Texas State Senators in Tricky Search for Money

It’s not just that state Sen. Robert Duncan doesn’t like gambling. He doesn’t think he could get legalized casinos out of his Senate State Affairs Committee, or out of the full Senate. And why, the Lubbock Republican asks, would you waste the Senate’s time on something that might not win approval in the House?

Better to wait.

In the meantime, the senator — assigned with several colleagues to find some new sources of money that can’t be called taxes — says he’ll take another week or so to get that job done.

The mission is to find $5 billion to $6 billion. The problem, other than that genetic Texan aversion to taxes, is that there aren’t many recurring sources of money. Taxes keep on rolling. So do fees. So, at least according to the promoters, do casinos and slot machines.

“There’s not a lot of revenue that doesn’t rise to the level of a tax increase,” said state Rep. Harvey Hilderbran, R-Kerrville, who heads the tax-writing Ways & Means Committee. He’s skeptical the Senate can find that kind of money, but he’d welcome it.

 

Duncan and his crew are more likely to come back with a list heavy with one-time sources of money. The upside is that money available now, of whatever kind, can be used to help close the state’s projected budget shortfall without cutting programs that lawmakers and their constituents want to protect: public schools, or nursing homes. The downside is in using one-time money for ongoing expenses.

Two years ago, state lawmakers came to Austin to write a budget that had the same problems — a “structural deficit” (the gap between what lawmakers promised to raise in a 2006 tax bill and what they agreed to spend on public schools at the same time), a shortfall, a recession — that are featured in this year’s edition. They were rescued by the federal government’s contribution of billions in stimulus money, and used that one-time money for ongoing expenses.

Now, lawmakers are staring at a larger version of the 2009 problem. They don’t have the money to pay for the things they’ve already promised to voters, and they have to break the promise of those programs, or break their promise of no new taxes, or find another way out.

The Easter Bunny isn’t bringing federal stimulus dollars this year, so it’s up to lawmakers to find a solution.

Duncan is not spilling any details, saying he doesn’t want to constrain the brainstorming by flinging up early suggestions for the political skeet-shooters. Most of the ideas are known, as they’ve been used before. What’s not clear is how many dollars each thing is worth.

Speeding up tax collections, particularly on the state’s main business tax, could bring in a couple of billion dollars this biennium (Texas has a two-year budget). Declaring amnesty for overdue taxes would generate about $75 million, according to Rep. John Otto, R-Dayton, who’s been working on these ideas. Holding the state’s monthly payment to school districts for one day — pushing that expense out of this budget and into the next one — is good for about $1.8 billion. There's another $3 billion in accounts related to tobacco lawsuit settlements in the 1990s that might be tapped.

A couple of tax-like options have been mentioned in other quarters. There’s the high-cost natural gas tax exemption, originally a temporary break designed to spur production. Legislators later made it permanent, but ending the exemption would bring in well over $1 billion (the exact amount depends on gas prices).

And there’s that corporate margins tax, too. It was created in 2006, replacing the old corporate franchise tax, and it has produced less money than state lawmakers hoped. Would "fixing" that constitute a new tax?

Some things work in reverse. Two years ago, lawmakers temporarily raised the exemption on that business tax so that companies with less than $1 million in revenue didn’t have to pay it. The old floor was lower, and raising it to the current level freed an estimated 39,000 companies from the tax. If lawmakers do nothing, many of those taxpayers will be paying a combined total of $172 million they don’t pay now, but they won’t be happy.

Worst of all, it’s all one-time money. The wonks who work for Comptroller Susan Combs have told lawmakers the state starts each biennium with that $10 billion structural deficit. Add another $5 billion to $6 billion in one-time money from Duncan’s effort that might get written into the next budget. Barring a windfall of some kind, they’d start two years from now with a $15 billion to $16 billion shortfall.

And the easy pickings, the one-time measures that come from accelerated tax collections and delayed payments? Those would be all used up.

 

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