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Texas Taxpayers and Research Association

When might we get a Supreme Court ruling on school finance?

When they’re damn good and ready is the usual answer for Supreme Court rulings, but in the case of school finance lawsuits they usually act with some measure of speed.

BagOfMoney

Given past rulings and politics — three justices on the nine-member, all-Republican court are up for re-election next year — the consensus among experts and insiders is that a decision will come early next year and likely will require a 2016 special legislative session because it will favor, at least in part, the 600 school districts suing the state. That could mean that a school finance fix is in place before the next school year.

For the justices who will be on the GOP primary ballot, “the perfect situation” would be for a ruling to come after that March 1 contest, said Austin-based lobbyist and political consultant Bill Miller.

“If I were on the ballot, hypothetically, and I’m a justice, I want the election over with before big, monumental decisions are released,” he said, noting that judicial candidates now are expected to talk more openly about their rulings on the campaign trail.

[…]

A more important date than when the court rules is what deadline it might give the Legislature to come up with a fix, said Sheryl Pace, a senior analyst at the business-backed Texas Taxpayers and Research Association who specializes in school finance. (That’s assuming the court upholds at least part of a 2014 district court ruling that struck down the state’s school finance system as unconstitutional, which Pace thinks will happen.)

Past school finance rulings indicate the court is “usually concerned” not with elections but with giving the Legislature time to implement a fix before the next school year or until the end of the next regular legislative session, Pace said.

With no legislative session until 2017 — and considering the amount of time the court has taken to rule in the past — Pace is predicting a January 2016 ruling with a fix-it deadline six months after that.

The current school finance case is the seventh of its kind to reach the high court since the mid-1980s. In the six previous cases, the court typically has taken anywhere from two to eight months to rule from the time it hears arguments, according to dates provided by the research association.

But Houston-based lawyer David Thompson, who has worked on all seven school finance lawsuits, said he wouldn’t be surprised if the court takes longer to rule than usual — “early next spring is certainly reasonable” — because there are more parties involved who are “making some different argument than the court’s ever dealt with.”

See here for the background. The last time the Supreme Court had to deal with this, they said that adequacy was not yet a constitutional issue, but it was getting there. That’s the big question here, whether the state will be forced to put more money into public education, though of course there are a lot of other issues in play as well. The AG’s office was basically dismissive of this claim, not really putting up any kind of defense but more or less asserting that it was obvious that the state was meeting the adequacy requirement. Nothing would please me more than for that argument to be forcefully dismembered, but I have no idea what to expect. At least we won’t be in suspense for too long.

On a side note, this is awesome.

In June, [an HISD Student Congress] subcommittee began work on an amicus brief with the Texas Supreme Court. They wanted to address the inadequacy of public school financing from the student perspective. Together with [Amy] Fan and [Zaakir] Tameez, a group of ten students started writing the brief in early August. This month, they filed it.

The students wrote the entire amicus brief on their own. It took months of brainstorming, planning, and outlining. “Even then, it took three different re-writes, dozens of hours meeting with each other, and probably hundreds of hours total between each student who contributed to researching, interviewing, and writing,” Tameez said.

Mostly, the brief relies on students’ personal stories. And it’s received nationwide attention. Says Amy Fan, the current Speaker of the Student Congress, “We may be young, but that’s precisely what makes this brief genuine and accurate.”

The HISD Student Congress is, you may recall, made up of students, who wrote and submitted that brief on their own. Pretty damn impressive, if you ask me.

Trouble in tax cut paradise

What if you propose a tax cut but the beneficiaries of it say they’d rather the money went to something else?

BagOfMoney

Major business groups pushed back Friday against a multi­billion-dollar package of tax cuts advancing in the Texas Senate, calling it inequitable and saying state needs should be funded before lawmakers consider tax relief.

The criticism highlights how, despite support for tax cuts among Republican legislative leaders, details are far from settled and are prompting dissension among lawmakers and businesses.

It also echoes concerns from some leading lawmakers that the emphasis on tax cuts could imperil efforts to address such issues, as education, transportation, state debt and pension programs.

“If, after paying our state bills, there is money left over for tax relief, that relief should be fair to those who pay the most taxes in the first place – both individuals and businesses,” said the letter signed by seven big-business groups.

“That portion of tax relief to business should encourage growth and investment, enhancing our ability to expand our production and payrolls. Unfortunately, we believe the package of bills up for consideration in the Texas Senate falls short of these principles and creates new inequities in the tax system,” they wrote.

The letter to Lt. Gov. Dan Patrick and senators is signed by representatives of the Texas Association of Business, Texas Association of Manufacturers, Texas Taxpayers and Research Association, Association of Electric Companies of Texas, Texas Chemical Council, Texas Oil and Gas Association, and Texas Association of Realtors. It mirrors concerns expressed previously.

[…]

Senate leaders, including Patrick, pushed right back at the criticism.

“While traveling the state for the last 18 months, taxpayers made it clear they expect tax relief this session,” Patrick said. “Gov. Abbott and I have said that lasting franchise and property tax relief are a critical component of a successful session.”

Senate Finance Committee Chair Jane Nelson, a Flower Mound Republican who is a lead sponsor of the package, defended its aims but did not dismiss the concerns.

“We are striking a good balance between tax reductions for businesses and homeowners, and we will continue to work deliberatively through the process on that issue. As a businessperson myself, I am grateful for the input from these important stakeholders and look forward to working with them moving forward,” Nelson said.

In other words, Patrick told them they’ll take what they’re given and they’ll like it and the hell with whatever the state needs. No wonder all these interests united to oppose his election last…oh, wait. Never mind. Maybe after Patrick and his crew finish wrecking the state’s finances these guys will get a clue. Hope it’s not too late by then.

Aycock files school finance reform bill

Interesting.

Jimmie Don Aycock

A key House Republican said Texas lawmakers should not wait for the outcome of a sprawling school finance lawsuit to discuss changes to the state’s current public education funding system.

“While we do not know the final outcome of the school finance lawsuit, I believe it is appropriate to foster broad conversations on this matter while awaiting the final decision,” Public Education Committee Chairman Jimmie Don Aycock, R-Killeen, said in a memo circulated to colleagues Monday.

[…]

In the memo, Aycock asked for the input of House lawmakers on a “very rough initial bill” that he intended to be a “conversation starter.”

His proposal, House Bill 654, would simplify the school funding mechanism by grouping the state’s 1,026 regular school districts into at least 30 “school finance districts,” which would provide per-student funding that is within $30o of the statewide average.

“I am not even confident that I like this concept,” Aycock said. “The unfortunate truth is that with each passing lawsuit, the Legislature is forced into more and more convoluted decisions in our effort to balance constitutional requirements, court mandates, and limited resources.”

Aycock’s memo is here. I didn’t expect anything of substance to happen this session, but I’ll be glad to be wrong. Aycock is an honest broker, so while there’s obviously a lot of blanks to be filled in, this is a discussion well worth having.

Until we have some more of those blanks filled in it’s hard to evaluate this idea – as noted above, even Aycock himself isn’t sure about it – but the basic idea has merit. It does attack the basic inequity problem, though I suspect setting up these school finance districts and maintaining them going forward will be fraught with political intrigue. Can you imagine what the school finance district redistricting process will look like? I’m not saying any of this to cast aspersions, just to point out that any change to the existing system, whatever its merits, will necessarily be difficult because someone will wind up better off and someone else will wind up worse off. It’s human nature.

And indeed, that seems to be the opening bid in response.

Aycock said his proposal is modeled after the “County Education Districts” the state set up in 1991, which subsequently were shot down for violating the state Constitution by enforcing an illegal statewide property tax.

School finance expert Sheryl Pace of the Texas Taxpayers and Research Association said she believed the education districts were working before they were undone.

“I thought it was a good system. It provided equity, but also gave school districts some local control,” said Pace, who added she believes Aycock’s proposal could “be an improvement because you’d have statewide equity.

“Right now you have some districts that are receiving substantially more revenue than others per weighted student,” she said. “My guess is the property-wealthy districts won’t like this bill because it forces them to consolidate their tax bases with other school districts, and more than likely given the math, their tax rate would go up.”

Mark Trachtenberg, an attorney representing many of the property-rich school districts, including Alamo Heights in Bexar County, confirmed Pace’s suspicions Monday.

“I think it’s a good idea to have a wide-ranging discussion on how we should finance our schools,” said Trachtenberg, who said the proposal “causes some concerns” from a legal standpoint. “I just think this idea is going to be a nonstarter for a lot of my clients.”

None of this means that Aycock’s bill can’t or won’t go anywhere, just that it will take a lot of effort and a lot of compromise to get something resembling consensus. I have more faith in some people working to achieve that consensus than I do in others. K12 Zone and Trail Blazers have more,

Hegar’s first revenue estimate is in

We’ll see how it holds up.

BagOfMoney

Amid concerns that tumbling oil prices could push the Texas economy into a recession, Comptroller Glenn Hegar offered a cautiously optimistic tone on the future of the Texas economy Monday, announcing that lawmakers will have $113 billion to haggle over in crafting its next two-year budget.

“Our projections are based on expectations of a moderate expansion in the Texas economy and reflect uncertainties in oil prices and the possibilities of a slowing global economy,” Hegar said.

The biennial revenue estimate sets a limit on the state’s general fund, the portion of the budget that lawmakers have the most control over. The general fund typically makes up nearly half of the state’s total budget.

Hegar predicted that Texas will take in $110.4 billion in revenue from taxes, fees and other income during the 2015-16 biennium. Hegar’s $113 billion projection also includes money expected to come from leftover funds in the current biennium. With the addition of federal funds and other revenue sources, lawmakers should have a total of $220.9 billion for the 2016-17 budget.

The state’s Rainy Day Fund is also projected to grow to $11.1 billion by the end of the next biennium if lawmakers choose not to use any money in the fund.

The state will end the current biennium, which ends Aug. 31, with $7.5 billion in leftover funds, Hegar said. That surplus will be split three ways between general revenue, the Rainy Day Fund and the state highway fund.

Two years ago, Comptroller Susan Combs estimated that the Legislature would have $208 billion for its budget, including $101.4 billion in general revenue and $11.8 billion in the Rainy Day Fund. Lawmakers ultimately passed a $200 billion budget.

[…]

The liberal Center for Public Policy Priorities has estimated that lawmakers will need to increase general spending from the current $95 billion to $101 billion to maintain the state’s current level of services. More than half of that $6 billion spike comes from Health and Human Services, where an increase in medical costs and Medicaid cases in particular has grown.

Don’t expect that to happen. Indeed, if Dan Patrick has his way, it will never happen. The good news is that this is a reasonably sunny estimate, meaning The Lege will be able to do at least some of the things it wants to do without too much voodoo, assuming it doesn’t impose some ridiculously lowball artificial limits on itself, which it must be noted is always a possibility. But just because there’s revenue available doesn’t mean it isn’t spoken for, or at least in demand. The Observer explains.

On one hand, it’s not a crisis budget, and it’s not one that will require legislators to make cuts (though they might anyway.) The office of Lt. Gov.-elect Dan Patrick released a brief statement that characterized the comptroller’s estimate as a green light for his agenda, which has included the promise of significant tax cuts: It provided “adequate revenue to secure our border, provide property and business tax relief while focusing on education and infrastructure. I intend to accomplish these goals.”

On the other, the “surplus” is a lot less than it looks at first glance, in part because the amount of budget trickery the Legislature has employed over the years. Gov.-elect Greg Abbott and Patrick have called for ending road funding diversions and making the Texas Department of Transportation whole again. But about $3 billion in additional revenue is needed to end diversions, and TxDOT says it needs an additional $5 billion just to keep the system at the current level of congestion—that is, without making any forward progress.

In education, the state has not yet gotten back to the level of funding that preceded 2011’s gargantuan cuts to public ed—a portion was restored in 2013, but a significant amount of money is needed even beyond what was the case in 2011, thanks to population growth. And it’s unclear how proposed voucher programs would affect the system’s overall cost.

And then there’s tax cuts. The truly sweeping tax overhauls that were talked about during the election, like substituting property taxes for increased sales taxes, seem to have fallen off the radar for now. In the past, GOP lawmakers of all stripes have passed minor tax bills and sold them to the voters as massive ones. That may be Patrick’s play, but even modest tax reductions will shave the “surplus” down in a hurry.

The question as always is what gets prioritized, and what gets left out. I believe this is an accurate summary:

Budget expert Dale Craymer, president of the business-based Texas Taxpayers and Research Association, pointed out that lawmakers in writing the next budget will have the cushion of unspent cash and “a pretty solid non-oil-and-gas base to our economy.”

Still, he said, the “three great wants” of tax relief, transportation and public education are big-ticket items.

“The state is still in a good position to deal with maybe one of these,” Craymer said, “but certainly not all three.”

I’d say that’s the priority order for the Republicans. What happens if the Supreme Court forces them to deal with public education, especially if they don’t leave themselves any room to do so? Your guess is as good as mine.

Once more with the margins tax and the Supreme Court

Here we go again.

The Texas Supreme Court could blow a hole in the state’s budget if it finds the business tax unconstitutional, as pressed Tuesday in a lawsuit led by food giant Nestlé USA.

“The Legislature can’t violate the constitution to promote even a legitimate interest,” said attorney Peter A. Nolan, arguing on Nestlé’s behalf that the tax violates a state constitutional requirement that taxes be equal and uniform.

If the Supreme Court throws out the law, the scope of the court’s decision will determine whether the state needs to quickly find another way to come up with some $4.5 billion annually or more.

“Should they rule for the plaintiff, they could throw out the tax in its entirety. They could require the state to provide four years of refunds, which is the statute of limitations period,” said Dale Craymer, president of the business-based Texas Taxpayers and Research Association. The business tax “is about 10 percent of all the taxes the state collects. It’s a sizable part of the budget,” Craymer said.

The court could, however, give the state some leeway to come up with a remedy, he said. It must rule in the case by Oct. 23, according to court staff.

See here, here, and here for some background. The Statesman gives November 9 as a rule-by date. Regardless, there will be a decision this year. The Lege was likely to tweak the margins tax anyway; they may wind up having to do a lot more than that. The Trib explains the legalities involved.

Dale Craymer, president of Texas Taxpayers and Research Association, says the suit boils down to questions over equal treatment.

Craymer explains the franchise tax charges one-half of 1 percent to wholesalers but a full 1 percent to businesses engaged in manufacturing. Nestle, a national manufacturer and wholesaler, does not manufacture anything in Texas, but is still subject to the 1 percent rate.

The company claims the distinction violates equal protection provision in the Texas and U.S. constitutions.

Texas designates Nestle and the other companies in the suit as “unitary entities,” or companies that have various components but operate as one organization. Unitary entities are subject to the 1 percent tax rate under current franchise tax rules that were revised in 2006.

Texas has had a version of the franchise tax since the 19th century. Sometimes called the margins tax, it’s a tax on doing business in Texas. Craymer says the dollars it brings in “generally pale in comparison to property and sales tax” on businesses.

Lawyers for the Texas Attorney General’s Office wrote in a brief to the court that Nestle’s equal-protection challenges hinge on an erroneous premise that the franchise tax was solely meant to cover the value of doing business in Texas and that the value should be assessed as if it were property. But, they wrote, the Legislature has wide latitude to create tax classifications.

My first impression when I read that was that Nestle’s argument sounds a lot like the one Amazon had made to argue that they weren’t subject to the sales tax in Texas because they didn’t have a “physical presence” in the state, just a distribution center. They eventually lost that fight as we know, but I couldn’t say what might happen here. Between this and the school finance lawsuits, the Supreme Court will have a big say over what Texas’ budget looks like in the coming years.

State revenues inching up

A little bit of good news.

State coffers will be bit plumper than previously expected, Comptroller Susan Combs announced Monday, but her outlook for the Texas economy is less optimistic.

Texas is estimated to collect $1.6 billion more than was budgeted for 2012-13, the two-year budget that started Sept. 1. The comptroller’s report provides the first official state revenue update since January.

[…]

The driving force behind the additional state dollars is improved sales tax collections, particularly in the oil and gas industry, according to the report.

Sales tax revenue from the mining industry, which includes oil and gas, was up 72 percent in the previous fiscal year. The industry also created 17.3 percent more jobs, while the rest of Texas’ industries combined had job growth of 1.9 percent .

But Combs cautioned against expecting that kind of robust growth going forward. Industry job losses in 2013 are expected to wipe out any gains in 2012, she said.

“The Texas unemployment rate — as low as 4.3 percent in early 2007 — is now at 8.4 percent and giving no indication of receding rapidly,” Combs said.

You can see Combs’ letter to state leaders about her revenue update here. This is better than the alternative, but it’s not going to do much to mitigate the cuts we experienced this spring. Mainly, if things continue on this pace, it means that at least the next Lege won’t have to start out by closing a deficit left over from the prior biennium, as this one did. Make sure you understand that when you read stories like this.

After a long run of tough times brought on by a sour economy, Texas lawmakers got some good news Monday as the state’s chief fiscal officer projected a $1.6 billion surplus that could provide a much-needed financial cushion for the next session of the Legislature.

The windfall available for the fiscal biennium that started Sept. 1 was generated by better-than-expected state revenue. It could enable lawmakers to partly offset a $4.8 billion shortfall in Medicaid and soften some other cuts enacted during the 2011 Legislature, analysts said.

The new projections by Comptroller Susan Combs will make things easier for budget-writers at the outset of the next legislative session in 2013, although lawmakers will still face a host of financial challenges.

Combs projected available revenue of $82.7 billion by the time the biennium ends on Aug. 31, 2013, which would give the state a $1.6 billion balance over the $81.1 billion in the two-year budget approved by this year’s Legislature.

Lawmakers entered the 2011 session facing one of the biggest shortfalls in years.

They ultimately enacted an austere budget that cut spending by $15.2 billion over the previous biennium and reduced state aid to public education by $4 billion.

[…]

Dale Craymer, president of the business-supported Texas Taxpayers and Research Association, said Combs’ report offers good news for lawmakers. In passing the $172.3 billion budget, lawmakers left Medicaid underfunded by $4.8 billion and expected to tamp down the shortfall by drawing from the state rainy-day fund in 2013. Craymer said lawmakers can use the surplus to partly meet the Medicaid obligation.

Combs projected that the rainy-day fund will reach $7.3 billion by the end of 2013.

Eva DeLuna Castro, an analyst for the Center for Public Policy Priorities, which advocates for programs for low-income Texans, said the surplus means that lawmakers “will have a little left over” to deal with Medicaid and restore $250 million in general revenue cuts. But she said the amount is not big enough to deal with broader financial issues, including state policies that critics say have created a permanent “structural” deficit. She called Combs’ projection “mediocre at best.”

This report has to do with this biennium. Other than ensuring that there should be enough in the Rainy Day Fund to handle the massive Medicaid short-changing and not requiring a second dip into the RDF to close the books on this chapter, it doesn’t really tell us anything about what conditions to expect for the next biennium and the budget that legislators will have to write for it. I fully expect there will still be a large deficit, quite likely another eight-digit shotrfall, because the underlying structural deficit of the business margins tax not paying for the 2006 property tax cuts is still there. Some healthier sales tax numbers aren’t going to make a dent in that. We also have no idea what may result from the various school finance lawsuits, but since they will be arguing (among other things) that the state is not adequtely funding public education, you can expect that to put some pressure on lawmakers to find more revenue. And of course the kind of lawmakers we have in place for when that comes up will have a huge effect on the kind of solutions, or “solutions”, that are found. We’ve got a long way to go before things change.

Supreme Court upholds margins tax

The days of the much-unloved business margins tax may be numbered, but it won’t be the Supreme Court that is responsible for its demise.

The Texas Supreme Court turned back a challenge to the state’s primary business tax, saying it doesn’t violate a constitutional ban on personal income taxes.

The Constitution allows personal income taxes only when if voters approve. Lawmakers didn’t seek voter approval when they revised the franchise tax in 2006, and Allcat Claims Service LLP and a limited partner there, John Weakly, sued for a refund from the state, calling it an illegal personal income tax and saying that it wasn’t applied in an equal and uniform way. In the majority opinion, written by Justice Phil Johnson, the court answered one of those questions:

“We hold that: (1) the tax is not a tax imposed on the net incomes of the individual partners, thus it does not facially violate Article VIII, Section 24; and (2) we do not have jurisdiction to consider the equal and uniform challenge.”

More from the Statesman:

The case focused on whether the franchise tax constituted an income tax for certain business partnerships, including many medical practices and law firms.

Allcat Claims Service LP, a Boerne insurance adjustment firm that filed the case last summer, argued that the franchise tax levied against the partnership reduced the income of Allcat’s partners, making it an income tax.

But a majority of the court maintained that the tax applied to Allcat, not the business partners, so it did not run afoul of a state constitutional provision that prohibits a personal income tax unless voters give their approval.

“In effect, the court said a business is a business, and restrictions against taxing persons do not apply. That gives the Legislature a broader range of options in revising the tax,” said Dale Craymer , president of the Texas Taxpayers and Research Association, a business-backed think tank.

[…]

Monday’s decision will not, however, affect a separate challenge to the margins tax that was filed by food behemoth Nestle USA Inc. and two other companies this fall.

But Craymer said the court decision implies that that case will be sent to a trial court because it deals with specific rather than broad issues.

I was surprised we got a decision so quickly, but apparently the legislation that created the margins tax had a provision that said a challenge to it would go straight to the Supreme Court and that it must render a judgment within 120 days. I fully expect the 2013 Lege to address the margins tax in some fashion, but at least they won’t be under the gun of having to make it constitutional. We’ll see if they actually try to fix the budget’s structural deficit by making it bring in more revenue.

Margins tax lawsuit goes to Supreme Court

Oral arguments for the lawsuit that claims the business margins tax is an unconstitutional income tax are being heard by the State Supreme Court this week.

In a lawsuit filed in July, Allcat Claims Service LP , a Boerne insurance adjustment firm, said the margins tax runs afoul of a constitutional provision that requires the Legislature to get voter approval before imposing an income tax.

The case will turn on whether the margins tax — implemented in 2006 as part of the court-ordered school finance fix — is effectively an income tax when applied to certain business partnerships.

Late last week, another challenge to the margins tax was filed by food behemoth Nestle USA, Inc. and two other companies. Their arguments, which are different from Allcat’s claims, [were not] heard by the court [Monday].

If any of the challenges are successful, the implications could be significant for the state because the margins tax is a major source of funding for public education.

That’s why legislators wrote into the 2006 law that any legal challenge to the margins tax would go straight to the Supreme Court.

[…]

The total tax paid by partnerships such as Allcat is estimated to be pretty small, though exact figures weren’t immediately available from the Texas comptroller.

But the implications could be huge if the court sides with Allcat, the state says.

“If Plaintiffs are right and any tax imposed on a partnership is an indirect tax on the net income of the partners, the State of Texas cannot lawfully impose any tax on any business entity, including a corporation,” [Attorney General Greg] Abbott argues in court documents.

If the court finds the tax unconstitutional, the remedy could range from a targeted exemption for the partnerships, which is what Allcat is requesting, to tossing out the tax for all businesses.

“It’s sort of wide open what the court might do,” said John Kennedy of the Texas Taxpayers and Research Association, which supports the state’s position that the tax is constitutional.

See here and here for some background. The argument before the Court now is whether or not it has jurisdiction in the case, since it has not been heard by any lower court as yet. It’s entirely possible they could rule that despite the Lege’s intent that the case go straight to them, it needs to go through the system like any other lawsuit would. Add this to the school finance lawsuits, and you’ve got some litigation out there that could profoundly affect Texas’ budget and tax system. Isn’t that a happy thought?

One more thing:

The state estimated the margins tax would raise almost $12 billion in the 2008-09 budget. It actually brought in $8.7 billion in its first two years.

Earlier this year, legislative leaders highlighted the need to reform the tax, but there was little appetite for tackling another complicated issue while grappling with a massive budget shortfall.

Lawmakers have promised to discuss how to fix the margins tax leading up the 2013 legislative session.

No, there was little appetite for doing anything that might raise revenues and thus mitigate the worst of the cuts. The fact that the underperformance of the margins tax was a huge driver of that massive shortfall was blithely ignored by nearly every Republican in Austin. I guarantee you, the more Republicans that are in the Lege in 2013, the more they will continue to pretend that Texas doesn’t really have a revenue problem at all. The Trib has more.

The biennial budget shuffle

In addition to billions of stimulus dollars, the budget this year relied on some old tricks to get certified as balanced.

Nearly $3.7 billion in levies collected for everything from fighting air pollution to helping low-income people with their electric bills to funding trauma care will instead help balance the state’s upcoming two-year budget.

The money, for the most part, is collected through fees and fines that legally are dedicated for a particular purpose. If lawmakers do not spend the money on the dedicated purposes, however, the balances become available to spend on other programs.

“It’s kind of like having your (household) budget laid out and spending part of your food money on entertainment, or vice versa,” said Dale Craymer, chief economist of the Texas Taxpayers and Research Association, who has worked for a state comptroller, two governors and as the Texas House fiscal analyst. “It’s a backdoor way to undedicate the money.”

It’s pretty much the same thing every two years. We have a bunch of dedicated funds, which levy fees on certain things that are supposed to pay for certain specific items, then for a variety of reasons we decide to use some of that money for other things. It would be more honest to dedicate the money to general revenue, and it would be fairer to admit that we do this sort of thing because we refuse to adequately fund the things we want to pay for via the taxes we already collect and to deal with that, but we don’t. And so the shell game keeps getting played.

In some cases, unspent balances in dedicated accounts have grown to hundreds of millions of dollars over years.

For example, the System Benefit Fund has accrued more than $670 million. The program imposes a fee on electricity customers in competitive retail markets, including Houston, Dallas-Fort Worth and most of the Rio Grande Valley, to provide a May-September discount for low-income customers.

[…]

“We’re generating funds for a good purpose. We’re diverting the funds, without telling people, for general purposes. And then we say we’re not taxing. Well, government is lying,” said Rep. Sylvester Turner, D-Houston, who called such levies amount to “a tax by misrepresentation.”

Turner is a big advocate of the System Benefit Fund, which he tried but failed to restore full funding to in 2007. Especially in a summer like this one, it would have been nice for there to be help available for folks who can’t afford their utility bills, but as has often been the case, it wasn’t a priority.

Senate Finance Committee Chairman Steve Ogden, R-Bryan, said he understands the argument, but “if you are going to criticize that, then go tell me what other parts of the budget I’m supposed to cut. … The choice to complain about it is just hot air.”

Alternatives, he said, would be raising general taxes or dipping into the state savings account known as the rainy day fund, which budget-writers expect to need in the future.

“The long and short of it is, we have to do this in order to balance the budget,” Ogden said. “I guess this was the least objectionable of the four alternatives.”

The situation points up a major public policy issue, he said.

“Our tax and revenue system is pretty messed up, and a case can certainly be made for a major overhaul of our tax structure,” Ogden said.

I would have argued that the rainy day fund was the right way to go, as I was arguing for the budget in general before the stimulus funds saved the day. But Sen. Ogden is correct that our system is broken and needs fixing. He’s not the guy I want fixing it, mind you, but he’s right about the problem. As with many other things, that isn’t going to happen until we get a change not just in leadership but in our philosophy of governing. I can’t say I see that happening any time soon.