Texas will have $208 billion in Revenue to Fund 2014-15, Use it to lower Property Taxes and Invest in the Future

By Alex Gonzalez

The 83rd  Texas Legislature will have $101.4 billion to quibble over in crafting the next two-year budget, along with an extra $11.8 billion in the Rainy Day Fund, or  Comptroller Susan Combs announced Monday morning.  This new revenue projection easily surpassed the previous biennium budget of $76 billion, or $176 billion two-year budget, in January 2011.

To understand the new budget revenue success, it is important to look back to the budget projection of two years ago.

In January, 2011, see diagram below, the   State of Texas  had an estimated $72.2 billion available for general purpose spending in the 2012-13 biennium, 2.9 percent below the corresponding amount of funds available for 2010-11. This figure represents the sum of the 2010-11 ending balance, 2012-13 tax revenue, and 2012-13 non-tax receipts, the state’s tax system is the main source of General Revenue-related funding. Tax collections in 2012-13 will generate $67.3 produce an additional $10.0 billion. Factoring in the estimated negative $4.3 billion ending balance carried forward from 2010-11, these three sources total $73.0

This January, see diagram below, the State of Texas will have an estimated $101.4 billion available for general purpose spending in the 2014-15 biennium, 12.4 percent greater than the corresponding amount of funds available for 2012-13.  The state’s tax system is the main source of General Revenue-related funding. Tax collections in 2014-15 will generate (rounding to the nearest one-tenth billion) $85.6 billion; and non-tax revenues will produce an additional $10.6 billion.  Taking all state revenue sources into account, the state is expected to collect $208.2 billion in revenue for all state funds in 2014-15.

The clear difference between $177 billion 2 years ago and $208 billion in this year is $30 billion, but only $20 billion is actual revenue; revenues from which  $96 billion will come from state revenue, up $26 billion from 2 years ago, and  $76 billion from “federal income,” up $6 billion from 2 years ago when “federal income” was only $70 billion.  Essentially, the state of Texas will collect $20 billion more in the next two years than it did in the past two years.  But what to do with this $20 billion is already creating a conservative Libertarians and Republican legislators.

The conservative Texas Public Policy Foundation’s Conservative Budget Coalition already issued a press release underling that the state Texas Model works because:

  The strong growth in state revenues confirmed today eliminates any argument for tapping the state’s rainy day fund to cover unpaid bills in the current budget or ongoing obligations in the 2014-15 budget. There will be enough money in the general fund to cover the Medicaid shortfall and undo many of the delayed payments and tax accelerations used to balance the budget last session.

“The positive revenue and economic outlook sets the stage for the Legislature to eliminate the margin tax, which is one of the few deterrents to private-sector investment and job creation in Texas.

“State lawmakers must take care not to make Texas a victim of its own success. The path to robust revenue growth runs through strong private sector activity and investment, not big government. Keeping the cost of government low and the focus on basic services allows for the tax burden to remain light, which provides a more reliable revenue stream to support those basic services.” 

Speaker Joe Straus

But the speaker of House Joe Straus sees the strong revenue collection, with low-taxes through business-friendly policies. Is the perfect environment to invest in the future of the state?  Gov. Rick Perry has called for a constitutional amendment making it tougher for lawmakers to increase state spending by more than the combined rate of inflation plus population growth. But, according to Speaker Straus the state need look into the future in fracture of the state and education.  In an interview with the Texas Tribune the state need to:

 Need to use the state’s better financial position to make investments to prepare Texas for its more crowded future. The state is expected to grow from its current population of 26 million to 33 million by 2030, according to some estimates.

  “Those of us who have been chosen to lead this state need to focus on the core functions of government so that Texas continues to be a place where businesses want to expand, where people have the opportunity to reach their full potential, even when there are 33 million of us here,” Straus said a luncheon of Austin business leaders last month. “To put it another way, we have to get serious about our future.”

Susan Combs, Texas Comptroller of Public Accounts, said the state’s booming oil and gas sector and a boost in motor vehicle sales contributed significantly to the rosy budget picture. In other words, the state needs to be aware about relying too much temporary economic waves, as it occurred in the late 80s when the state went into fiscal disaster after the oil prices plummeted and the state was forced to increase sales taxes to compensate for loss of “oil revenue,” and which force the state of Texas to give subsidies just to keep then in the state.

It would be important to know the Speaker Straus knows more that another legislator, the Texas has been postponing investment in state infrastructure, new schools, and Medicaid payments. As a result, while Texas should avoid raising taxes to keep the current business-friendly environment, the state need to recognize that the future of the state will depend on an educated and highly-skilled labor force, as well as in revamped state infrastructure.  In addition, rather than  reducing  the “marginal” tax, or give more subsidies to energy companies, middle-class Texans already pay one of the highest and more “oppressive”  property taxes in the nation. So new $20 billion of revenue could be used to lower property taxes for middle-class Texans. So Joe Straus maybe right on where the new revenue ought to be spent: the future of the state.

Alex Gonzalez  is a political Analyst and Political Director for Latinos Ready To Vote!  He received a Bachelors Degree and a Masters’ Degree, with emphasis in American politics,  from San Francisco State University.
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