Issues

Thanks to strong state fiscal discipline, a robust Texas economy, and growing oil and gas revenues, as of today Texas has a $4.3 billion budget surplus. 

The nearly $15 billion swing from a $10 billion shortfall in January 2003 to a $4.3 billion surplus today is a testament to strong, fiscally conservative state leadership in the 2003 and 2005 sessions, and a resilient and growing Texas economy. 

Some now suggest we use the entire surplus to reduce property taxes in the special session, without an offsetting revenue source to pay for the tax cut.  Using one-time monies like today’s budget surplus on ongoing costs like property tax relief should be considered with a long-term analysis.

The $4.3 billion surplus could buy down property tax rates from $1.50 to $1.10, a forty-cent reduction.  But that means we walk into the Capitol in January 2007 with an $8.6 billion price tag to maintain the property tax cut.  Even if revenues continue to grow between now and January 2007, we could face a massive shortfall, just to get to zero budget growth.

Last biennium, general revenue grew about $5 billion.  Using some of the surplus to provide property tax relief makes sense.  We could probably safely use $1 billion to $2.5 billion to offset property tax cuts. 

The Legislature is also facing unusual needs as 2007 approaches.  During the past twelve months, Texas has seen several natural disasters, with Katrina, Rita, and West Texas wildfires that may require emergency funding. 

Other anticipated appropriation needs include school textbooks and education obligations, Health and Human Services and Medicare expenses, and the Teacher Retirement System and the Employees Retirement System costs.
 
WOULD YOU CUT SCHOOLS OR HEALTH CARE IN 2007?

Population growth means ever higher education costs, Health and Human Services caseloads, Medicaid, employee retirement expenses, and the like.  Early estimates indicate this growth in population will cost up to $4 billion in the next biennium.

56% of GR is spent on education.
26% of GR is spent on health and human services, mostly mandated state-matched programs like Medicaid.
10% of the budget is spent on criminal justice, courts, and prisons.
92% of the state budget is education, health and human services and criminal justice.

That leaves 8% for parks and wildlife, economic development and other general government needs.

Texas’s GR budget is about $64 billion today.  Spending the surplus now means we need another $8.6 billion just to pay for 2007-2009 property tax relief. 

Our budgetary leadership took a $10 billion shortfall in 2003, and turned it into a $4+ billion surplus because we did not raise taxes to get out of the hole.  That’s a roughly $15 billion swing in the economy in three years.

Taxpayers deserve some of that money back, but we have to do it in a prudent manner or we will be in a hole later on down the road.
 
An excellent document to look at for budget related issues and revenue and tax growth issues is the "Fiscal Size-UP" which you can find on the LBB website at: http://www.lbb.state.tx.us/Fiscal_Size-up/Fiscal_Size-up_2006-2007_0106.pdf