of those casinos on the LA/TX border with TX plates in the parking lot. Plus over 40 states already have casino style gambling in some form

  2. Kenneth D. Franks says:

    I don’t have a problem with how people spend their own money and if they want to gamble with it that is their business. You are correct about the Casinos on the TX/LA border. Put it on a ballot and let the people decide.
    We need however to work on a non regressive tax plan that consistently funds what we as a state decide are our priorities. Certainly everything mentioned in the post must be funded.
    My property taxes went down slightly but I have paid more to the state since then. Example: Buy a used car and get a good deal, I have bought two since 2006. I paid taxes on what the state said they were worth and not what I paid for them. There are new fees to get married, and anything that can be called a fee and not a tax. Right wing Republicans reduce taxes they just increase fees, bust unions, send jobs overseas, or entice immigrants to work in the shadows so they can make a little more profit.

  3. […] state’s budget problems, which are caused to some degree by the economic slowdown, aren’t just problems for the […]