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Did I mention that we’re facing a revenue shortfall?

In case I haven’t beaten this horse beyond recognition yet, the stimulus money really saved our budgetary bacon this year, and without something equally dramatic, we are so screwed in 2011.

“It was a deficit budget as written,” said Scott Hochberg (D-Houston), who chaired the Appropriations subcommittee on Education.

As soon as legislators knew how much money the state would have to spend, they realized the state was about $4 billion short of covering the proposed costs.

The federal stimulus money came to the rescue. In addition to the one-time expenditures typically associated with stimulus — roads, buildings, etc. — the Legislature also used the money to cover ongoing costs, particularly for education and health and human services.

But in order to avoid cutting education money next session, legislators will have to find a way to make up for this year’s missing education money as well as the money for growth.

“We sort of had a $5 billion hole that we covered with $8 billion of stimulus money,” said Dale Craymer, president of the Texas Taxpayers and Research Association.

[…]

“Primarily the stimulus in Texas was used to just move dollars around and you didn’t have the level of benefit that the stimulus was designed to create,” says Rep. Jim Dunnam (D-Waco), chair of the Select Committee on the Federal Economic Stabilization Funding, the formal name for the stimulus money.

Dunnam argues that the Legislature created a deficit in education when it was actually spread throughout the budget.

If he’s right, that may prove to be a problem for educators. Next session, legislators will have to find a way to balance the budget, and this time, they’ll probably be without a stimulus package. Basic costs in education will be even higher as more kids join the ranks of students.

I’ll say it again, because I never get tired of saying it. The simplest solution to this problem is to roll back the unaffordable, irresponsible property tax cuts of 2006 that guaranteed we’d have a structural deficit in the budget for years to come. Given the creation of the business margins tax, we can probably get away with rolling back only a part of the property tax cut, so that there would still be a net reduction in rate. But that fifty-cent reduction was and is a complete budget-buster, and it has to be tamed. There’s no other truly viable option.

But wait! I hear you cry. What about the rainy day fund? That could cover the shortfall for 2011, and if we’re lucky we’ll have grown our way out of the problem by 2013. Putting aside the need for a supermajority to tap into the RDF, there’s a teensy weensy problem with this: The rainy day fund is smaller than you think.

[Texas Comptroller Susan] Combs revised her estimate for the so-called rainy day fund to $8.2 billion, down from her January projection of $9.1 billion.

The primary culprit is falling natural gas prices, which will lead to less production and thus less tax revenue.

Guess we better start hoping harder. Phillip has more.

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5 Comments

  1. The Texas Gross Margin tax is really a business income tax in disguise. Republicans didn’t have the cojones to try to amend the Texas constitution to allow for an income tax so they took the business franchise tax and expanded it.

    The gross margin tax is so confusing that even the Texas State Comptroller’s office doesn’t understand it. I’m a CPA and take courses for continuing education credit. If I want to take tax courses for any state I can do so. South Carolina? No problem. California? Yep. Pennsylvania? Sign up here. Massachusetts? Sure.

    Except Texas. No CPA education service provider will touch the Texas Gross Margin Tax with a ten-foot pole because it is such a mess.

    Think about what a gross margin is. It is sales less cost of goods sold. Deductions are not allowed for selling, administrative or interest expense? So you can lose your butt with a whopping loss for the year, but, if you have a positive gross margin, you owe Texas money. This is coming from a republican legislature and governor who tout themselves as being “pro-business.”

    The Financial Accounting Standards Board has refused to go along with Texas’ “Gross Margin” terminology. The FASB has called it for what it is, an *Income Tax*, albeit an extremely unfair and confusing one.

  2. Elizabeth says:

    “I’ll say it again, because I never get tired of saying it. The simplest solution to this problem is to roll back the unaffordable, irresponsible property tax cuts of 2006 that guaranteed we’d have a structural deficit in the budget for years to come. ”

    The thing about those property tax cuts though….who got them? My property taxes have gone up $500 + since that ‘tax cut’ and yet my property valuation did not go up (because I carefully watch those things) so what gives? If the 2006 property tax cut meant my taxes went up $500 in the past 3 years I shudder to think what would have happened ‘without the tax cut’! Don’t get me wrong – i agree with you on principle (though it seems like alot of this has to do with Perry refusing stimulus money more than anything else) – I just wonder about ‘those property tax cuts’!

  3. Joe White says:

    Back in my LBJ School days (shudder) we created a simulator for the state budget (basically a glorified Excel spreadsheet that let you adjust inputs (ie taxes) and outputs at the agency level, adjusting for matching federal funds, &c.). Too bad it isn’t still around. The legislature reduced inputs without reducing outputs (or, rather, grossly mismodeled the the new input). You are probably correct in that the simplest solution is just to reraise property taxes. But cutting some of the expenditures of our state government is in order as well. The Comptroller’s office has a searchable database that will let you see what appropriations are made. For example, do we really need a cosmetology board? Granted, finding cuts is always harder than raising taxes (those many who face an increase in taxes tend to be less vociferous those few who face loss of funds), but that doesn’t mean it shouldn’t be done.

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