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Feel the fees

The Trib reviews the bidding from the 2003 legislative session as a preview for what’s to come next year.

The 2003 session most closely mirrors the current scenario — a national recession, a previous budget balanced with the use of one-time funds — and remains fresh in political minds. Then, the Legislature turned to deep budget cuts. Talmadge Heflin, the House appropriations chair in 2003 and the current director of the Texas Public Policy Foundation’s Center for Fiscal Policy, says that when projected revenues and expenditures are out of sync, “The task is not to get revenue up. It is to get expenditures down.” Social services like education, public safety, and health and human services took the brunt of the blow. Money from the Rainy Day Fund and relief from the feds (both chipped in more than $1 billion) helped. But that’s not all.

“They certainly didn’t do it on budget cuts alone,” says Dick Lavine, a senior fiscal analyst at the nonpartisan Center for Public Policy Priorities, which released a review of the 2003 budgeting process this week. Balancing the budget, he says, also required “new revenue, creating the appearance of new revenue, and cost-shifting.”

The “appearance” of new revenue comes from so-called smoke-and-mirrors provisions that, for example, shifted an $800 million payment to the Foundation School Program into the next biennium and deferred payments to the Employees Retirement System and Teacher Retirement System.

Cost-shifting refers to transferring the burden of paying for a service from the state government to its beneficiaries. The best-known example from 2003 was the deregulation of tuition at public universities. Those with state-subsidized health insurance also had to shoulder higher costs — including $790 million in new co-pays, premiums and other costs.

Measures that actually raised new revenue included entering a multi-state lottery (projected to bring in $102 million), establishing a quality-assurance fee for facilities for the developmentally disabled ($54 million) and hiring more auditors to get the most out of the existing taxes ($122 million). Other additional fees included a $1,000-a-year charge for three years for motorists’ first driving-while-intoxicated conviction.

“The bottom line,” says Dale Craymer, president of Texas Taxpayers and Research Association, “is that there’s lots of ways to raise revenues without raising taxes.” Craymer acknowledges that a tax increase — generally a political loser — might be the best way to raise revenue but says it’s untenable in this economy.

Let’s pause for a moment to give thanks that Talmadge Heflin is no longer in the Lege. Perhaps he’s forgotten that some of those budget cuts he helped push through led to a number of his fellow Republicans subsequently losing elections; just ask Arlene Wohlgemuth, for one. Bad public policy isn’t always bad politics, but thankfully it was in this case.

The simple reason why fees are more popular with the Lege than taxes is that fees hit fewer people, and in most cases they hit the people who have the least influence. Tuition deregulation is probably the biggest exception to that, and it’s why many candidates and officeholders have campaigned on re-regulating tuition ever since. And of course some fees, like the Driver Responsibility Program, were utter failures in their goals, revenue and otherwise. Not that any of this will matter, since “tax” has become a four-letter word. And don’t be surprised if we’re in a similar position in 2013, since nothing that is likely to be adopted will be anything more than a band-aid. EoW reaches back to 2006 for more.

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One Comment

  1. Joe White says:

    I’d like to argue that fees are *fairer* than taxes. Very broadly speaking, taxes are usually indiscriminate, with little or no relation between the activity being taxed and the intended use of the funds. Fees, on the other hand, directly affect those using the service that the fees maintain.