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Legislative Budget Board

The case for calling a Harvey special session

Rep. Gene Wu disagrees with Greg Abbott’s decision.

Rep. Gene Wu

The historic level of damage and suffering caused by Harvey requires that we tap into our state’s Rainy Day Fund. Gov. Greg Abbott’s decision to not call a special session of the Texas Legislature to access emergency funding will worsen the long-term economic effects of one of the most powerful storms to ever land on our shores.

Abbott has stated that there is no need for a special session, implicitly saying that there is no need to tap into the Economic Stabilization Fund — our state’s savings account, commonly known as the Rainy Day Fund — and that existing resources are sufficient to deal with the widespread devastation caused by Harvey.

However, if there has been one lesson that I’ve learned in my three terms in the Legislature, it’s that existing resources are never adequate in Texas. Our schools continue to be some of the worst funded in the nation, half of our rural hospitals are on the verge of closing, and we barely maintain our existing infrastructure. Texas mostly skates by on a combination of luck and creative accounting. But more importantly, what we have budgeted for are common occurrences and normal disasters. The historic level of damage from Harvey is anything but common.


The Rainy Day Fund is available right now. The Texas Legislature needs to only meet for a few days and send a bill to the governor to access the funds. There is strong bipartisan support because members understand the desperate need for a quick response. In this past legislative session, conservative members argued that the fund should not be used for “reoccurring” expenses because we needed to save it for one-time emergencies. This is that emergency.

The state could provide immediate, low-interest or no-interest small loans to help businesses rebuild quickly. The money could go to help Houston ISD to repair the more than 200 schools that suffered flood damage, including 53 with critical damage. Harris County could use the funds to expedite repairs so that courts and the jury assembly center are not closed for the next three months. Outside of the Houston area, entire cities need to be rebuilt. Simply leaving local counties and municipalities on their own to rebuild means a slower recovery — possibly causing businesses to close or leave our state, and taking jobs with them.

See here for the background. I guess I’m not fully clear on what the Legislative Budget Board can and cannot do, and what gaps there would be if only the LBB gets to act. I do think Rep. Wu is right on about appropriating money to the schools and school districts that have been heavily damaged by Harvey. I can’t think of a better use of Rainy Day Fund money than to make schools safe and available for students again. Again, if the LBB can do this, great. It will be a lot less messy that way – I mean, if you think the jackasses of the Freedom Caucus won’t try to screw with an emergency appropriations bill for school repairs, I have to ask what Legislature you’ve been watching – but if the LBB can’t do that, then a special session it needs to be.

No special session needed to address Harvey flooding

So says Greg Abbott.

Gov. Greg Abbott said Friday another special session of the Texas Legislature won’t be necessary to deal with the response to Hurricane Harvey.

“We won’t need a special session for this,” Abbott told reporters, noting that the state has enough resources to “address the needs between now and the next session.”


In recent days, some members of the Texas Legislature have speculated that a special session to address the recovery seemed likely. They included state Sen. Paul Bettencourt, R-Houston, an ally of Lt. Gov. Dan Patrick and the chairman of the Senate GOP caucus.

“My personal assumption right now is that we will probably be back in Austin at work no later than January,” Bettencourt told the Houston Chronicle on Thursday.

Here’s that Chron story. A few details from it to help clarify:

“My personal assumption right now is that we will probably be back in Austin at work no later than January,” said Senate Republican Caucus Chair Paul Bettencourt, R-Houston, echoing the sentiments of other House and Senate members.

“The governor and the Legislative Budget Board have the ability to move around quite a bit of money in current appropriations, but it probably won’t be enough when all the bills come in. This storm is going to cost more than (hurricanes) Katrina and Sandy put together, and I’m thinking we’ll be breaking the $200 billion mark before this over.”

While the state would be liable for only a fraction of that amount, after insurance and federal payments come in, but whatever that (remaining) amount is will be something the Legislature will probably have to address.”

That, say other lawmakers, will most likely involve a politically charged debate over tapping the state’s so-called Rainy Day Fund — a $10 billion account officially known as the Economic Stabilization Fund — to pay for some of the storm-damage tab.


In a Thursday letter to House members, House Speaker Joe Straus said he will be issuing selective interim charges — directives for legislative recommendations — “in the near future to address these challenges” resulting from the massive destruction caused by Harvey, especially to schools.

“The House Appropriations Committee will identify state resources that can be applied toward the recovery and relief efforts being incurred today, as well as long-term investments the state can make to minimize future storms,” the San Antonio Republican said in his letter. “When the appropriate time comes, other committees will review the state’s response and delivery of services.”

The Legislative Budget Board, jointly headed by Lt. Gov. Dan Patrick and Straus, can make key decisions on reallocating state funds to meet emergency needs — up to a point, officials said. Half of its members — three senators and two House members — represent areas devastated by Harvey.

My guess is that Abbott is probably right and the LBB can cover this for now. Tapping the Rainy Day Fund, which I will point out again was created for the purpose of helping to cover budget shortfalls in times of economic downturn before being bizarrely recast as in-case-of-disaster savings by Rick Perry in 2011, may require the Lege, but that may be done in a way as to defer that action until 2019. My wonk skillz are limited in this particular area. Point being, if Congress can manage to allocate relief funding without tripping over their ideologies, there shouldn’t be that much for the state to have to pick up. We’ll see.

How the Legislature is raising your property taxes

RG Ratcliffe explains it all to you:

Just how much money does the increased appraisal on property in your school district and elsewhere save the state budget writers? The projection is $1.5 billion for the next two-year budget. And where does this money go? In its initial budget, the Senate plans to use the savings on other state expenditures. The Straus starting-point budget includes giving the money to the public schools, but only if a school finance reform passes. But even if the $1.5 billion is put back into the school system, the state’s share of funding the public schools will decline to 39 percent by 2019 without a major boost in state spending.

That figure does not include the $3.8 billion that the state will recapture from property-wealthy school districts over the next two years to redistribute to low-wealth school districts. (That amount is about equal to what the state collected in oil-and-gas severance taxes in the current two-year state budget, or to the taxes collected on alcohol and tobacco combined, or about twice the tax motorists paid to fill the tanks of their cars and trucks.)

In the meantime, a program that was meant to keep school districts from losing money because of 2006 property tax cuts is set to expire. A decade ago, state legislators wanted to make certain that no school district had its budget cut because of state-mandated tax cuts, so they set up a program called Additional State Aid for Tax Reduction. Originally, they intended the program to phase out as property values rose. But faced with a budget crunch in 2011, the Legislature put an expiration date on the program: September 1, 2017. When the program expires, it will leave 175 school districts faced with having to raise taxes or cut budgets to make up for $225 million in lost state funding. For the 55,000-student Frisco school district near Dallas, that means a $30 million budget cut, while the 100-student Webb Consolidated on the border will lose $4.3 million in state funding – 66 percent of its total operating budget. Losing the state tax-relief funding is a hardship for the districts; for the state’s budget writers, it’s just another $225 million they won’t have to finance.

“Even though the state is working to say, ‘We want to provide property tax relief,’ they benefit from higher tax rates and higher tax efforts made by the locals,” Christy Rome, executive director of the Texas School Coalition, told me.


Plano ISD last year sent Governor Greg Abbott a letter explaining, how as a property-wealthy district, rising values did not increase funding for local schools even though local property owners were paying higher taxes. In the 2015-16 school year, the PISD collected $470 million from local taxpayers, sent $52.6 million to the state for redistribution, and kept $417.6 million to pay for local education. If the district did not change its tax rate, rising values would push tax collections up by almost $40 million, but the state would now take an additional $43.6 million in recapture and leave the district with $5 million less to pay for schools.

The district could cut the tax rate so that total tax collections stayed the same, but the formulas would still take an additional $25.6 million because of rising property values and leave Plano with $392 million to run its schools—a $25.6 million cut from the previous year.

The other idea was to give taxpayers some relief by adopting a $10,000 local option homestead exemption while leaving the tax rate unchanged. But even this proved problematic for PISD: the district would raise another $30.2 million in total property tax collections and boost the transfer of funds to the state by $43.6 million, all while leaving the district with $13.4 million less to pay for schools.

No matter how it was calculated, Plano taxpayers paid more, the state reaped cash that lawmakers could use to reduce how much they had to spend on public education, and the schoolchildren of Plano were left with less money to pay for their education.

Read the whole thing. And as RG says, when you hear Greg Abbott say that he wants to cut the business franchise tax even more, understand that he’s really saying he wants to put a bigger share of the burden of paying for schools on you.

Turns out a little budget flexibility is a good thing

Some lessons have to be learned the hard way.

More than a year after Texas voters approved routing billions in state sales taxes to roads and bridges, some lawmakers are questioning whether the first payment of $5 billion should move forward as planned.

Texans voted in 2015 to boost funding for state’s public roadways and bridges, which have strained under the state’s growing population. Proposition 7 — loudly cheered by top Texas leaders and supported by 83 percent of voters — changed the constitution to route some taxes collected on car sales to the State Highway Fund.

But in an unusually tightfisted legislative session, some Texas lawmakers are raising the prospect of reducing that initial cash infusion to the State Highway Fund scheduled for this year to free up money for other state programs.

No one has publicly backed such a move, but key budget writers have privately discussed the option. And at a Senate Finance Committee hearing Monday, Sens. Kirk Watson of Austin and Charles Schwertner of Georgetown asked Legislative Budget Board staffers about how it might work.

It turns out that the enabling legislation for that referendum included an escape hatch, in which a two-thirds vote can be used to divert some of that $5 billion for other purposes. That probably won’t happen, though I presume it’s no less likely than a vote to tap the Rainy Day Fund to get through this session and hope that things will be better in 2019. We can certainly debate whether it should happen or not, but my reason for highlighting this is that it’s yet another example of why artificial budget constraints are so often a bad idea, whose main effect is to force budget writers to come up with creative ways around said constraints. I say it’s more honest to just let them have the flexibility to figure it out rather than be forced into certain choices, but that’s not how we do things.

Who is paying for public education

The state is paying less, while local districts are paying more.

The state of Texas will spend a projected $40.5 billion on public education during the current 2016-17 budget period, and when state officials tell you they’re spending more on education, they’re telling the truth.

Not all of the truth, but some of it. Their spending increases haven’t kept up with the burgeoning number of students. In the 2017 fiscal year, the state is planning to spend $19.6 billion, according to the Legislative Budget Board, up 7.4 percent from the amount they spent 10 years earlier.

The average daily attendance in 2017, one way to measure the number of students in public schools, will reach 5.04 million, an increase of 16.8 percent over the 4.3 million in Texas classrooms 10 years earlier.

This isn’t a brainteaser: The population has been rising faster than state spending. Texas is spending more, but not keeping pace.

Local and federal spending increases have covered the difference. Public school districts are on track to spend $26.2 billion in 2017, up 44.2 percent from 2008. Federal spending rose 22.2 percent to $5.1 billion.

On a per-student basis, local spending rose $990.21 over those 10 years, state spending fell $339 and federal spending rose $45.06.

The state is spending more than it was overall, but it’s spending less per pupil.


Try this exercise. Don’t fool with the overall cost of public education in each of those 10 years — leave that number alone — but keep the state’s overall share of 44.9 percent in place the whole time. State government would have spent $18.6 billion more than it did on public education over the past 10 years. Local school districts paid 44.8 percent of the total in 2008 and are on track to carry 51.5 percent in 2017. Had the burdens remained constant, local school districts would have spent $11.6 billion less over that decade.

For the second session in a row, state Rep. Donna Howard, D-Austin, has pre-filed a proposed constitutional amendment that would require the state to keep its share of public school spending at 50 percent or higher.

Pinch yourself — that would cut $10.3 billion from what the school districts and their property taxpayers are spending in the current budget, but it would cost the state government — fueled by sales and other taxes — the same amount. That’s back-of-the-envelope math, but you get the idea.

If the state agreed, as Howard has proposed, to cover even more of the cost of public education local schools could spend less. They’d be able to lower property taxes by a sizeable, politically significant amount. Legislators would be on the hook for education support they have been foisting off on local school boards.

Wouldn’t that be something? I’m sure you can guess what its odds of passage are, but it’s still worth the effort. This highlights perhaps the main reason why so many people called for the defeat of the recapture referendum last month. The money HISD will have to send to the state won’t go towards education elsewhere, which at least would be a good moral reason for supporting it. It’s an accounting maneuver that gives the state credit for spending on education when it really isn’t doing anything more. And remember, the Supreme Court said this was all fine. Meanwhile, Dan Patrick wants to divert money away from public education to the private school vouchers that he doesn’t want you to call vouchers because that’s an unpopular name. I’ve said it before and I’ll say it again: Nothing will change until we have different people in charge of these things. In the meantime, spare a bit of pity for your school board trustee, and tell your Rep and your Senator to support Rep. Howard’s bill.

AG’s office upholds Abbott’s line item vetos

Of course it does.


Gov. Greg Abbott was well within his powers when he vetoed more than $200 million in funds approved by the Texas Legislature this year, Texas Attorney General Ken Paxton’s office wrote in an opinion issued Monday.


The nonbinding opinion, written by First Assistant Attorney General Chip Roy, has the potential to shore up the governor’s power over the budget-writing process if Roy’s interpretation ultimately held up in a court of law.

“The provisions vetoed by the Governor each designate a specific purpose and the amount to be used therefor, and they are items of appropriations subject to the Governor’s veto” Roy wrote.

Abbott’s office praised the opinion Monday evening.

“The Attorney General’s opinion upholds the governor’s constitutional authority to limit unnecessary spending and ensure fiscal solvency,” spokesman John Wittman said.

The Budget Board is co-chaired by Lt. Gov. Dan Patrick and House Speaker Joe Straus, and its members include the chairs of the House Appropriations and Senate Finance committees who write the budget. Like Abbott, Patrick also publicly criticized the board’s argument — so much so that he wanted a special committee to review the budget board and other legislative agencies. Email traffic between his office, the board and the House speaker’s office made it clear that a top Patrick aide had seen the board document in advance and approved sending it to Hegar.

The vetoes covered funding for projects at several state agencies and higher education institutions.

The largest funding item at issue was for $132 million from the Texas Facilities Commission’s budget to build a state office building in San Antonio to replace the G.J. Sutton State Complex. State Rep. Trey Martinez Fischer, D-San Antonio, has previously urged the city of San Antonio to consider legally challenging Abbott’s veto, noting that the new building is expected to play a key role in the revitalization of the city’s East Side area.

See here, here, and here for the background, and here for the AG opinion. I’m not qualified to address the legal points of this, but it’s hard to escape the feeling that the fix was in. I said before that this probably needs to be resolved by the Supreme Court, so I hope the city of San Antonio takes up TMF’s call to sue over this. Perhaps a better question to ask, especially of Republicans, is if it’s such a good idea to expand the Governor’s powers in this way. It’s certainly open to debate whether this is a good idea or not, but shouldn’t we at least have that debate? I’m just saying. The Chron and Trail Blazers have more.

Hegar punts LBB veto issue to Paxton



Describing the debate as one that “goes to the heart of separation of powers within Texas government,” Comptroller Glenn Hegar announced Wednesday that he will not authorize more than $200 million in funds approved by the Texas Legislature but vetoed by Gov. Greg Abbott as the comptroller waits for the attorney general to settle the issue.

“There are complex questions related to the governor’s vetoes, so I am seeking clarity and requesting guidance from the attorney general’s Office,” Hegar said in a statement.


For several weeks, the issue was awaiting a decision by Hegar, the state’s chief financial officer. The governor’s office strongly disagreed with the budget board, sending a 29-page memo to Hegar decrying the Legislature’s attempt to use “magic words” to block the governor’s authority.

On Wednesday, Hegar said he would not dole out the funds at issue for the time being.

“I am lapsing the funds for all items objected to by the Governor and will treat the items in question as vetoed,” Hegar said. “However, if advised otherwise, those appropriations can be made available immediately.”


Hegar’s decision comes less than a week before the start of the fiscal year on Sept 1, when the budget approved by lawmakers this year goes into effect. His 15-page request to Paxton demonstrates the complexity of the dispute. Because Abbott’s vetoes targeted budget riders rather than appropriations, Hegar seeks clarity on not only the validity of the vetoes but also what to do about the impacted agencies’ budgets if the vetoes are upheld. Should Hegar reduce each agency’s budget by the vetoed amount? And if those agencies can still get the funding, can those agencies then choose to spend some of their budgets on the projects Abbott vetoed anyway?

“This is a constitutional issue that goes to the heart of separation of powers within Texas government,” Hegar said. “I have a fiduciary duty to Texas taxpayers to ensure their hard earned dollars are spent in a manner that is consistent with the constitution of the state of Texas.”

See here and here for the background, and here for the AG opinion request. Putting aside my lack of confidence in Ken Paxton, I kind of think this one needs to be settled by the Supreme Court. The Lege can then take a crack at clarifying what the Constitution says if it wants. We’ll see how it goes.

Still reviewing the video on the line item vetoes

Any day now.


With varying degrees of concern, a smattering of government offices and higher education institutions around the state are waiting to learn the fate of more than $200 million in funds that the governor might — or might not — have excised from the state budget.

The Legislative Budget Board is challenging several of Gov. Greg Abbott’s line-item vetoes, arguing in a July 21 letter to Comptroller Glenn Hegar the governor has no authority to veto some of the items because they were included in budget riders. The challenged vetoes include funds for public projects and money for research at colleges and universities.

“The Comptroller’s Office is reviewing the documents provided and working to determine next steps,” spokeswoman Lauren Willis said Thursday.

Abbott is pushing back against the challenge, even encouraging potential political donors to help.

“Unelected bureaucrats want to strip Governor Abbott of his line-item veto authority in order to grow government and increase spending and debt. Join our fight with a contribution!” his campaign wrote in an email Wednesday that linked to his donation page.

Abbott has repeatedly boasted he cut off $386,000 meant for the Southern Regional Education Board, a nonprofit that helps states develop education policies, that would have been used “to finance the promotion of Common Core,” a charge the Board has denied.

The largest item vetoed would have provided $132 million to build a new state office building in San Antonio to replace the G.J. Sutton State Complex.

“The renovation project was intended to play a major role in the revitalization of the East Side and would have been an enormous boon to the City of San Antonio,” state Rep. Trey Martinez Fischer, D-San Antonio, wrote in an email to the San Antonio mayor and city council last week. “I find Governor Abbott’s unprecedented and possibly unconstitutional actions deeply worrisome.”

Martinez Fischer encouraged the city to consider legally challenging Abbott’s veto if necessary.

See here for the background. It’s hilarious to see Abbott fight this by appealing to donors decrying his battle against “unelected” enemies – you know, like Joe Straus and Dan Patrick, who has been his typically weaselly self in all this – but that’s your modern Republican Party for you. In the end, the amount of money involved is a pittance, though the project in San Antonio sounds like a fairly big deal, but the spectacle is what it’s all about. It’s just a matter of posturing and trying to be the most macho, as that’s what they care about the most. See this Trib story and Burkablog for more.

Vetoes: You’re doing it wrong



Some of Gov. Greg Abbott’s line-item vetoes in the state budget might be invalid, the state’s Legislative Budget Board said in a 14-page letter sent Tuesday to Texas Comptroller Glenn Hegar.

The director of the LBB said the governor’s veto proclamation, listing line items he chose to excise from the new budget, doesn’t have the effect Abbott apparently intended.

“The Proclamation from June 20, 2015 seeks to veto the appropriation for a number of purposes and programs contained in House Bill 1,” LBB Director Ursula Parks wrote. “However, in nearly all instances the Proclamation does not veto the actual appropriation but rather seeks either to veto non-appropriating rider language or informational items. As it is the case that the Governor may only veto items of appropriation, for the reasons outlined below I believe that many of the items in HB 1 referenced in the Proclamation remain valid provisions.”

That letter amounts to a rebuke of sorts from the leaders of the Legislature to the new governor. The LBB is co-chaired by Lt. Gov. Dan Patrick and House Speaker Joe Straus, and its members include the chairs of the House Appropriations and Senate Finance committees who write the budget, along with six other legislative leaders from both chambers.

“In our analysis, most of the actions in the Proclamation have the effect neither of actually reducing agency or institution appropriations, nor indeed of eliminating legislative direction on the use of funds,” Parks wrote. “The Proclamation seeks to go beyond what is authorized in the Texas Constitution, is in many respects unprecedented, and is contrary to both practice and expectation since adoption of the Texas Constitution in 1876.”

Abbott’s office received the letter Tuesday afternoon and did not have an immediate comment, but argued in a memo last month that the governor’s vetoes were within the law. Lauren Willis, a spokeswoman for Hegar, said the comptroller’s office is still reviewing the LBB letter.

It says, in effect, that the governor vetoed items in the budget that he doesn’t have the power to veto, an assertion Parks sourced back to Abbott himself. In his proposed budget earlier this year, Abbott said that he wanted to expand the governor’s line-item veto authority and suggested amending the state constitution to take care of that. The Legislature made no such amendment.

“The implication in this statement supports the analysis that the Constitution currently provides limited and specific authority in this area; authority that the Proclamation seeks to extend,” Parks wrote.

The LBB letter is here, and the Abbott memo on which it was based is here. Nothing like having your own words used against you, is there? This isn’t a LePage level of failure, but it would be pretty embarrassing if it holds up. On the plus side for Abbott, his buddy Dan Patrick is there for him, even though he is also on the LBB. Intrigue! Ross Ramsay has more.

Reforming property tax appraisal protests

From the inbox:

Sen. Rodney Ellis

Sen. Rodney Ellis

Senator Rodney Ellis (D-Houston) releases the following statement regarding Senate Bill 1084, his bill to create a fairer property tax appraisal system in Texas:

“Homeowners and local communities across Texas are shouldering an unfair burden when large commercial property owners manipulate the property tax system to drive down their property values and property tax bills,” said Senator Ellis. “While most homeowners pay taxes on the real value of their property, many large commercial property owners routinely use appeals and lawsuits to avoid paying their fair share. When large commercial property owners shirk their responsibility, ordinary homeowners pay more property taxes to make up the difference. That’s not fair, it’s bad public policy, and it needs to change.”

SB 1084 closes the loophole related to how owners of business properties worth more than $1 million present their cases in court. No longer can lawyers for these property owners game the system, “cherry-pick” properties, or make adjustments that do not follow generally accepted appraisal techniques just to drive down their appraised value. Instead, they must select a reasonable and representative sample of comparable properties located within the county and based on similarities in location, square footage, age, and other conditions.

Relief can only be granted by a court if the appraisal ratio of the property exceeds the median appraised level of the comparable properties by 10 percent.

The bill also requires the Comptroller to adopt rules that establish standards for the equal and uniform appraisal of industrial, petrochemical refining and processing, and utility properties. Lastly, the bill allows courts to award attorney’s fees to appraisal districts that establish that the property in litigation was appraised in an equal and uniform manner.

The Legislative Budget Board examined the issue in the agency’s January 2015 Texas State Government Effectiveness and Efficiency Report. SB 1084 is based on LBB recommendations, as well as numerous meetings with homeowners, appraisers, counties, and cities around the state.

Photos from today’s press conference can be viewed and downloaded here. Video of the press conference can be viewed here.

As you know, this subject has been a minor obsession of mine lately; see here and here for examples. The game is rigged, with a small number of high end properties essentially dictating what their taxes are, while appraisal districts and the vast majority of homeowners are left holding the bag. I don’t know what the odds are of this bill – the Houston Business Journal reports that there are several similar bills out there, including a couple by Republican Senators, though I can’t say how any of them compare to SB1084 – but any step in the direction of fairness and equity is long overdue. Better Texas Blog has more.

Appraisal caps back on the agenda

The idea will never die, unfortunately. No matter what the effects are.


Local officials in the Houston area say they are concerned that incoming state leaders will push for tax relief measures that could limit their ability to meet the needs of fast-growing urban and suburban areas.

Gov.-elect Greg Abbott has spoken of “looking at ways that we can try to provide some level of tax relief,” and it was also a key platform of the incoming lieutenant governor, Dan Patrick. With rising assessments driving up tax bills in many suburban counties, some lawmakers have proposed reining in such increases. Proposals include making it easier for residents to call a tax rate election when property tax revenue comes in high to lowering the cap on taxable home values.

Harris County Judge Ed Emmett said he is concerned about state lawmakers potentially tying the hands of county officials to set tax policy and provide adequate services.

“If you lower property taxes, someone is going to have to tell counties like Harris what services you don’t want anymore, because we’re barely funding our mandated duties as is,” Emmett said.


Other proposals submitted so far in early bill filings for 2015 include hiring county-level tax experts, lowering the appraisal cap from 10 percent, expanding exemptions, capping revenue growth based on a formula that considers population and inflation, and abolishing property taxes altogether, replacing them with a modified sales tax.

“The devil is in the details,” said Fort Bend County Judge Bob Hebert. “Depending on how they cap it, it could shut down how Fort Bend serves the county. I think there’s a reasonable solution to it if we get everyone to be reasonable.”

Bennett Sandlin, executive director of the Texas Municipal League, agreed that some of the proposals could provide taxpayers with relief without crippling the budgets and autonomy of local leaders.

“We’re always open to the idea of appraisal reform, but we’re not fans of the revenue-capping idea,” Sandlin said. “The revenue cap takes discretion away from the governments closest to the people. It’s the state saying, ‘We know what’s best.’ ”

If the Legislature actually cared about making the appraisal system better and fairer and more equitable, there’s lots they could do to make that happen. That’s not what they’re interested in, of course. It’s the usual wingnut wish list of cutting taxes for the wealthy and limiting spending for no good reason. You’d think these legislative Republicans would be leery about making Texas be like California, but irony died a long time ago and left no successor.

Besides, it’s not like there aren’t other ways to arbitrarily limit spending.

The Legislative Budget Board voted unanimously Monday to set the state’s growth rate at 11.68 percent for its 2016-17 budget, about 1 percent higher than the spending cap for the current budget.

The decision comes as state officials expect to enter the next legislative session in January with a multibillion-dollar surplus and competing factions push to ramp spending growth both down and up.

The budget board — made up of Lt. Gov. David Dewhurst, House Speaker Joe Straus, and four members each of the state House and Senate — selected the rate with little discussion, though the decision could have a big impact on next year’s legislative session.

The growth rate guides how far the next budget can exceed the current one in spending on “nondedicated revenue,” which are the parts of the budget that are funded by state taxes but not required to go to specific programs. In practice, the growth rate puts a spending cap on less than half of the state’s two-year budget. State leaders have indicated they have no plans to attempt to “bust the spending cap” next year, a move that would require the support of a majority of lawmakers.

That 11.68 percent growth rate was the low end of the range. Moody’s pegged the state’s growth rate at over 15 percent. Ah, but what do those private sector yahoos know about anything, am I right?

From the “Simple answers to simple questions” department

The Statesman asks “Would Dan Patrick’s tax plan lower your taxes?”

Efforts to shift toward sales tax in lieu of property and income taxes have in recent years gained momentum in Republican-led states — even as economists warn that this sort of tax reform is likely to harm the majority of taxpayers.

Economists point out that sales tax is highly regressive, meaning its net result is savings for wealthy people, who enjoy a lower tax rate overall; poor and middle class taxpayers, however, pay more tax as a proportion of their income and thus bear a heavier burden for funding government services.

Texas’ tax system is already considered regressive because it doesn’t levy a personal income tax and instead relies heavily on sales tax, the state’s single biggest source of nonfederal income, $27.4 billion in fiscal 2014.

Counting both sales and property taxes, Texans who earn less than $19,000 a year are taxed an average of 12.6 percent of their income, according to a 2013 study by the Institute on Taxation and Economic Policy, a nonpartisan think tank in Washington.

The institute found that a family earning $32,000 to $52,000 — the middle 20 percent — will be taxed an average of 8.8 percent of their income. The top 1 percent of earners, those earning $437,000 or more, are taxed a much lower average of 3.6 percent.

Matt Gardner, executive director of the nonprofit institute, says this disparity will likely worsen if sales tax is increased to buy down local property taxes, as Patrick has proposed.

“Unless you have some way to offset the increase in sales tax, it’s pretty clear that this is going to hurt low-income people,” Gardner said.


The Lone Star Card piece of Patrick’s plan appears similar to a failed 2005 proposal, which was nixed from tax reform legislation that cut property taxes paid to school districts and swapped that funding with state sales taxes. This is the measure that allowed the state to cut $5 billion to public schools in later years and spurred a protracted court battle between school districts and the state (a state district judge, citing several reasons, ruled for the second time in August that this financing scheme unconstitutional).

The nixed piece of that plan was a proviso to raise the sales tax rate from 6.25 percent to 6.75 percent, along with a package of other excise taxes and tweaks that would have replaced $4.3 billion in property taxes with $4.8 billion in other taxes.

In the same way that Patrick touts his tax plan would either result in a net neutral or net reduction in total taxes paid by Texans, the Legislative Budget Board in 2005 calculated the fiscal impact of that swap would result in a “net reduction to individuals.”

But beneath that neutrality — the total amount of taxes paid wouldn’t increase — is a stark disparity in distribution. Those with annual incomes in the low $10,000s, the board calculated, would have paid $8.1 million more in taxes by 2007. Middle-income taxpayers, those earning from the $40,000s to low $50,000s, would have paid $151 million more.

Those at the highest income level, $140,000 a year and up? They would have seen a $212 million decrease in their tax liability.

Remember the Legislative Budget Board analysis of that 2005 tax swap plan? It has the answer to the question posed above: Unless you’re in the top five percent, your taxes will be going up. There’s nothing complicated about this. In any “revenue neutral” tax plan, some people win and some people lose. Is anyone surprised at who the winners and losers are in Dan Patrick’s world? I guarantee, this will still be the case when he inevitably comes up with a plan that gets scored as a net tax cut. It will be a big cut for a small number of people, and at best a wash if not an outright increase for everyone else. It doesn’t matter that he hasn’t specified any details yet. They don’t really matter to him anyway – it’s the big picture that counts. This is who he is, and this is what he wants. It’s right there in plain sight.

We really should have expanded Medicaid

We know it would have done a lot of good, at a very reasonable cost. Turns out that cost was even less than what we had been told.

It's constitutional - deal with it

It’s constitutional – deal with it

News reports and state officials have commonly stated that expanding the Medicaid program in this fashion would cost the state about $15 billion over 10 years. Except, that figure, provided by the state Health and Human Services Commission, is actually an estimated total cost for all aspects of the Affordable Care Act, many of which the state is going to have to pay for even though state leaders have remained steadfastly opposed to almost all aspects of the law.

“What?!?,” you say?

In a presentation given to lawmakers in March 2013, state Health and Human Services Executive Commissioner Kyle Janek estimated that because of the publicity and outreach involved with the Affordable Care Act, more people who are eligible for Medicaid but not currently part of the program would likely enroll. The estimated price tag? About $6 billion over 10 years, or approximately 40 percent of the total Affordable Care Act implementation cost.

According to that presentation, the estimated cost for expanding Medicaid eligibility to all adults who make less than the 138 percent of the poverty level was about $8.8 billion over 10 years. However, the Legislative Budget Board, the Legislature’s budget arm, came up with a far lower cost estimate of about $4 billion over 10 years. The differences can be attributed to two factors, HHSC spokeswoman Stephanie Goodman said. First, HHSC projects that more people will join the Medicaid program than the LBB does; and second, HHSC projected it would cost more to provide the coverage than the LBB does.

Secondly, assume that $1.5 billion figure is correct and that adding it to the state budget would cause taxes to skyrocket and the state’s economy to crumble. However, it begs the question why that hasn’t already happened. Taxpayers in the five major urban counties in Texas — Harris (Houston), Dallas, Tarrant (Fort Worth), Bexar (San Antonio) and Travis (Austin) — already shell out more than $1.5 billion a year in hospital district taxes to provide care and facilities for their largely indigent populations. A study commissioned by Methodist Healthcare Ministries and Texas Impact estimated total local government spending on providing health care at roughly $2.5 billion a year.

Thirdly, expanding Medicaid would produce additional revenue for hospital districts, potentially allowing county governments to cut their tax rate. In Bexar County, hospital district officials estimate that expanding Medicaid would save them $52 million a year, roughly 20 percent of the amount of revenue they get from the hospital district tax, and County Judge Nelson Wolff said he would cut property taxes to pass on the savings if it were approved. In Harris County, hospital district officials say the expansion of Medicaid would mean they would receive an additional $77.5 million in reimbursements, or roughly 15 percent of their tax revenue, based on 2013 financials.

Sure would have been nice to get that extra revenue to help pay for what we’re already paying for, wouldn’t it? We can still take advantage of it if we want to. All it takes is a different set of leaders in our state government.

On a side note, remember that the 7.1 million figure you’ve been hearing for Obamacare signups is just for people going through the webpage. It doesn’t count state exchanges, Medicaid enrollments, or people who got ACA-compliant policies outside of the exchange. Those first two numbers would surely have been a lot higher nationally had it not been for the cruel and mulish refusal by governors like Rick Perry to create state exchanges and expand Medicaid. There was an increase in Medicaid enrollments across the country, as people who had been eligible all along but didn’t know it or hadn’t gone through it did so thanks to the publicity push from Obamacare. Of course, the total enrollment count was much higher in states that expanded Medicaid, but Texas saw new enrollments as well. That 7.1 million number will likely be higher as well when all is said and done, thanks to some lag in the system. I’ll say it again – just imagine how many more people this law could have helped if only everyone agreed that providing coverage to as many people as possible was a worthy goal and not something to fight against. EoW has more.

Collier hammers Hegar for property tax idiocy


Mike Collier

Mike Collier

During the recent Republican primary for state comptroller, state Sen. Glenn Hegar repeatedly endorsed eliminating local property taxes in Texas.

Borrowing from GOP opponent Debra Medina’s 2010 playbook, Hegar urged a shift to sales taxes to make up the more than $40 billion a year of revenue that cities, counties, school districts and other local governmental entities would lose.

Hegar, R-Katy, even suggested a very rapid transition to the new tax system. At a Longview tea party gathering in January, he told a man in the audience, “You just do it.”

This week, though, the governing implications of so massive a shift seem to have cooled Hegar’s jets.

Burying the property tax, after all, would require leaders to more than double the current rates of all state and local sales taxes.

See Exhibit 1 on page 1 (or page 5 of the PDF) of this comptroller’s report. You can readily see that state and local sales taxes, combined, yield about 32 percent of all state and local tax revenues in Texas. That compares with a whopping 47 percent raised by local property taxes. You get the picture.

On Thursday, Hegar campaign manager David White said Hegar “has been clear that we are many years away from being able to implement such” a shift from property tax to sales tax.

White repeated a response he gave The Dallas Morning News on Tuesday, saying “Glenn will review all options to reduce the burden on taxpayers.”

Democratic comptroller nominee Mike Collier, though, has blasted Hegar’s happy talk on property tax during the primary. Collier, a Houston businessman, called it an “unimpeachably bad” policy idea that would produce a monster increase in sales tax, shift power away from localities to the Legislature and “put our schools at unnecessary risk.”

He warned Hegar’s “promise” to eliminate the property tax would require sales tax “to be at least 20 percent — and possibly as high as 25 percent.” In most Texas cities today, the combined state-local sales tax rate is 8.25 percent. Collier even created an online petition drive so voters can protest “Senator Hegar’s sales tax.”

However, in a Thursday email blast that urged people to sign the petition, Collier incorrectly called Hegar’s proposal a “massive tax increase.” In recent years, Republicans have only advocated tax swaps, which presumably would be revenue neutral.

Still, Hegar seems to be switching gears on property tax abolition, pivoting from a “just do it” battle cry to a chin-stroking, “many years away” proposition. The rhetorical shift has given Collier an opening to start the general election battle — in March, not September.

Actually, Hegar’s idiotic idea would be a “massive tax increase” for a large majority of Texans. The whole idea of a tax swap is that some people wind up paying more, while others wind up paying less. The Republicans have floated various tax swaps in the past, and I’m sure you’ll be shocked to learn that a wealthy minority benefits greatly from them, while everyone else pays more. It’s true, as some people note in the comments to that story and on Collier’s Facebook page, that renters pay property taxes as part of their rent. Let me ask you a question: Which do you think is the more likely outcome of a Hegar-style tax swap – a massive, statewide reduction in rents, or a massive, statewide increase in profits for landlords? Take all the time you need before answering.

Anyway. Whether someone finally explained the math to Hegar or he realized that he might need to do more of a campaign than just pandering to fanatics, he has shifted from “we can do this right now!” to “this idea is many years away from implementation”. And in doing so, he earned a bit of media for Mike Collier. More like this, please. BOR and EoW have more.

There are no new ideas, but there are plenty of bad ideas

There’s so much wrong with what Greg Abbott wants for Texas that it’s hard to know where to begin.


In his first major policy address as a gubernatorial candidate, Attorney General Greg Abbott proposed tighter constitutional limits on state spending and increased constraints on the multibillion-dollar Rainy Day Fund.

Abbott laid out his “Working Texans” plan, which is based on fiscal reform to reduce the scope of government, during a campaign stop Monday in Brownsville.

Abbott said that if he were elected governor, he would propose two constitutional amendments to keep state spending tied to population growth and inflation and to safeguard the Rainy Day Fund, the state’s savings account, from “being raided” by the Legislature.

Additionally, Abbott said the governor should be given “expanded line-item veto authority” to reduce excessive spending. He will face former Texas Workforce Commission Chairman Tom Pauken in the 2014 Republican primary.

“I am willing to take on the task of making difficult decisions to reduce government spending when at times the Legislature may not be able to do so,” Abbott said, according to prepared remarks, adding that the state has seen “a troubling trend” of using the Rainy Day Fund to cover “what should be core government operations and expenses. “

Instead, Abbott wants to limit the excessive spending of the fund by only allowing it to be used to meet unforeseen revenue shortfalls, to reduce existing debt, to pay for state disaster relief and to address one-time infrastructure payments.


In his proposal, Abbott also emphasized the importance of finding a permanent source for additional transportation infrastructure, including a proposal to constitutionally divert a portion of the motor vehicle sales tax to road construction and maintenance.

“We need to stop diverting transportation funding away from building roads,” Abbott said. “Money raised for roads should be spent on roads.”

Texas Politics has this in bullet point form. Let me open with what Burka has to say:

Abbott’s ideas will have the effect of constricting the state’s economy rather than expanding it. He says next-to-nothing about public education, for example, nor does he address health care; in other words, he ignores the two biggest and costliest areas of state services. The only solace one can take in Abbott’s vision for the future of the state is that it resolves the question of whether he would be better or worse than Rick Perry. Astonishing as it may seem, I think he is worse than Perry.

The question must be asked: Is Abbott’s vision what Texans want for their government — or their families? Is this really a state whose leaders have no interest in improving the lives of its citizens? Is Texas really going the way of Arkansas and other backward states where all that matters is guns?

Well, there’s also hating on gays and “illegal immigrants”, plus suing the federal government, but you get the idea. I guess it hasn’t occurred to Abbott that the reason we’re dipping into the Rainy Day Fund for a water infrastructure bank is because we have a vast unmet need for water infrastructure projects and no other politically acceptable way to pay for them. He’s also probably not noticed the gaping hole in Texas’ transportation funding, and the fierce resistance to any way of paying for some of it. Oh, and there’s also the judgment against the school finance system – the suit is being relitigated, but I don’t expect a substantially different outcome – and the millions of uninsured Texans that he and his cronies try not to acknowledge. Clearly what we need is a rigid and restrictive spending cap, because that will solve all these problems with the magic of the free market, or something like that.

The Observer shows the degree of Abbott’s ignorance on the subject.

The idea of tying spending to inflation and population growth is not a new one. It’s been popular among elements of the right for years. The Texas Public Policy Foundation, uber-activist Michael Quinn Sullivan and even Perry have flogged the proposal for years. But it’s never gone anywhere for two main reasons—one, there is little appetite in the Texas Legislature for tying their own hands; two, it’s a bad idea.

Texas is already a (relatively) low tax, minimal services, small government state. Indeed, as Nate Blakeslee pointed out in a January Texas Monthly profile of Sullivan, state spending as a share of both the state’s gross domestic product and personal income has been trending downward for two decades. For personal income, which is what the Comptroller uses to set a spending limit, the share of spending has decreased from around 5.2 percent in the early ’90s to just over 4 percent today. Even using the population-plus-inflation spending limit, Texas’ budget has stayed under that limit for the last decade, according to an analysis by the Legislative Budget Board.

In other words, there’s just not a spending problem in Texas. Which is not the same thing as saying there’s an inequity problem when it comes to how revenues are collected (not having a state income tax, for example, means the poor and middle class take it on the nose with regressive sales and property taxes).

Still, tying the state’s budget to inflation and population growth could further constrain state government. You could pretty much forget about ever investing more in public schools, higher education or infrastructure, at least during non-flush times.

In April, the Legislative Budget Board crunched the numbers. The growth in personal income used to set the spending cap for 2014-2015 was 10.71 percent. In other words, the state could spend almost 11 percent more than it had the previous biennium. Using population growth plus inflation instead would limit spending growth to 6.82 percent. That would mean $2.7 billion less for state leaders to work with. That’s not a huge number given that the 2014-2015 state budget includes $95 billion in general revenue. But lowering the spending limit now would have a compounding effect over time.

That’s probably the point—force future generations to subscribe to the current model of low-ish taxes and minimal services. Abbott more or less admitted as much during a press confab after his Brownsville speech.

“By imposing these standards by constitutional provision it means that for generations there will be limits in the growth of spending in this state,” he said, according to the Associated Press.

However, the Legislature has shown little appetite for any of the proposals Abbott is touting. A bill tying the spending limit to population-plus-inflation is filed every session… and goes nowhere.

The Lone Star Project points out that much of what Abbott is proposing is constitutionally redundant as well. The good news is that by going the constitutional amendment route, Abbott starts from a position of not having enough votes for his ideas, and being unlikely to get any more support for them. But the best way to prevent bad ideas from gaining a foothold is to beat them back at the ballot box.

Turner seeks a way to get around Public Integrity Unit de-funding

Rep. Sylvester Turner takes aim at one of Perry’s vetoes.

State Rep. Sylvester Turner

State Rep. Sylvester Turner

Rep. Sylvester Turner, D-Houston, said he would propose a House Concurrent Resolution advocating restoration of funding for the Public Integrity Unit of the Travis County district attorney’s office, which was vetoed by Gov. Rick Perry last week.


This morning on the floor of the Texas House, Turner raised what options lawmakers have in responding to the veto. Afterwards he told reporters he would seek the resolution for restoring the funding.

“Over the last 10 years, there have been attempts to eliminate, weaken, move the public integrity unit from Travis County to the AG’s (attorney general’s) office and over the last 10 years the Legislature has said no,” Turner noted. “We are entitled to know where the funding will come from or what the plan is. Is it the intent of the state to say no to the Public Integrity Unit, to significantly weaken it?”

Turner questioned Perry’s use of his veto power to influence who holds a particular office.

“I am just not comfortable with vetoing funding because some people here have problems with one person,” he said

A concurrent resolution is basically just a “sense of the chamber” vote, so even if such a thing passed (which I doubt) it wouldn’t compel anyone to do anything. This is about sending a message. The politics of this situation are increasingly complex, but there’s a good case to be made that whatever you think of Rosemary Lehmberg and her sins, it’s not up to Rick Perry to force the issue. There’s a process in place that is already in motion, and Perry’s involvement is a conflict of interest.

More on this in the Statesman:

From the back microphone of the Texas House, Turner asked Speaker Joe Straus if any options exist to fund the unit.

Straus said after Monday’s meeting of the House that his office would do some research for Turner.

“With the questions from Mr. Turner and others, it’s certainly something that we should explore with the governor and with the Public Integrity Unit personnel. I’m assuming that the governor’s office has considered this,” Straus said in an interview. “We just have to assess where we are, and what the implications are as we go forward.”


Also Monday, state Rep. Steve Toth, R-The Woodlands, asked from the House floor if funding could be revived if Lehmberg resigns.

House leaders didn’t have an immediate response.

But Dale Craymer, president of Texas Taxpayers and Research Association, had a thought. The former top budget official for Govs. Ann Richards and George W. Bush said it is possible to restore funding through budget execution action, which involves the governor and the Legislative Budget Board agreeing on moving money from other parts of the budget.

I can’t claim to be optimistic about anything happening to counter Perry’s veto, but clearly we are in uncharted territory. Rep. Turner in particular got a lot done in the budget deal, so I would not discount his efforts.

On a related note, Travis County Commissioners Court is exploring its options as well.

Travis County commissioners will discuss the legislation and the governor’s actions on their agenda around 11 a.m. Tuesday.

“We likely will not take action tomorrow, rather just discuss this issue,” County Judge Sam Biscoe told KVUE. “There are a lot of unanswered questions. I have sent a list of questions to the county attorney to understand our authority and limitations on this matter. I also want to know whether the governor’s decision can be reversed by himself or the Legislature before September 1, 2013.”

Biscoe says the commissioners will address the item and then go into executive session. They will likely take action on June 25.

“From my understanding, the revenue from that unit goes to residents of Texas as well as the state and federal government. I personally don’t see the benefit of fully funding the unit if the money goes to outside agencies. We will explore the issue,” said Biscoe.

The main thing I’d be concerned about is that if Commissioners Court picks up the slack, what incentive does the Lege have to fund the PIU in a future session, post-Lehmberg? This is the same dilemma school districts that had room to raise their tax rates faced after the massive cuts to public education in 2011. A one-time fix can quickly be seen as the new normal.

Texas Lottery Commission dies and is reborn

And we have our first curveball of the legislative session.

Is this the end?

The House voted Tuesday to defeat a must-pass bill reauthorizing the Texas Lottery Commission, a stunning move that casts doubt on the lottery as a whole and may potentially cost the state billions in revenue.

House Bill 2197 began as a seemingly routine proposal to continue the operations of the commission that oversees the lottery until September 2025. But opposition mounted after one lawmaker called it a tax on the poor, and the House eventually voted 82-64 to defeat the measure.

A short time after the vote, the House called an abrupt lunch recess and could reconsider the measure if any lawmaker who voted against it offers such a motion. Unless lawmakers reconsider, the commission would begin a one-year wind down, and cease to exist by Sept. 1, 2014.

“There are more members than I thought who are against the lottery and just have a psychological aversion of it,” said Rep. Rafael Anchia, D-Dallas, who sponsored the failed bill.

The state Senate has yet to consider the matter, but it can’t because the so-called “sunset bill” on the Lottery Commission initiated in the House.

For now, there’s no one to operate the lottery, which means a potential loss of $1.04 billion in annual revenue for the Permanent School Fund and $27.3 million to cities and counties from charitable bingo.

The state budget already under consideration in the Legislature has factored in the $1.04 billion — and losing the lottery proceeds would create a deficit lawmakers would need to fill.

Here’s HB2197. I think it’s fair to say no one saw this coming. Here’s more from the Trib:

During a spirited debate on the bill, state Rep. Scott Sanford, R-McKinney, got a round of applause in the House as he spoke against the bill, calling the lottery a “predatory tax” and “a tax on poor people.”

As soon as the vote was over, House leaders were already discussing possible workarounds to keep the programs going. Anchia said the House may reconsider the vote.

Texans spent $3.8 billion on lottery tickets in the 2011 fiscal year, according to the Legislative Budget Board. The majority of that was paid out to players and retailers, with $963 million transferred to the Foundation School Account. Another $8.1 million was transferred to the Texas Veterans Commission.

Anchia warned that charity groups around the state would be outraged at learning they could no longer host bingo games.

“VFW Bingo’s dead now,” Anchia said. “They’re going to have to go back to their constituents and explain why bingo is illegal.”

I don’t disagree with what Rep. Sanford says, though I wonder if he will feel the same way when the payday lending bill comes to the House floor. In the end, however, everyone sobered up after taking a lunch break.

In a 91-53 vote Tuesday afternoon, the Texas House passed House Bill 2197, continuing the the Texas Lottery Commission. An earlier vote Tuesday had failed to continue the commission.

Bill supporters spent the hour after the first vote impressing on those who voted against it the impact of cutting $2.2 billion from schools. The House Republican Caucus hastily assembled to discuss the situation.

“I think when people took a sober look at the budget dilemma that would ensue, they voted different,” said state Rep. Rafael Anchia, D-Dallas, the bill’s author.

Several lottery critics in the House saw the day’s drama as a victory, setting the stage for a more thorough debate on the lottery in the future. Public Education Chairman Jimmie Don Aycock, R-Killeen, said he originally voted “no” largely to make clear his opposition to gambling. Once that statement was made, it made more sense to back the Lottery Commission for now.

“I don’t like gambling, but I do like school funding,” Aycock said. ‘It was, for me, at least, a signal vote. I sort of anticipated I would switch that vote when I made it.”

State Rep. Lon Burnam, D-Fort Worth, said school funding was also the primary motivator for his switch.

“When you weigh principle vs a billion dollars in public ed, I set aside my principle for a billion dollars in public ed,” Burnam said. “I still hate the lottery.”

I had always wondered why they vote on bills three times in the Lege. Now I understand. Having had their fun and having made their statements of principle, if the Lege is serious about wanting to eliminate the Lottery, let’s go about it in the next session by filing a bill and letting it go through the usual committee process, mmkay? Thanks. BOR, who notes that failure to pass this bill could have led to a special session, and Texpatriate have more.

Bad ideas never die

And so we find ourselves once again talking about tax breaks for yacht buyers.

Just think how much you would save on this baby

From capping the sales tax on yachts to phasing out the state business levy, some lawmakers are pushing for tax breaks even as others say the system is already riddled with too many special-interest exemptions.

The breaks are most often cast as a driver for economic development, and a Monday hearing on the yacht tax break was no exception.

Senate Bill 862 “is not about giving tax breaks to the rich. It is all about jobs and protecting our Texas economy,” said Sen. Larry Taylor, R-Friendswood, who pitched it before the Senate subcommittee on fiscal matters as necessary for the state to compete for boat business.

The subcommittee, which left the bill pending, is trying to have hearings on at least a representative sampling of the tax breaks that have been proposed, said its chairman, Sen. Glenn Hegar, R-Katy. “Obviously, the question always becomes do they, at the end of the day, provide a benefit to the taxpayers overall?” said Hegar.


A similar measure sank two years ago. Backers emphasized then, as they are now, a decision by Florida to cap its sales and use tax at $18,000. They said that has prompted buyers to purchase and keep their boats in Florida.

As filed, the legislation would cap the amount of boat tax at $15,625 per retail sale, the amount typically paid for a $250,000 yacht. Taylor has a substitute to change that to $25,000.

The subcommittee left the bill pending while it awaits a new fiscal note on the change.

As noted, a similar bill was introduced last session, but it did not pass. The fiscal note for SB862 says it would cost $2,893,000 for the upcoming biennium, which is slightly more than the fiscal note of the previous bill. Perhaps the Legislative Budget Board is forecasting more yacht purchases for this biennium, or maybe it’s just that yachts are more expensive these days. In either case, I doubt that Taylor’s substitute bill will make that much difference in this department.

I expended all the snark I have on this two years ago. There’s only so much time available in a legislative session, and it really says something about John Davis and Larry Taylor that they think this particular issue, which would greatly benefit a very small number of people at the expense of the general revenue fund, is worth their limited time and energy. I haven’t even seen a bogus “economic benefit” report on behalf of the yachters, making the usual dubious claims about how much more money this would actually mean for Texas despite the fiscal note, which is telling in itself. As Rodney Ellis says in the story, our tax code is already an unmanageable jumble of bizarre, obscure, and often needless tax breaks that cost billions for no clear reason. We don’t need to add to that.

Senate committee restores some money to public education

Emphasis on the “some”.

Texas public schools would get back a chunk of the $5.4 billion in state funding they lost two years ago under a budget proposal adopted by the Senate Finance Committee on Thursday.

But they probably should not expect much more than the $1.5 billion the committee added to the 2014-15 state budget, said Chairman Tommy Williams, R-The Woodlands.

“It is going to be very difficult given the other demands we have in the budget to add any more,” said Williams.

Williams plans to pay for all the demands, including water projects, highways and some form of tax relief, without exceeding the constitutional spending cap. That would leave about $1 billion of projected state revenue over the next two years unspent. Lawmakers could exceed the cap with a simple majority vote in both the House and the Senate, but there is little appetite within the GOP to do so.

Many Republicans are also reluctant to increase education spending until the Texas Supreme Court rules in the pending school finance litigation. A district court judge found the school finance system unconstitutional earlier this month.

“Based on the politics of the state, we will not see the $5.4 billion that was cut last time go back into” education, said state Sen. Royce West, D-Dallas.

More from the Trib:

The money would come on top of the proposed $35.1 billion in general revenue for public education, which unlike the 2011 budget did, accounts for new students expected to enroll in the state’s public schools. The additional funding approved Thursday would also restore some of the $5.4 billion reduction in state funding that lawmakers passed during the last legislative session. The full Senate must still approve the Finance Committee’s recommendation.

During Thursday’s hearing, lawmakers on the committee suggested they might fight for more education funding, including money for measures like early college high school programs and the Student Success Initiative, which provides remedial help for students who fall behind.

The $40 million for pre-kindergarten — which Sen. Tommy Williams, R-The Woodlands and chairman of the committee, referred to as a “down payment” — would replace a fraction of the $200 million in competitive grants the Legislature eliminated in 2011 for full-day programs for low-income children. The funds would be distributed proportionally to school districts based on eligible student populations.

Again, note the partial and incomplete nature of this. The Observer highlights one salient feature.

Finance chair Tommy Williams (R-The Woodlands) said the new amount would mean “no net revenue losses for any school district for 2014.

You may recall that HISD was talking about raising their tax rate to make up for an operational shortfall next year, which was caused by the 2011 budget cuts. If this extra funding, which keep in mind only represents 28% of the $5.4 billion that had been cut in the first place, prevents the need for that, it would at least be something. That question hasn’t been answered yet.

Anna Eastman, president of the Houston Independent School District’s board, called the Senate panel’s decision a step in the right direction.

“It’s good news and I’m glad to see the state making this effort, but I still think it doesn’t come close to restoring the large cuts made two years ago,” Eastman said. “We’re at a place right now where we have a big gap to fill to maintain what we’re doing.”

Until that gap is closed, Eastman said, HISD cannot consider hiring new teachers or taking on additional costs.

Texas State Teachers Association President Rita Haecker said lawmakers can restore all $5.4 billion cut from school spending in 2011 “and meet other important state needs without raising anyone’s taxes.”

Education Committee Chairman Dan Patrick, who also serves on Finance, disagreed, citing other pressing needs, finite dollars and a constitutional spending cap. The $1.5 billion increase is recommended on top of the committee’s starting-point budget, which accounted for student enrollment growth.

“We don’t have those dollars. It’s not a choice,” said Patrick, R-Houston. Asked whether it may be an option to exceed the spending cap, which would require a majority legislative vote, Patrick said, “Not in my world.”

So yes, it is a choice, just not one that Dan Patrick wants to make. But it’s very much a choice, and don’t let anyone mislead you about that.

Assuming this survives the full Senate and the House, this is good in the sense that it’s not bad, but it’s not good in a quantitative sense. How can it be, when schools are still down almost three quarters of the original total? I’ve been trying to come up with a snappy analogy for this, but really, what it comes down to is simply the fact that the Lege cut a bunch of money last time, and has now restored just enough of it to keep things from getting worse, but not enough to make anything better. We’re stuck with this until the Supreme Court rules on the school finance appeal. Just take a look at that chart I embedded above of inflation-adjusted dollars per student, provided by the office of Rep. Gene Wu, and you’ll see how little that $1.5 billion will do.

On a side note:

The committee left just one piece of the education budget in limbo: funding for a new charter school authorizer that would be created under Sen. Dan Patrick’s Senate Bill 2—a seven-member appointed board to oversee the state’s charter schools.

It was a telling diversion in an otherwise agreeable budget meeting to watch a pair of Democratic senators try to make Patrick, the usually tight-fisted tea party favorite, defend the extra cost of his school reform plans.

Dallas Democrat Royce West began by saying he wasn’t convinced Texas should create a separate board for authorizing charter schools. That’s already the State Board of Education’s job, West said. He worried about putting charter school approvals in the hands of an unelected board and questioned how they’d be held accountable.

The move clearly irritated Patrick, who said he wished West had told him about his reservations sooner. (West said he already voted against it once in their workgroup, which should have been sufficient notice.) Members of the charter school authorizing board, Patrick said, would probably need Senate confirmation, and might answer to the State Board of Education—though those details aren’t final yet.

SB 2 is still pending in Patrick’s education committee after a hearing last week. The Legislative Budget Board has estimated Patrick’s bill would carry other huge costs to the state, growing every year—from $24 million in 2014, up to $55 million in 2018. Those costs include students coming from private or home-schooling into a charter school, new funding for charter school buildings, and state employees to oversee all the new schools.

Today’s argument focused on what the new Charter School Authorizing Authority would cost.

“Why would we turn to more government as a solution?” Houston Democrat John Whitmire asked Patrick. “Because I know that’s not your philosophy; I do listen to you closely.”

“Instead of fixing the agency that is in charge of this responsibility, you want to turn and create a new bureaucracy, more state employees, and I promise you this [charter school authorizer] budget will not remain where it is,” Whitmire said.

“I will bet you, whoever evaluates us,” Whitmire said, “this will be a measurement by the folks that advocate less government, that we’re creating another governmental entity. It is what it is.”

I wouldn’t take that bet.

LBB calls for expanding Medicaid

From the Quorum Report:


It’s constitutional – deal with it

The recommendation given to the Article II Senate Finance workgroup notes that $50.4 million in state funding would draw down $4 billion in federal match for the next budget cycle

The Legislative Budget Board has included funding to extend Medicaid coverage to low-income adults as part of its list of priorities for additional funding to SB 1, the Senate budget bill.

The state’s political leadership has balked so far at endorsing the program’s expansion, which is a central component of the federal Affordable Care Act. The LBB recommendation, though, stems directly from the size of the federal match and the resultant outsized return on investment for the state.

Or to put it another way, the LBB is acknowledging just how much cash would be left on the table should the state’s leadership ultimately decide against the expansion. Also, the added coverage is expected to drive down governmental health care costs at the local level as fewer people seek care in hospital emergency rooms. Uncompensated care at hospitals amounted to $3.1 billion in 2011, according to LBB figures.

The federal government would cover 100 percent of the cost of coverage for the 2014-15 state budget cycle. Meanwhile, the cost to the state would be $50.4 million to cover half of the administrative costs of the expansion. In turn, the federal aid over the next two fiscal years for the expansion is expected to be $4 billion, according to the LBB. In other words, the state in its next budget would bear 1.2 percent of the total cost of the expansion.

The state’s share could actually be less than that. The LBB earlier recommended allowing the local taxing authorities that bear the biggest burden of paying for uncompensated care provided by hospitals to cover the match.

Burka thinks that freshman Republicans will be happy to hear this, because it means they won’t have to “[tell] their hometown doctors, hospitals, nursing homes, and other healthcare providers to go fly a kite”. I don’t know where he derives that conclusion, as it seems completely out of character for them. Take a look at this Tribune overview of the new legislators and tell me if you see any inclination towards that finding any kind of solution for Texas’ shameful lack of health care access. It’s one statement after another about what they oppose – abortion, “big government”, regulations, and taxes – and the only mentions of health care at all are in the context of opposing Obamacare. I really don’t understand what he’s thinking. Be that as it may, the bottom line continues to be that by any rational evaluation, this is a no-brainer. The only reasons Rick Perry and his legislative cronies have to oppose Medicaid expansion are political zealotry and a deep indifference to the needs of millions of people. EoW has more.

This time it’s different

Why is this school finance ruling different from all other school finance rulings? For one thing, it was way more comprehensive.

The changes needed to correct the constitutional violations [Judge John] Dietz identified could comprise the most far-reaching overhaul of education policy the state has enacted in more than 40 years, said Lynn Moak, a school finance veteran who has testified in all six of the school finance lawsuits dating back to 1987.

“I don’t think it’s an understatement to say that the bill that resolves yesterday’s decision is going to be one of the most comprehensive and far-reaching pieces of legislation that we have seen in the education system certainly over my lifetime,” Moak said.


Dietz’s decision Monday looked much like the court order he issued in 2004, when he heard the previous legal challenge to the school finance system.

At that time, the Texas Supreme Court agreed with Dietz’s finding that the Legislature had effectively imposed a statewide property tax in violation of the constitution. The high court rejected his conclusion that the Legislature had failed to provide adequate resources to meet the state’s academic standards.

This time around, Dietz also declared that the funding differences between school districts are now constitutionally inequitable. He had turned aside that claim from property-poor school districts in 2004.

The funding gap between property-rich and property-poor school districts has grown since the previous case from $965 per student to nearly $1,600, according to data from the Texas Education Agency.

“The facts scream out that there is an equity violation,” said Richard Gray, a lawyer who represented more than 600 property-poor school districts.

The court has said that districts that tax the same must have access to essentially the same amount of funding. It is the state’s constitutional obligation to even out the differences among property-poor districts and their wealthier peers.

The fix implemented after the last lawsuit, which involved freezing the amount of per-student funding each district got, contributed to the inequity problem that Dietz ruled was unconstitutional. If the Supreme Court upholds this, it’s going to be a big effing deal.

On a side note, please read this. The key takeaway:

Bottom line: While the claim that the state has increased spending on public education is technically correct, data from the Legislative Budget Board, which accounts for inflation, shows that state spending has largely flat-lined — even before accounting for the roughly 70,000 students who enter the school system each year.

That was a key aspect of Judge Dietz’s ruling as well. The budget cuts of 2011 exacerbated the problem, but it was a problem even before that. Assuming the Supreme Court doesn’t gut Judge Dietz’s ruling, it will finally be time to fix this.

Finally, the Chron prints an excerpt of Judge Dietz’s remarks from his ruling.

Finally, I would point out the simple truth: We are in competition with 195 other nations and their economies. If I ask the 20 million Texans who are not in school right now whether they agree that we should have more rigorous and challenging standards for our education systems, what would their answer be? I believe a vast majority of Texas would say “Yes” and that for our students to successfully compete in the future, we must have tougher, higher standards now.

So with this vast majority of Texans in support of higher standards, I now say, “Great, we’re going to have to develop a new curriculum, we have to substantially upgrade our technology in schools, we have to increase training for teachers, we have to hire some new teachers in complex content areas that we will be teaching and we have to provide more tutoring and remediation to our challenging population. We need to have evaluation and accountability to make sure we are meeting our goals concerning these increased standards. Finally, we need some public outreach to make sure the parents buy into this new program. I think we can do all of that for an additional $2,000 per student, or in other words, an additional $10 billion to $11 billion. You support this tax increase, don’t you?”

Suddenly, my vast majority becomes a minority. Now, what I begin to hear from my vast majority is, “You can’t solve the problems of education by throwing money at it.”

As the economists put it, there is no free lunch. We either want the increased standards and are willing to pay the price, or we don’t. However, as the economists point out, there is a cost to acting, namely the tax increase, and there is a cost to not acting, namely loss of competitive position. So, we as a state and as a nation are wrestling with this question of priorities, and our leaders are looking for direction from you, the public.

The full decision will be released later this month. Given the price tag suggested, you can see why most Republicans are eager to appeal this, and not so eager to do anything until the Supreme Court has ruled.

From the “Anyone can call themselves an expert” department

Now see, this is what happens when you go soliciting expert witnesses on Craigslist

Bloom County was awesome

Joseph Bast, president and CEO of the Chicago-based Heartland Institute, is a witness for Texans for Real Efficiency and Equity in Education, or TREE, a group led by former state Rep. Kent Grusendorf that is not a plaintiff but was permitted by state District Judge John Dietz to present testimony.

Bast said a taxpayer savings grant program similar to education vouchers would benefit low-income families who could put grant money toward paying for private school tuition.

“If you’re low-income, you’re pretty much trapped in the public school that’s in your direct area,” he said.

Bast estimated that such a grant program would spur about 6 percent of students in Texas public schools to move to private schools, a number he arrived at by evaluating similar programs, including the now-defunct CEO Horizon voucher program in San Antonio’s Edgewood Independent School District.

He said the state saves $7,750 each time a child leaves the public system and, therefore, “the program actually benefits the public schools.” He estimated the annual savings would be about $2 billion.

The state’s previous failure to act on such a proposal “is evidence of the inefficiency of public schools,” Bast said.


Questioned by Maribel Hernández Rivera, an attorney for one of the plaintiff groups represented by the Mexican American Legal Defense and Educational Fund, Bast acknowledged that he has not graduated from college and holds no degrees in economics, though he considers himself an economist.

He also said neither of two reports he co-authored, which were entered into evidence, had been peer-reviewed.

David Thompson, attorney for another group of school districts, later pointed out that the Legislative Budget Board concluded that the taxpayer savings grant proposal would cost the state money in its first two years of operation. Bast acknowledged that he and the budget board arrived at different conclusions on this point.

“To your knowledge, no government entity in the state of Texas has ever agreed with your analysis of savings, is that correct?” Thompson asked.

“Apparently,” Bast replied.

I figure civil litigators live for these sort of “Perry Mason” moments. I really don’t think I can add anything else to that.

Another reason why spending caps are a bad idea

There are many reasons why, but this is one we haven’t encountered before.

Several political observers well-versed in the state’s finances say that lawmakers could hit the state’s spending limit this session, complicating efforts to access the $11.8 billion in the state’s Rainy Day Fund.

The Texas Constitution says the government can’t grow faster than the state’s economy. That growth rate is always set ahead of the session based on the estimated rate of growth in Texans’ personal income over the next two years. Passing a budget that busts the limit requires support from a simple majority of the House and Senate.

While it’s a simple idea, in practice, the constitutional spending limit is about as clear as mud. The exact amount of the spending limit for the next budget remains a moving target, and there is disagreement on some aspects of how the limit is meant to be applied, particularly whether any spending from the Rainy Day Fund is subject to the limit.

“Apparently there’s a lot of confusion out there about what counts and what doesn’t,” said Eva DeLuna Castro, a senior budget analyst for the liberal Center for Public Policy Priorities in Austin.

This year, lawmakers find themselves contending with reaching the limit largely because of the Texas economy’s rapid swing from a recession to a robust recovery. Cuts made in 2011 were based on estimates from the comptroller’s office that revenue would come in at low levels. The rebound happened faster than expected, leaving the current Legislature with a large surplus and calls to spend some of it on a range of expensive proposals, including tapping the Rainy Day Fund to restore billions in education cuts made last session.

“One can argue that we really didn’t need to make many of the cuts in the budget that were made in the last legislative session, including the $5 billion in cuts to public education,” said education finance expert Lynn Moak. “But to get it back, you have to bust the spending limit.”


In November, the LBB voted to set the growth rate in spending at 10.71 percent. Several people watching the budget process predict that rate should lead to a final spending limit that will allow lawmakers, if they choose, to spend virtually all of the available general revenue this session, expected to be roughly $95 billion after lawmakers pass a supplemental budget for 2012-13.

The $11.8 billion projected to be in the state’s Rainy Day Fund is a different matter. House officials have said the limit applies to most types of spending that lawmakers have proposed for the fund, though certain kinds of tax relief would be exempt. Dale Craymer, president of the Texas Taxpayers and Research Association, helped write the legislation that created the Rainy Day Fund in the late 1980s, and he said that’s not what the lawmakers who originally approved it bargained for.

“It was never the intent that the spending limit apply to the Rainy Day Fund,” said Craymer. He agreed the issue is now a point of debate.

Well, this is the sort of thing that happens when you let ideology override policy. Surely no business would allow itself to be handcuffed by the inept forecast of an incompetent financial officer, but that appears to be the position Texas has put itself in. The good news, as the Statesman notes, is that so far at least legislators don’t appear to be willing to tie themselves down in this fashion. Rep. Donna Howard has filed a bill to clarify that the Rainy Day Fund is not subject to this spending cap; the bill in question is HB652. There’s hope that we can work around this without anything too dumb happening.

This assumes that Rick Perry doesn’t make the situation worse by pushing through an even tighter cap, because doing stupid and harmful things like that is his job. Scott McCown explains why this is such a bad idea.

If a family budgeted this way, no matter how much money the family made, it could never improve its life. Imagine sitting down to write your first family budget. Naturally it is lean, but you have dreams of a better future — a safer neighborhood, a graduate degree. Under the governor’s proposal, though, even as your income increased, you would be stuck living under that lean budget adjusted only by family growth and household inflation. You could never make your life better.

Not being able to make things better would be a big problem for Texas. However you measure it, Texas ranks low in spending. Our systems for education, water, transportation, mental health, child protection, and many others are struggling. If we could adjust our current lean budget only for population and inflation, we could never make major new investments to improve our state.

The governor’s proposal has another big problem: Not only could a family not improve its life, periodically things would actually get worse. As the Great Recession reminded us, income doesn’t always go up. Sometimes breadwinners suffer a pay cut or lose a job, and a family has to cut its budget. Under the governor’s proposal, this lower level of spending would become the new base.

For a family, that would mean if it made $35,000 last year, but only $30,000 this year, its budget for next year would have to be based on the lower figure even if it made $40,000. Yes, even after the family’s income recovered, it couldn’t increase spending. No family would budget in a way that prevented recovering from a setback, and no state should, either.

The governor’s formula also uses the wrong measures of population and inflation. A family budget isn’t based merely on family size, but on family composition — whether the family is budgeting for a baby, for a child in college, or to care for grandma matters a lot to the bottom line. Likewise, a state can’t merely consider growth in total population; a state must consider who it is actually serving. For example, in Texas the rate of elderly who potentially need assisted living through Medicaid is projected to grow twice as fast as our total population between now and 2040.

And just as a family wouldn’t base its budget on government inflation, a state shouldn’t base its budget on household inflation. Families and governments buy different “baskets” of goods and services. A much higher portion of the state budget, for example, goes to buy health care, which is increasing in cost faster than household inflation. By using the wrong measures of population and inflation, year after year, the governor’s proposal would force Texas to do less and less for fewer and fewer.

As far as Perry and his cronies are concerned, doing less and less for fewer and fewer is a feature, not a bug. As always, now is an excellent time to let your State Rep and State Senator know that you want them to work on solving Texas’ problems, not making them worse. It’s not their job to tell future legislators what they can and cannot do. EoW has more.

Dewhurst and Nelson push Medicaid reform

I’m reserving judgment on this for now.

Sen. Jane Nelson

Lt. Gov David Dewhurst and Sen. Jane Nelson, R-Flower Mound, on Wednesday touted Senate proposals they say would bring down spending on Medicaid, the state’s health program for the poor, by instituting quality-based payment reforms for long-term care services and measures to catch Medicaid fraud and abuse.

“Our Medicaid costs have doubled, doubled since 2002-2003,” said Dewhurst, adding that Medicaid costs are crowding out room in the budget for “services people in Texas want to see,” such as public education, higher education and transportation.

Dewhurst said Senate Bills 7 and 8, filed by Nelson, the chairwman of the Senate Health and Human Services Committee, would bring down ballooning state Medicaid costs. “What we’re trying to do, Senator Nelson and myself, is improve the quality of health care for our Medicaid population” by providing incentives that lead to better patient outcomes.

The idea of payments based on medical outcomes rather than simply payment for services rendered is of course one of the cornerstone reforms of the Affordable Care Act. Given the Republican origins of many parts of the ACA, it’s hard to say if Dewhurst and Nelson are cribbing from it or if they’ve just gone old school. Either way, I’m quite certain that they would recoil from any attempt to compare their bills to the ACA, because of socialism or something like that.

SB 7 would redesign long-term and acute care services for the disabled and elderly — the most costly services in Medicaid — by instituting quality-based payment systems and expanding Medicaid managed care to cover services provided in nursing facilities.

SB 8 would ensure that providers found guilty of Medicaid fraud in Texas or other states would be barred from participating in the state’s program, strengthen prohibitions against marketing to Medicaid patients, add medical transportation services to managed care and enable the Health and Human Services Commission’s Office of Inspector General to establish a new data system to catch Medicaid fraud earlier.

Nelson highlighted that the OIG has identified more than $6 billion in fraud and waste between 2004-2011 in Medicaid, and she said a computerized claims monitoring program could be used “to identify outliers, anomalies and red flags in the Medicaid program so we can deal with those abuse trends on the front end.”

I want to hear from the professional wonks about this, but the Trib story doesn’t have any such quotes. Looking elsewhere, I do find some reactions. Here’s one in the Statesman:

Anne Dunkelberg, associate director of the Center for Public Policy Priorities, said Nelson’s goals of eliminating fraud and trying to create a Medicaid payment system that doesn’t provide incentives for too much or too little care “are goals everyone shares.”

Dunkelberg said her organization, which advocates on behalf of low-income Texans, will watch certain issues, particularly attempts to target fraud in the Medicaid transportation system, which many children, elderly Texans and disabled people rely on to make medical appointments.

Fairly nondescript, but not negative, which is good. Here’s the Chron:

It’s important for the state to take steps including making every effort to prevent providers from defrauding the state, said Bee Moorhead, executive director of the interfaith advocacy group Texas Impact. But Moorhead said the legislation touted Wednesday “is not the heart of the matter.”

“The biggest Medicaid problem Texas has is (that) so many people should be getting it, but aren’t,” she said.

Moorhead said more than 1 million children are eligible for health care but aren’t getting services. She also noted the opportunity for Texas to add 1.6 million people to Texas Medicaid over a decade through the expansion.

More of the same, so it would seem there isn’t anything particularly controversial. Going after fraud is relatively low-hanging fruit, and is unlikely to generate much opposition. Who doesn’t want to prevent fraud, and to punish those who do offend? I’d just note that any line item based on “money saved from fraud detection and prevention” is likely to be questionable, and anti-fraud measures have their own costs, since it takes people and other resources to investigate, prosecute, and collect repayments.

Expanding Medicaid is indeed the heart of the matter, but we know how that’s going to go.

Dewhurst also announced at Wednesday’s news conference that Texas would not expand Medicaid to cover impoverished adults, as outlined by the federal Affordable Care Act. “One size does not fit all in the health care arena,” he said, explaining he would rather apply for a block grant from the federal government to run the state’s Medicaid program independently.

Republican lawmakers have been under pressure to expand Medicaid to bring down the rate of uninsured and cut uncompensated care costs for hospitals and local government entities. Some Republicans in other states — such as Arizona Gov. Jan Brewer — have agreed to support the Medicaid expansion.

The Legislative Budget Board — headed by Dewhurst and House Speaker Joe Straus — issued a performance review on Wednesday morning recommending that the state empower counties to choose whether to expand Medicaid. Supporters of the Medicaid expansion say turning the decision power over to counties would relieve political pressure on Republican leadership.

The LBB report recommends that lawmakers pass a statute allowing counties to use local revenue to fund the expansion. In that way, local money that is currently spent on uncompensated care for the uninsured could be used to pull down $2.5 billion in federal funds for the 2014-15 biennium and cover 1.3 million impoverished adults in the six most populous counties.

The Chron quotes Dewhurst as saying expansion is off the table “at the present time”, for whatever that’s worth. I can’t say I expected Dewhurst to say anything different about Medicaid expansion – it would have been a bombshell if he had – but there are other aspects of the ACA that will affect Texas whether Dewhurst et al like it or not. This may not have been the venue to address that, but it would be nice to hear what he and others think about that. Be that as it may, here’s what that performance review says about Medicaid expansion:

Of the 535 hospitals in Texas, 108 hospitals owned by city, county, or hospital districts accounted for 48 percent ($1.5 billion) of charity care spending reported in fiscal year 2011. Most of the charity care (94 percent) local public hospitals provided was attributable to six hospital districts—Bexar, Dallas, El Paso, Harris, Tarrant, and Travis. Local public hospitals that account for a significant amount of uncompensated care spending report that 90.8 percent of patients receiving some form of charity care were non-elderly adults. With certain exceptions, federal law allows states to use intergovernmental transfers to obtain funds for use as the non-federal share for Medicaid services. By using local funds as the non-federal share for expanding Medicaid to newly eligible population, Texas could generate an estimated additional $2.5 billion in Federal Funds for fiscal years 2014 and 2015.

I had previously noted an announcement by the Center for Medicare and Medicaid Services saying that there would be no option for a “partial or phased in Medicaid expansion”. My interpretation of that was that it meant the county option for Medicaid expansion had been mooted. Obviously, the LBB and I can’t both be right, and I’d assume they’re the ones that are correct. I haven’t heard much on this option, if it still is one, since September, so I have no idea if anyone in the Lege is currently pursuing this. Dewhurst said that neither he nor Sen. Nelson endorsed the idea, which isn’t the same as saying they opposed it but which does present an obstacle. The Chron story has reactions from the type of people who might want the Lege to provide this option:

Local officials said their first choice would be for Texas to expand the program statewide. That would provide a uniform program across Texas and ensure a funding source while relieving them of some of their costs of uncompensated care.

The Legislative Budget Board assumed the higher match would apply for newly eligible adults with a county-based expansion.

If counties were to do an expansion, local officials said it would be important for private hospitals to contribute, not just leave the cost to local taxpayers. They suggested a fee as one option.

David Lopez, president and chief executive officer of the Harris Health System, said, “If this becomes a local option, then … everybody needs to have skin in the game.”

Ron Cookston, executive director of Gateway to Care, a Harris County-based nonprofit collaborative focused on health care, said letting communities manage expansion could have a real benefit, but a state-level expansion would be preferable.

“If it is not done at the state level, there is going to be, community by community, variations in the services … ,” Cookson said. “That creates an infrastructure nightmare.”

That second paragraph makes it sound like the LBB isn’t fully certain that county-based expansion is an actual option. It would be nice to have some clarity on that. As I said before, one does have to be concerned that if some counties opt to expand Medicaid on their own, some others will try to leech off of that, which is unfair all around. The county folks clearly understand this. Full statewide expansion is the only way to deal with that, but that ain’t happening, at least for now.

One more thing, from Trail Blazers:

Dewhurst and Nelson repeated their opposition to expanding Texas’ Medicaid program to add non-disabled adults between 18 and 65 whose incomes are below 138 percent of the federal poverty level. The federal health care law provides full funding of adding the adults for three years and will pick up at least 90 percent of the cost after that. But Texas Republicans have said they fear federal deficit-reduction efforts will undo the federal government’s promise to pay most of the cost. Nelson said she’s “concerned about the cost three years from now.”

If that’s your concern, then tell your colleagues in Congress to tone down their deficit obsession, which as we all know only really manifests when there’s a Democrat in the White House. The White House has already come to the realization that including Medicaid in any deficit-reduction “grand bargains” would undermine their own efforts to expand Medicaid, so I’d largely consider Nelson and Dewhurst’s concern to be no big deal. Unless Republicans get their way at the national level and disembowel Medicaid via the Ryan budget or something similar, of course. As above, I don’t really expect them to embrace my line of thinking here. The Observer has more.

Why are we paying for a privatized psych hospital?

Makes no sense to me.

The Department of State Health Services has spent more than $2 million on bond interest for a psychiatric hospital that it doesn’t own and that was championed by Senate Finance Chairman Tommy Williams.

But that’s not all the state is paying for, said Montgomery County Commissioner Ed Chance, who spearheaded the effort to build the Conroe facility. If its allocations remain the same, State Health Services will eventually pay off the entire $32 million Montgomery County borrowed to finance the hospital, he said.

“If they hadn’t agreed to the funding behind it, we wouldn’t have built it,” Chance said.

The state maintains that it’s not covering the total cost of the hospital’s construction, just the interest. State Health Services pays the county $15 million a year for psychiatric services for patients accused of crimes and deemed incompetent to stand trial.

About 9 percent of that is allocated to bond interest, said State Health Services spokeswoman Carrie Williams.

“Interest is OK,” she said. “Construction is not. We monitor the expenses that come in and will be conducting a regular financial review, as we do with all contractors.”

The Legislative Budget Board, which advises the Legislature on financial matters, says it is taking a closer look at the issue. Matt Hirsch, spokesman for Lt. Gov. David Dewhurst, said the lieutenant governor’s office been assured by State Health Services that its payments are acceptable, “but out of an abundance of caution, we’ve asked the Legislative Budget Board to look into it.”

See here and here for the background. I just have one question: If this is such a normal, no-big-deal thing, then surely there are other examples of the state helping counties pay off such bonds. The story doesn’t mention any, however, and I have a sneaking suspicion there aren’t any to be found. I don’t think this is a bad idea for a state-owned facility, but given the involvement of a private entity with a spotty record and the fact that as Grits notes this didn’t go through the normal budget processes, the whole thing has the stink of boondoggle on it. Surely we can find a better use for my tax dollars than providing a subsidy for Montgomery County.

It’s news but it’s not new

Before the Labor Day weekend, Sen. Dan Patrick said something that was considered to be newsworthy even though he and others have been saying it for years.

A Republican state senator calling for a tax increase is clearly in the man-bites-dog media category. When that senator is tea party champion Dan Patrick, R-Houston, it’s in the man-bites-big dog realm, although Patrick himself insisted he wasn’t really making news.

In remarks to the Cy-Fair Houston Chamber of Commerce on Thursday, Patrick called for raising the state’s 6.25 percent sales tax by 2 cents and dedicating the amount raised to public education.

“Every penny that we bring in in sales tax generates approximately $2.5 billion per year, so a two-cent increase on a two-year budget would bring us nearly $10 billion,” he said.

Patrick proposes to tie a sales-tax increase to a property-tax reduction of somewhere between 5 and 10 cents.

“I’ve been saying this for months,” the senator said yesterday, “so this is nothing new.”

It’s older than that. The idea of swapping a property tax cut for a sales tax increase goes back to at least 2005, when then-Speaker Tom Craddick tried to get one through the Lege as a preemptive “solution” to the forthcoming West Orange-Cove ruling from the Supreme Court. In addition to not actually solving the state’s revenue shortfall, since Patrick would offset all that revenue with property tax cuts and appraisal caps, this proposal would represent a huge shift of the tax burden from the wealthiest to everyone else. The Legislative Budget Board analysis that led to the headlines in that last link were based on a one-cent increase in the sales tax; Patrick is proposing a two-cent increase. It’s true that if you’re a homeowner, you would pay less in property taxes. It’s just that unless you own a really really expensive home (or homes) you won’t get enough savings to offset the extra sales taxes you’ll be paying. And if you’re a renter, well, Dan Patrick doesn’t care about you.

So there is something newsworthy about what Patrick said to the Cy-Fair Houston Chamber of Commerce, even if it is old news. It’s just that the newsworthiness isn’t in what he said, but in being clear about what it means. EoW has more.

Non-robust job numbers in Texas

As goes the country, so goes the state.

The Houston area is showing signs of a slowdown after coming off some fairly strong job gains during the winter months.

“It’s very consistent with the national pattern,” said Barton Smith, professor emeritus of economics at the University of Houston, who pointed to the data released Friday by the Texas Workforce Commission that showed Houston area employers added just 45,000 jobs during the past 12 months, a gain of 1.8 percent.

Since January, when area employers put on 56,600 jobs, a 2.3 percent gain, they have been easing back on their hiring.

The slowdown is relatively modest, Smith said. But it’s becoming increasingly clear hiring isn’t as robust as it was just a few months ago.

There’s another factor in play as well.

Austin-area employers added 13,700 jobs in the 12 months that ended in May, a 1.8 percent annual gain, the Texas Workforce Commission reported Friday.

But the region’s largest job sector, government — which includes local school districts and higher education — lost 600 jobs, a 0.3 percent decline. That was the first sign of local and state budget cuts that are expected to grow over the summer, as the full impact of teacher and state agency layoffs is felt.

That sector accounts for 22 percent of the 785,300 jobs in Central Texas.

The cutbacks were even deeper in other large Texas cities.

The Dallas area lost 3,200 government jobs last month, a 1.2 percent drop. Houston was down 7,300 jobs, or 1.9 percent, and San Antonio was down 2,400 jobs, or 1.4 percent.

That’s just the tip of the iceberg. Remember, the Legislative Budget Board forecast large numbers of jobs lost as a result of the penurious spending cuts. That was based on the initial House budget, which was a lot harsher than what is now in the pipeline, but it’s still going to result in a lot of layoffs. Maybe as Rick Perry continues his Ego Across America tour, someone in the national media should ask him about that.

So what happens if there isn’t a school finance deal?

You may recall that having to change the school finance formula to distribute the billions of cuts to public education is causing problems with the budget. What happens if no changes are made to the formula? The Trib contemplates the question.

So what would doing nothing look like? Without legislation that provides a mechanism to allocate the billions of dollars in cuts, the state would have to pay districts under existing law. That would mean borrowing from the second year of the biennium to fully fund the first year. When the money dwindles in the second year, Commissioner of Education Robert Scott would have to ask the Legislative Budget Board to tell the Legislature to vote on using the Rainy Day Fund to fill in the gap. He also has the authority to decompress property tax rates, which would allow school boards to make up the difference in state funding with local revenue.

The former is the expected choice — an appointee of Gov. Rick Perry isn’t likely to endorse a property tax hike — and it would probably happen when the 83rd Legislature, which meets in 2013, is up and running. Tapping the Rainy Day Fund in that situation would require approval from three-fifths of the House and Senate. If they decided not to access the fund, Scott would distribute what’s left of state money through what’s called proration, which would proportionally allocate funding according to districts’ statewide property value, with the idea that the state would pay back its share during the next budget cycle. That could potentially leave districts under proration for only a few months. Or he could opt for a combination of decompressing tax rates and proration.

There are serious drawbacks to avoiding school finance legislation, said veteran school finance expert Lynn Moak, who runs the consulting firm Moak, Casey, and Associates. The 1993 statute governing proration, he said, addresses scenarios in which the state comes up short by relatively small amounts in the second year of the biennium and isn’t designed for a multi-billion dollar reduction.

“It wasn’t written against the background that we intentionally screw things up by not having a school finance bill and appropriations bill that match,” he said. “It never visualized the kind of situation we’re talking about.”

There is also uncertainty as to how proration would work with target revenue and the “hold harmless” guarantee the Legislature made to districts with the 2006 property tax reduction. “We haven’t done this since property tax relief funding, and statutes on proration and relief weren’t written together,” Moak said.

So as is the case with the Senate budget and Medicaid, the most likely scenario is that the Rainy Day Fund gets tapped to cover the shortfall. How it is that this could possibly be better public policy than just tapping it now to avoid the shortfalls, and fixing the structural deficit that will lead to future shortfalls, is an exercise best left to the geniuses at conservative think tanks who believe that the time to act is always during the next crisis, which thanks to their preferred policies will be just around the corner. This is more than a theoretical concern:

The Texas House’s barebones budget proposal would run out of money for public schools by early 2013 and for Medicaid soon after unless lawmakers add money to the plan and revise education funding formulas, the chamber’s chief budget writer said Thursday.

“There’s a lot of holes in that budget that we need to fill,” House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, told his colleagues after postponing bills that would use accounting maneuvers and other changes to provide more revenue.

The House needs to take up the repeatedly postponed legislation next week, he said. The legislative session ends May 30.


Besides agreeing on a funding level for the overall budget — and finding the revenue to pay for it — lawmakers must agree on a school finance plan that would allow them to spend billions of dollars less through the next two years.

Otherwise, current school funding formulas would entitle school districts to current spending levels, Pitts said. At those levels, under the House budget proposal, Pitts said the money would run out by February 2013 or perhaps months earlier.

“That means the schools cannot operate. The teachers will not be paid,” Pitts said.

The House proposal would give schools $8 billion less through the next two years than they’d get under current funding formulas. The Senate proposal’s cutback would be half that.

A Legislative Budget Board staffer said in a memo that if education were underfunded and formulas weren’t changed, the LBB would propose spending money from the rainy day fund for fiscal year 2013 to meet the gap. If the Legislature didn’t do so, the education commissioner would pro-rate state aid.

A special session is looking pretty likely, so there is still a chance to do something about this. Otherwise, Medicaid also runs out of money at about the same time as the schools. What it comes down to is simply this: We can spend Rainy Day funds now to plug this hole, or we can spend it later. We will continue to be in this position until we fix the underlying problem. And that will never happen until we have a different Legislature. Burka, EoW, and Abby Rapoport have more.

Senate fails to bring the budget to the floor

It started Monday when Senate Finance Chair Sen. Steve Ogden said he might pull same Rainy Day funds out of the budget in order to get more Republican (read: Dan Patrick) support for it. After some discussion about alternate ways of incorporating Rainy Day funds and some griping about the Comptroller, CSHB1 was brought up for debate about suspending the rules on Tuesday afternoon. The Trib liveblogged the action, in which Ogden laid out the game plan:

Ogden started by telling lawmakers that if they vote to suspend — to take up the budget bill for debate — he’ll take out the provision that would dip into Rainy Day Funds if state revenue comes up short. He’d reduce Medicaid spending by $1.25 billion (more on that in a second), and would include a contingent appropriation equivalent to a 1.2 percent across-the-board spending increase in everything except public education and debt services.

The across-the-board cuts would take place if the comptroller says the money isn’t available; if it is, those cuts won’t happen.

And the Medicaid cuts are a sleight of hand: Lawmakers will be back in January 2013 and if Medicaid comes up short — by, say, $1.25 billion — they’ll take care of it then. In fact, the budget without any changes pushes $3 billion in Medicaid spending off for the next Legislature to deal with.

That was not acceptable to Democrats, and after three hours the vote to suspend fell short, 19-12, on straight party lines. But as Nate Blakeslee noted, the Republicans have another card to play.

Under the Senate rules, Wednesdays are “House bill days” in which House bills already on the calendar may be brought up for consideration without suspending the regular order of business—that is, without a two-thirds vote of the senators present. You do have to take the House bills in the order they currently appear on the calendar. The next House bill on the Senate’s official Regular Order of Business calendar—that green book you see floating around the Senate that nobody ever looks at because it is usually totally irrelevant–is HB 1, the budget. Tomorrow is a Wednesday.

It’s clear that this is what will happen today.

Sen. Rodney Ellis, D-Houston, said the decision before the senators is not about the budget but whether “to change the whole nature of how things operate here.”

Ogden agreed that if he could not get the 21 votes needed today, Senate traditions were at risk.

“That is why I have worked so hard and done everything that I could possibly think of to get to 21 votes,” Ogden said.

But Ogden pointedly noted that “we were not sent down here to preserve the two-thirds rule. We were sent down here to govern.”

“People of the state of Texas don’t give a diddly about the two-thirds rule,” he said.

I do agree with Sen. Ogden about that. People for the most part don’t know or care about procedural minutiae. I for one am not going to defend any supermajority requirements, not after all the crap we saw in the US Senate these past two years. Let the debate happen, and if in the end it passes on another straight party vote, as was the case in the House, then so be it. If this is what the Republicans want, if this is what they think they were elected to do, then let them do it. I’m happy to have that debate. There was some speculation earlier in the week that Democrats, on the House side at least, were hoping for Senate budget talks to break down and force a special session, but politically speaking this does nearly the same thing.

So we’ll see where it goes from here. Robert Miller thinks this is the demise of the Senate’s 2/3 rule, and I think he’s right. Jason Embry had wondered why conservative activists hadn’t been rebelling against it before; now they may not have to. What I know is that ownership of all of the bad effects of the budget is now fully in the Republicans’ hands. Let’s get the next election season started, shall we? A statement from Sen. Kirk Watson is here, a statement from the Texas AFL-CIO is here, and a letter to Sen. Wendy Davis from the Legislative Budget Board about her request “regarding historical funding of student enrollment growth in the Foundation School Program” is beneath the fold.

UPDATE: EoW and the Trib have more.


Senate makes progress on the budget

They still haven’t gotten to the actual budget yet, but they’ve passed a bill that allows for some extra “non-tax revenue” plus a bunch of accounting gimmicks, which makes their less-penurious-than-the-House budget possible.

The Texas Senate, digging publicly for money while it battles quietly over a proposed budget, approved a “non-tax revenue” bill that would make $4.3 billion available for spending over the next two years. The vote was 21-10, with all of the no votes coming from Republicans.

Senators walked around taxes, wary of a constitutional provision that requires revenue-raising measures to start in the Texas House. They talked about taxes on small cigars, on full-time residents of hotels and motels, and on ending exemptions to producers of high-cost natural gas. Other ideas, like sweeping the balances in the governor’s economic development funds, were presented and then pulled down before they came to a vote.

The Senate Finance Committee voted out a budget a week ago that depends on the money in SB 1811, and also contains a provision for tapping into the state’s Rainy Day Fund for up to $3 billion. That provision, combined with the fact that the budget cuts 5.9 percent from current spending, has senators struggling to assemble the 21 votes it would take to call up the budget for debate.

Given the 10 Nays from Republicans, you can see how difficult it is for the Senate to thread the needle on this budget. Ogden thinks the budget may come to the floor on Monday. I’ll bet there’s an awful lot of intense negotiations between now and then.

Along the way, the Senate rejected Republican amendments to impose a hiring freeze at state agencies as well as some other salary cuts, and they adopted some transparency initiatives that had been pushed all session by Sen. Kirk Watson. All this happened while Lt. Gov. David Dewhurst was whining about Democrats being mean and partisan without saying who he had in mind, which drew a sharp retort from Sen. Judith Zaffirini, who is generally not one of the hotheads. Like I said, this ought to be a fun weekend for them. And finally, in separate action, a Senate committee voted to stick a knife in the guts of Planned Parenthood, which as we all know will do ever so much to improve the health of women everywhere. EoW and BOR have more.

In Perry’s world

Rick Perry creates his own reality. You got a problem with that?

Gov. Rick Perry, sticking to his guns against further use of the state’s rainy day fund, dismissed a question Tuesday about whether he’s planning for dislocation of tens of thousands of elderly Texans if the House budget is passed and many nursing homes close.

“Those are … estimates that are not on my radar,” Perry told reporters outside the Texas House, where he made his first casual visit of the session to chat with members on the floor.


On April 18, Dewhurst said, “The last thing we want to do is force every nursing home operator who has Medicaid beds to shut down and some 50,000 to 60,000 grandmas and grandpas are pushed out on the street. Now, that’s not Texas.”

On Tuesday, though, Perry made it clear he’s not excited about using rainy-day money to avoid nursing-home closures.

“Look, everybody’s got concerns,” he said. “I don’t get confused about that. It’s also on people’s radar screens what they’ve been through the last two years, where people have had to make huge and hard decisions in their personal lives and their small businesses. And for the government to not have to make those is inappropriate. Look, nobody says it’s going to be an easy period of time. We all understand that. But to sit here and say, ‘Hey, sorry, we’re just going to have to raise your taxes,’ because we don’t have the courage to pass a budget that meets the requirements of being in our revenue stream, I don’t think is appropriate.”

When a reporter noted that Legislative Budget Board officials have told Senate budget writers that the rainy day fund very well could have $12 billion by August 2013, Perry snorted with derision. “I’ve lost so much faith” in the board’s “ability to estimate what’s going,” he said, after it estimated last month that 335,000 jobs could be lost in fiscal 2013 if as many cuts to state spending occur as the House budget proposes.

Perry’s been Governor for more years than I’ve been a blogger. I’ve long since run out of ways to characterize him. The Legislative Budget Board displeased him by contradicting his worldview, so he dismisses them and continues on. If anything about this surprises you, you haven’t been paying attention. And if you think he’ll change his tune when the LBB’s projections pan out, I’ve got some lakefront property in Midland to sell you. After all this time, what else is there to be said?

Senate Finance Committee passes its budget

The fight over the Rainy Day Fund is now officially on.

A $176.5 billion budget for the 2012-13 biennium — 5.9 percent smaller than the current budget but almost $12 billion larger than the version passed earlier by the House — won approval from the Senate Finance Committee Thursday morning and will come to a full Senate vote after the Easter break.

And, unlike the House version, the Senate would use up to $3.1 billion from the Rainy Day Fund for the .

The vote was 11-4, with Sens. Eddie Lucio Jr. of Brownsville, Dan Patrick of Houston, John Whitmire of Houston and Judith Zaffirini of Laredo voting against it. All but Patrick are Democrats. Two Democrats — Juan “Chuy” Hinojosa of McAllen and Royce West of Dallas — voted for the bill.

The chairman of the committee, Sen. Steve Ogden, R-Bryan, said the Senate version spends more money on nursing homes, on public education and on Medicaid. “It doesn’t generously meet the needs of Texans, but I think it’s adequate,” Ogden said. He said he wasn’t spending more to set up a compromise in coming negotiations with the House. “I’m going to fight for this bill,” he said.


The House version would spend a total of $164.5 billion. Senate Finance’s version totals $176.5 billion. The current budget totals $187.5 billion. Spending from state sources — general revenue — comes to $80.7 billion in the Senate plan, as against $77.6 billion in the House plan and $82.1 billion in the current budget.

The Senate’s biggest cuts, compared with current spending, come in health and human services, which would get $7.8 billion less. Ogden said the budget leaves Medicaid spending about $3 billion short of what current law requires. But with changes afoot in Washington on health care and Medicaid, he said current law could change before the money is needed. If it doesn’t, the state will have the money. “That’s why we need to leave some money in the Rainy Day Fund,” he said.

According to an analysis prepared by the Senate, the upper chamber’s version makes smaller cuts in Medicaid reimbursement rates than the House, provides $200 million more for mental health services, and restores proposed cuts to foster care programs. It puts $4.3 billion more into public schools, $400 million more for textbooks and makes smaller cuts to teacher retirement and health plans than the House. Almost $200 million more would go to TEXAS Grants. The Department of Public Safety would get $249 million more than in the House version, and prisons would get $358 million more — enough, according to the analysis, to maintain current probation and capacity needs in prisons.

Let’s be clear on this: The Senate budget still sucks. It’s better than the House budget, by a lot, but that’s like saying that it’s better to be smothered in your sleep than to be eaten alive by piranhas. The end result is still the same, which in this case is a budget that does not meet the needs of the state. Don’t get me wrong, I’m glad the Senate has done what it has to make the truly wretched House budget better, and I’m glad that Sen. Ogden intends to fight for his version. That’s a fight that can only end with one or both sides giving in, now or after some number of special sessions, so if he really means that, it’s saying something. It’s just too bad that even in the case of a clear win for Sen. Ogden, the victory will be extremely hollow.

Sen. Kirk Watson sums it up well:

For weeks, politicians and pundits have focused on a genuinely horrendous plan approved by the Texas House of Representatives to hack away at schools, nursing homes and so many other priorities that Texans hold dear – even knowing that such a devastating proposal would never be approved by the Senate.

So compared to that gore-fest, the milder horror show of the Senate budget must look pretty good, right?

But compared to anything else – Texans’ priorities, Texas’ history, even the status quo – the Senate plan that’s now on the table remains unworthy of this state and its people.

And make no mistake: had we been told back in, say, September that the state was about to take about $4 billion from Texas schools and billions more from universities and the uninsured – all the while using the same debt, diversions and deception that have been a staple of the state’s budget-balancing practices for years – I suspect most of you wouldn’t have called that a “best-case scenario.”

I doubt you’d conclude it was an acceptable solution simply because “it could have been worse.”

Meanwhile, the Rainy Day Fund that Rick Perry and the band of radicals in the House are fighting to preserve is doing just fine on its own, thank you very much. Thanks to robust oil and gas prices, the fund may increase by another $3 billion or so in the next two years, far more than the current Comptroller projection. Given that sales tax revenues are ticking up as well, one might wonder why we plan to sit on a huge pile of cash when teachers are getting fired and nursing homes are closing. That’s a question that needs to be at the forefront of the 2012 elections. In somewhat related news, the House adjourned for the weekend without taking action on a bill that would allow for greater class sizes and give school districts some more flexibility in dealing with cuts by getting rid of the minimum salary schedule for most employees. This is similar to but not the same as the Senate bill that would allow for furloughs, among other things. For the more wonkish among us (you know who you are), here are three documents of interest sent to me from the office of Rep. Mike Villarreal: The Legislative Budget Board summary of CSSB 1; the LBB summary of CSHB 1; and a comparison of HB1 and CSHB 1. Robert Miller, Abby Rapoport, and EoW have more.

UPDATE: The Statesman story from today notes that the class size provisions in Sen. Shapiro’s SB12 have been removed by Sen. Dan Patrick, who was their main booster. “I didn’t want to do anything to make it any more difficult to pass,” Patrick said. “There are too many good things in the bill to have the whole thing go down on one area where we don’t agree.” For more on Rep. Eissler’s HB400, the bill that was postponed until next week, see here, here, and here. Finally, RG Ratcliff writes on BurkaBlog “If you think of the two-year budget passed by the Texas House as a bankruptcy filing for the State of Texas, then the budget approved by the Senate Finance Committee yesterday is a reorganization plan that requires a substantial liquidation of assets.” Good way to look at it.

House ponders what to do about Amazon

My guess is that they ultimately won’t do anything this session, but it’s good to see the matter discussed by the Ways and Means Committee. If nothing else, it may lay the groundwork for a future session.

House Bill 1317 by Rep. Elliott Naishtat, D-Austin, and House Bill 2403, by Rep. John Otto, R-Dayton are aimed at finding ways to force Amazon and other retailers to collect taxes on online sales that involve Texas consumers or so-called affiliate marketers in Texas, who make a commission by steering customers to Amazon’s website.

Both bills seek to address what constitutes having a physical presence in the state. Under a 1992 U.S. Supreme Court decision, retailers with a physical presence in a state can be required to collect sales taxes, legal experts say.

The committee heard pleas from retailers who said they increasingly can’t compete with online sellers who don’t collect sales tax.


Naishtat said his bill is “a method by which we, the legislators, can level the playing field between law-abiding Texas retailers who collect and remit sales tax and those out-of-state retailers who do not. Not only will this clarification of law help our troubled Texas retailers, it will also generate revenue for Texas without new taxes or a tax increase.”

A fiscal note released Monday from the Legislative Budget Board projected that Naishtat’s bill would have no significant affect on the state budget, because it anticipates “major online retailers” would cancel their agreements with Texas affiliates.

Otto said his bill would establish a “fair and equitable” system by clarifying what constitutes a physical presence in the State of Texas.

“If this issue is not addressed, then we are inviting new and existing businesses to structure in avoidance of the collection of our sales tax,” Otto said. “To me, this is about making sure our tax laws are applied fairly and equally to all Texas businesses.”

The fiscal note on Otto’s bill projects that the state would collect an additional $6 million in 2012 and $10 million in 2013, rising to $18 million in 2016.

Noticeably absent from the hearing docket was House Bill 2719, a pro-Amazon measure filed by state Rep. Linda Harper-Brown, R-Irving. That bill would amend the state tax code to say that a company can’t be classified as a retailer required to collect sales tax if it, or a subsidiary, operates or uses “only a fulfillment center … or a computer server” in Texas.

I’ll say again, I think the ultimate solution to this is Congressional action. The original justification for exempting online retail from sales taxes has long been obsolete, and is now a real drag on local and state governments. One way to force Congressional action is for a bunch of states to implement their own solutions, thus making the case for a single standard to be applied. I don’t expect Texas to do anything about it now, but I believe it will eventually.

The Lege’s job killing budget

Do you think this is what all those people who came out to vote last November had in mind?

The Legislative Budget Board, a nonpartisan state agency that helps lawmakers with budget numbers, predicts that House version of the 2012-2013 state budget would result in 272,000 fewer jobs in Texas the first year and 335,000 fewer in 2013.

The projected loss includes eliminating 117,000 private sector jobs in 2012 and 146,000 in 2013. An amendment to the House rules by Rep. Mike Villarreal, D-San Antonio, directed the LBB, which is overseen by the House speaker, lieutenant governor and other state leaders, to produce the Dynamic Economic Impact Statement.

“The voters did not elect us to eliminate hundreds of thousands of jobs. We have to be smarter than this,” Villareal said. “We can’t grow the Texas economy with a budget that destroys jobs, hurts neighborhood schools and makes college more expensive.”

Villarreal has more here. The report doesn’t say directly that this many jobs will be lost, just that Texas will have this many fewer jobs than it would have under a baseline budget scenario. If you have a basic understanding of economics, there’s nothing surprising about this. Cutting government spending is taking money out of the economy. Firing government workers adds to unemployment. Any other conclusion by the LBB would have been shocking. What I expect to happen, if the Republicans are forced to acknowledge this report, is that they will begin attacking the LBB in much the same way that Congressional Republicans have attacked the CBO when it tells them something they don’t want to hear. So far, it’s mostly just whining, as seen in this Statesman story, but give it time. And pay heed to what this guy says:

The projections do not come as a surprise to Bernard Weinstein, an economist at the Cox School of Business at Southern Methodist University.

Weinstein said he had not examined the analysis but that it appeared to be “a government agency in the state of Texas saying, ‘Before you start slashing right and left, remember there are going to be consequences.'”

Weinstein said it was obvious that proposed budget cuts would have an effect on the state’s job market.

“Jobs creation results from spending by both the private sector and the public sector. So now you have what economists call the negative multiplier,” Weinstein said. “By cutting the budget here and cutting the budget there, there will be at least for some time a negative economic impact on income, employment and tax revenue. By cutting state spending, you are cutting state revenues, because the recipients of that spending will not be paying taxes on that.”

Weinstein said the effect is illustrated by the possibility of thousands of teachers being laid off statewide as part of the budget crunch.

“Where are they going to find employment quickly?” he said. “The answer is: nowhere.”

All I can say is that I’m glad to see some kind of counterweight to the overly optimistic forecasts of job growth in Texas. I think we have tougher times ahead than a lot of people expect. If I’m right about that, who do you suppose will get blamed for it this time? Burka, Postcards, Texas Politics, and the CPPP have more, and see also this article in The Economist for a broader view of Texas’ economic situation.