Republicans’ Proposals Will Require Tax Hike Next Session

They said it was a plan to cut taxes. They went so far as to call it, “tax relief.”

The fact is, any relief will last only until the state’s budget writers sit down to write the appropriations bills for the next biennium—when the 80th Legislature convenes in January.

Today, during the session in the House today, HB 1 authors Rep. Warren Chisum (R-Pampa) and Rep. Rob Eissler (R-The Woodlands) admitted to the people of Texas that the legisiation will require a tax hike next session. Without a tax hike, the state won’t be able to pay for House Bill 1, which has been heretofor touted as the cornerstone of the massive Texas Tax Reform Commission proposal to both get the state out of hot water with the Texas Supreme Court over school finance and provide property tax relief.

The TTRC proposals which have been billed [no pun intended] as a tax cut will cost billions—that’s billions—and result in massive tax increases in the long run.
State Rep. Scott Hochberg has even told the Dallas Morning News that future budget shortfalls could grow larger than the entire combined budgets of the prison system and the Texas Department of Public Safety.

Of course, the alternative to a tax increase is massive cuts. And, in a Republican dominated legislature, you know those are cuts that will come from social services and affect the poorest of Texans.

The Center for Public Policy Priorities has already pointed out that the bills don’t harmonize as advertised, and that they will result in budget cuts of as much as 16 percent next session.

As far as facilitating those cuts, the Lege could do a number of things, including pull all general revenue funds from public colleges and universities. For the 2006-07 biennium, general revenue appropropriations for higher ed totaled $10.9 billion.
Appropriation from all state funds totaled $15.9 billion for the biennium.

While the cut that may have to be made in higher ed to facilitiate the 16 percent discussed above wouldn’t touch funds from the constitutionally mandated Permanent University Fund and Higher Education Assistance Fund.

(Keep in mind, too, that the PUF is no longer the goose that laid the golden egg and that it only applies to the UT and A&M Systems. Two thirds of the interest on the principal of $15 billion goes to to the UT System while the other third goes to the A&M system. That doesn’t mean that those systems’ flagship universities (Austin and College Station) get that much, either. It’s distributed system wide and the PUF moneys make up between five and ten percent of the individual universities actual budets).
This cut would, since the state has deregulated college tuition, cause tuition bills to skyrocket out of control making college out of reach for more and more middle class Texas families.

The higher ed cuts, while a possibility, would probably take a major back seat to HHS funding cuts. Cutting HHS funding by two thirds (which would also eleminate billions in federal matching funds) is the more likely approach the state would take. And, yes, a two thirds cut would basically render HHS obselete. Also, cutting all general revenue funds dedicated for any programs which are non-education and non-HHS  is an option. The other alternative is closing prisons, and you know the Lege isn’t going to do that. And, of course, there is always the option of doing a little bit of all these options.

To hear state leaders like Lt. Governor David Dewhurst talk, though, you’d think they’re just casually talking about some unimportant appropriation that might or might not run out of money, as opposed to the worst fiscal disaster to face the state of Texas since the 1830s when the Republic of Texas was forced to finanance the budget with “redback” paper money. Or, just as bad, back in 1933 when the state depository was forced to shut down and the state was declared in default on its bonds because of the deficits brought on by the Depression.

During the worst economic crisis in the last 100 years (the Depression), the state was forced to cut spending by 20 percent. Next session, it will only be four percent less than that, 16 percent.

Dewhurst told the DMN:

“It’s something we’ll have to pay attention to, to make sure we have enough revenue to go into public education — we’ll have to monitor it very closely.” He also said lawmakers would look to trim fat from future budgets.

Uh, trim the fat? How about cut off the cow’s head, tail, one leg, gouge its eyes out and, for good measure, take a big hunk out of its hindquarters. These problems will require more than just a little fiscal housekeeping and “fat trimming.”
While Sen. Steve Ogden thinks everything will be okay through 2008, he admits—like his House counterparts—that the Legislature has simply played a shell game with taxation:

“But in 2009, I don’t know [what we'll do] — other than we’ll balance the budget,” said Ogden, a Bryan Republican. “There could be some problems in the future beyond 2008, but I thought we could manage in some way. . . . There are a lot of variables.”

Those variables include hundreds of thousands of Texans who are the beneficiaries of HHS services the Lege is likely to cut.

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