Taking From The Surplus: Is It A Good Idea

While John Sharp was busy telling people it is “safe” to take from the budget surplus to make the TTRC’s tax plan work, several key senators are noting it may be a dangerous idea:

Members of the Senate Select Committee on Education Reform and Public School Finance also raised questions about the other major revenue sources in the multibillion-dollar proposal — a proposed business-tax expansion and $1-a-pack increase on cigarettes.

State Sen. Florence Shapiro — who heads both the select committee and the standing Senate Education Committee — said senators have “high regard” for the proposal developed by a group of business leaders appointed by Perry and led by former comptroller John Sharp.

“But there’s also lots and lots and lots of questions,” said Shapiro, R-Plano, adding, “I’m very concerned about the surplus.”

…Shapiro said she has received calls from lawyers, doctors and dentists concerned over the tax that would newly apply to them.

“The cost of goods sold is a difficult piece to deal with when you are a service industry, because you don’t sell goods, you sell your service,” she said.

The property-tax cut also would be financed by the higher cigarette tax and use of a portion of an estimated $4.3 billion budget surplus. Democratic Sens. Eddie Lucio of Brownsville and Royce West of Dallas noted some would like to see at least a portion of a cigarette-tax increase used for health programs.

The use of the surplus drew particular concern from senators, who said the move could mean a budget challenge down the road. Their concern comes as some in the House are taking an opposing view by urging an even bigger use of the surplus to buy down property taxes.

“We all have to recognize that it is a one-time surplus,” Shapiro said. “You have to address that surplus every year from this day forward if you include that in any of your numbers.”

The proposal the first year would use about $1 billion of the estimated surplus. Sharp said it’s a traditional assumption that it’s safe to use 25 percent of a surplus, because natural budget growth will keep pace.

Sen. Robert Duncan said the plan would require lawmakers to come up with $1.4 billion annually after the first year to account for the surplus being used.

“So the next biennium we’ll be looking at a $2.8 billion appropriation … to make this balance,” said Duncan, R-Lubbock. “It all boils down to this whole big picture and how we make it all work in connection with … Medicaid costs, CHIP (Children’s Health Insurance Program) costs, criminal justice costs and everything else.”

Howard Wolf of Austin, a member of the tax-reform commission that developed the plan, said there was “great angst” about using any of the surplus. But he said members believe the business tax will raise more money than the $4 billion initially projected.

Lucio combined his concern over using the surplus in this way with his desire for also addressing measures meant to improve education.

Perry has said lawmakers must address the tax issue, as ordered by the court, before considering other education measures in the special session. The governor sets the special-session agenda.

“I really do not feel we should be using the surplus for property tax relief. If anything, we should use it — every bit of it — for public education reforms,” said Lucio, who supports a teacher pay raise and said schools also need funding to build classrooms.

I’m personally doubting, after this, that there is any chance the TTRC’s proposals will make it out of the Lege even reasonably intact. I knew there would be more trouble for the plan in the Senate (even from Dewhurst), but I think this shows the thoughts are pretty bipartisan.

In the House, full of more Mavericks but also more lock-step Perry Republicans, we may see either total chaos or total support. Only time will tell.

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