When is Too Much Money Not Enough?

This week's  Update from the Tax Front from Texas Taxpayers & Research Assocition (TTARA) includes commentary on the difficulties of crafting a state budget when the state has plenty of money.  Below is the complete article from the TTARA update. 

As TTARA has been advising almost since the moment the gavel dropped on the legislature in the summer of 2013, lawmakers will have a substantial excess of funds when they convene for their 2015 regular session. While Comptroller-elect Hegar begins work on the official revenue estimate, and as the Legislative Budget Office continues their work on the draft appropriations bill the 84th Legislature will work from, whisper numbers as to the state’s excess range from a few billion dollars to more than $10 billion.

Even with the excess, the legislature, as it should, will continue to critically evaluate state programs and cut unnecessary or inefficient spending. Some areas will require additional funds regardless of the legislature’s fiscal conservatism. Medicaid, the state’s health care safety net program, will see substantial cost growth. The state has limited authority to impact Medicaid budget levels, which are largely driven by federal law. The retired teacher health insurance program will require a substantial infusion of state funds in 2016 in order to remain solvent. Public education enrollment continues to grow, but increasing local property values will place the burden on the property tax, rather than increasing state aid.

The overall budget math still suggests a substantial excess of funds even after lawmakers address mandatory budget needs. So what can a surplus buy? As a point of reference, TTARA ran the numbers on a handful of the items being talked about in the back halls of the Capitol:

 

                                                                                                           Annual Cost                            Biennial Cost

Public Education

Increase state school funding by $250 per “weighted” student         $1.6 billion                    $3.2 billion

Increase state school funding by $500 per “weighted” student         $3.2 billion                    $6.4 billion

Increase state school funding by $1,000 per “weighted” student

            (plaintiff’s demand)                                                                         $6.4 billion                  $12.8 billion

 

Increase Highway Spending

Eliminate “Diversions” of Highway Funds to Dept. Public Safety    $0.5 billlion                    $1.0 billion

Dedicate Half of Motor Vehicle Sales Tax to Highway Fund             $2.2 billion                    $4.4 billion

 

Tax Cuts

Reduce school M&O property tax rates by 10 cents

            (roughly ten percent)                                                               $2.0 billion                    $4.0 billion

Increase the school homestead exemption by $15,000

            (double from current)                                                               $1.0 billion                    $2.0 billion

Exempt business inventories from the school property tax          $1.5 billion                    $3.0 billion

Maintain 2015 franchise tax cuts                                                        $0.3 billion                    $0.5 billion

Eliminate the franchise tax                                                                  $5.0 billion                  $10.0 billion

Increase franchise tax small business exemption to $5 million   $0.4 billion                    $0.9 billion

Cut Sales Tax Rate by ¼ Percent                                                        $1.2 billion                    $2.4 billion

 

Reduce Debt (non-recurring, one-time expense)

Retire non self-supporting highway debt                                           $1.9 billion              $1.9 billion

While the prospects of a multibillion excess of funds is most certainly welcome, the various items on many wish lists easily exceed whatever may be available. Rob Junell, former chair of the House Appropriations Committee often opined that legislative sessions in which the state had no money were easier than those with money, because one could say “no” to everybody without offending anyone. The 2015 Legislature, though, will be a session where legislators can say “yes”—just not to everybody.

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