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Don’t expect the next budget to be any better than this one

Continuing a theme I’ve harped on here, if state legislators thought that they solved Texas’ budget issues this year they are sadly mistaken.

Some experts say Texas tax revenues must zoom far above forecasts, if we’re to escape another miserable budget session in 2013. But the state’s leading forecaster on Wednesday offered little hope that will happen.

“The year of ’12 is not going to be a great recovery year,” John Heleman, chief revenue estimator for the Texas comptroller’s office, testified at the House Ways and Means Committee. He was referring to the fiscal year that began this month and ends Aug. 31, while answering a question from Kerrville GOP Rep. Harvey Hilderbran, the panel’s chairman.

“It’s still going to be flattish [and] soft,” Heleman said.

That could mean, if you check out the bottom half of this post I had earlier this month, that we’re sailing into fiscal headwinds in trying to keep up with the education, health care and transportation needs of a growing state. True, as Hilderbran pointed out, recent revenue numbers have looked good. Final but unofficial figures for fiscal 2011 show sales tax receipts increased by 9.4 percent over the previous year, which was — in a word — ugly. Fiscal 2010 included December 2009, which “marked the low point in Texas employment” during the Great Recession, Heleman said in a written presentation. In the just-ended fiscal year, Texas consumers and diners spent about 5.5 percent more on retail and restaurant purchases, he testified. The reason overall sales tax receipts leapt by 9.4 percent was “supercharging” from a burst of oil and gas drilling activity, some decent manufacturing growth and a bit of an uptick in at least parts of the construction industry, said Heleman.

This fiscal year, though, he sees “probably a little bit less than” 5.5 percent growth in retail and restaurant sales. As for the energy exploration and production sector’s purchasing, “it’s actually just going to flatten out — at higher levels,” he said. But that won’t grow, in percentage terms, the way it did last year.

Click on that link referenced above, and you learn the following bit of cheery news:

In the 2013 session, the budget gap may very well turn out to be as large. The economy’s recovery is slow, and lawmakers this year exhausted many of the available, one-time-only fiscal remedies — such as delaying state payments and speeding up tax collections. They also punted a $4.8 billion Medicaid IOU to next session. Yes, this time they could do that because they left about $6 billion in the rainy day fund. But next time? Probably a non-starter.

If revenue doesn’t run well ahead of forecasts for the next two years, and keep growing strongly for the two years after that, then “2013 will pretty much be a re-run of the 2011 revenue shortfall – with a 24 percent gap, instead of 27 percent,” said Eva DeLuna Castro, budget expert at the center-left Austin think tank the Center for Public Policy Priorities. That’s “back of the envelope,” but still pretty alarming, she said.

But don’t worry. The legislators will always have flim-flammery available to them.

In a report released this week, Comptroller Susan Combs illustrates the trickery that legislators and Gov. Rick Perry used to get there. That’s because lawmakers assess fees under the guise that they will be used for a specific purpose — to help low-income residents pay electric bills, for instance — but then leave much of that money unspent to balance the state budget.

Combs’ report shows the problem is getting worse. The state will leave $4.9 billion unspent in its dedicated accounts over the next two years, up from about $4.1 billion in the previous budget.

The unspent balances include $851 million that comes from fees on electric customers and is supposed to help low-income Texans defray their utility costs, $654 million meant to improve air quality and $388 million in an account for improving trauma facilities and emergency medical services. Technically, these dollars don’t get spent on other programs. But by sitting there unspent, they allow the state to show on paper that it has enough money to pay for the amount it budgets for education, health care and other high-cost programs.

That $851 million is of course the System Benefit Fund, which I’ve mentioned several times before. There’s also hunting and fishing license fee funds, which are supposed to go to the Parks and Wildlife Department, and there’s funds from the sale of specialty license plates, which are supposed to go to various non-profits. All that money is just sitting there, not being used for its intended purpose, because to do so would mean that it couldn’t be used to “balance” the budget. The end result is that these are stealth tax increases, passed because the purpose they were intended to serve was seen as worthwhile, but then not used for that purpose so the funds can then be counted along with general revenue even though they can’t be used as general revenue. A more honest approach would be to admit that we need more general revenue, not only for the things that general revenue provides for, but also so that these dedicated funds can actually be used for their intended purpose. Just another thing to think about when you go to vote next year. EoW has more.

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