Myth, Reality, and the State Budget Surplus

Depending on who's doing the talking, next year's budget will have Texas sitting on billions of dollars ... or hot air

There are two things certain in Texas – painful property tax bills and politicians who promise R-E-L-I-E-F in campaign commercials. Oh, the heartburn of reality TV. Speaking of which, the state's budget-making process cranks up anew in January, and property taxes will be a hot item on the legislators' brawl menu. Our puffed-up leaders spent the election year feeding us a lot of happy talk about the state's economic picture, saying things like, "We're rich!" at public forums. The "we" in this case doesn't apply to you and me.

Depending on who's doing the chest-thumping, next year's budget will have Texas sitting on either an $8 billion surplus (Gov. Rick Perry's figure) or a $15.5 billion surplus (House Speaker Tom Craddick). It's a big old pile of money either way. Others would suggest that Perry and Craddick's lofty figures are just … figures. That figures.

"This so-called surplus is really illusionary," said Dick Lavine, a tax analyst with the Center for Public Policy Priorities, a research group that advocates for the 3.6 million or so Texans living in poverty. In a press briefing last week, Lavine and Eva DeLuna Castro, a budget analyst with CPPP, said Perry and Craddick's yakking about extra money isn't based on hard, cold truth. Like frugal parents counseling their thrift-challenged children, Lavine and Castro say that if by chance there is money left over after all the bills are paid, then tuck it away into the reserve fund, for crying out loud. "We don't have a $15 billion surplus, as the speaker is saying," Castro said. "We have $3 billion less than what we need to fund current services to pay for those [property] tax cuts and have an adequate reserve fund set aside."

In any case, just the word "surplus" is cause for concern when you consider who's driving the gravy train. The surplus discussion has riled up the anti-tax forces, who are organizing in a big way ("Refund!" "Appraisal caps!" "Privatize!"). Plus, all the talk over how rich we are has swollen Perry's head something awful, and now he's convinced that his corporate welfare boondoggles are just the ticket for building a strong economy and catapulting him to the VP post in '08. While on the campaign trail, Perry suggested using some of the "surplus" to lower the new business tax rate – before it even takes effect.

After many, many failed attempts, lawmakers last year passed the new business tax deal as part of a court mandate to change the school-finance system, which drew most of its funding from property taxes. The idea was that homeowners would get some property-tax relief and businesses would shoulder more of the public-education costs. Critics of the tax swap predicted that homeowners would see little or no relief in their tax bill, and hey, whatever happened to putting more money in schools? Never mind schools, a group of lawmakers friendly to the anti-tax crowd plan to push a bill that would clamp new restraints on local taxing entities.

A similar effort was thwarted in the last session. The new Legislature will have a few more Democrats and moderate Republicans on board, so it's not entirely clear how the tax-cap proponents intend to smuggle this one onto the governor's desk. But even with a new government-friendly-leaning Legislature, local officials across the state are nonetheless waking up in cold sweats over the prospect of taking a major drubbing in '07. The reason? Perry would not have assembled his Texas Task Force on Appraisal Reform if he weren't serious about getting a tax-cap bill passed, by hook or by crook, in the next session. Pass the Rolaids, please.

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budget surplus, Rick Perry, Center for Public Policy Priorities, property taxes, business tax

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