Grading Texas

Although it still is unclear if he will get any support from the governor who portrays the state’s financial crisis as a mere hiccup, Senate Finance Chairman Steve Ogden apparently still is looking at some kind of fix to the state’s underperforming business tax.

This is the broaderbased tax, also referred to as the margins tax, enacted in 2006 to replace the old franchise tax and supposedly help pay for the school property tax reductions ordered by the governor and the Legislature that year. But, as we know, the new tax fell short and is a significant reason the state is now about $10 billion short of paying for those property tax cuts during the upcoming budget cycle.

Ogden, RBryan, who also is the Senate’s president pro tempore, was talking on the session’s opening day about correcting problems with the new tax. Unlike Gov. Perry, he also advocates spending part of the $9.4 billion Rainy Day Fund to reduce the need for budget cuts.

Ogden was discussing the business tax again yesterday, this time with Comptroller Susan Combs during Combs’ appearance before the Senate Finance Committee. According to Jason Embry in today’s Austin AmericanStatesman, the two discussed the fact that the broad definition of cost of goods sold was one reason why the margins tax has produced significantly less revenue than projected.

Cost of goods is one factor that lowers a business’ tax liability.

Asked if the cost of goods definition should be changed, Combs replied that that possibility was “a conversation you might want to have.”

Ogden and the Senate can’t do much about squeezing more money from the margins tax or spending any of the Rainy Day Fund without some cooperation from the House and some give from the governor. But it would be refreshing to see some serious debate over the margins tax and the Rainy Day Fund start competing with news of looming teacher layoffs and school closures.

Any effort to raise much new revenue from the business tax, of course, would be greeted with howls of protest from many business people. But they should know better than most people that sound investments in education and health care are essential to a welleducated, healthy work force.

Those investments aren’t going to come from budget cuts – or thin air.

You Texas chauvinists who would rather wave the state flag than face up to reality may not want to read any further because you may be offended. Not that I really care, but I am just trying to save you some time.

I (a Texas native, for the record) hope the rest of you have had the opportunity by now to have read or heard something about the state’s latest report card. Not the rosetinted one from the governor’s office, but the realistic “Texas on the Brink” report released yesterday by the Legislative Study Group. If you haven’t, click on The Texas Tribune link at the bottom of this post.

It is realistic, but not pretty. Similar to previous reports that used to be compiled periodically by former state Sen. Eliot Shapleigh of El Paso, the latest report shows Texas at or near the bottom in just about every quality of life category that can be considered good and leading or near the front of the pack in most categories that are bad or ugly.

For longtime observers of state government, of course, this really isn’t much in the way of news. It just reinforces the reality that Texas – despite all the bluster of its political leaders – is a very difficult, even dangerous, place for millions of people to call home. And this is before all the proposed cuts in education and health care that have been laid out for lawmakers during this legislative session.

Without reciting all the statistics, I will note one that should be particularly galling for parents and business people, including some of the governor’s top political donors. Texas is 50th – dead last among the states in the percentage of its population 25 and older with a high school diploma.

This clearly is not the fault of teachers, school administrators or anyone else in the education profession. This ultimately is the fault of the state’s political leaders who, despite tons of rhetoric, have refused to adequately and equitably fund the state’s school finance system. And, if the governor and legislative leaders have their way, they will retreat even further from that responsibility this session.

Yes, education requires more than money. It also requires dedicated teachers, strong curricula and administrative efficiency. But dedication doesn’t pay the teachers’ bills, build classrooms, buy textbooks, purchase computers and equip science labs. And efficiency goes only so far.

It is not part of this report, but Texas ranks 37th among the states in perpupil expenditures on public education.

Texas’ horrible graduation rate also is directly impacted by some of the other poor statistics on the state’s report card, notably the fact that Texas leads the nation in the percentage of children without health insurance and is fourth in the percentage of children living in poverty.

Simple survival – not a high school diploma – is the No. 1 priority of children and families constantly struggling with illness and hunger.

Not so incidentally, Texas ranks 47th among the states in tax expenditures per capita. That may make some shortsighted politicians proud, but it is shortchanging millions of their constituents their taxpaying constituents.

-From The Texas Tribune

Here’s some more information on the futility of proposing a $10,000 pricetag (including books) for a bachelor’s degree in Texas without raising taxes or increasing higher education funding, as Gov. Rick Perry is advocating.

State Rep. Mike Villarreal, DSan Antonio, today released data he obtained from the Texas Higher Education Coordinating Board, showing the potential realworld implications of cuts in the higher education budget, as laid out in the House budget plan. This is the proposed budget that would cure the state’s revenue shortfall without raising taxes or spending any of the Rainy Day Fund, per Perry’s wishes.

If that budget were passed as is, and universities made up the cuts in appropriations with tuition increases alone, average tuition for a fulltime resident undergraduate student at a statesupported university would increase by $1,023 a year, Villarreal said. If universities passed through only half of the cuts in the form of higher tuition, tuition for the same student would increase, on average, by $511 a year.

According to the Coordinating Board, the starting House budget proposal, or House Bill 1, would reduce general revenue appropriations for higher education by $898 million over the next two years.

“The Coordinating Board cannot say how much, if any, decrease in state funding would be passed on by institutions as increases in designated tuition,” the Coordinating Board noted. “This would also likely vary significantly among institutions.”

But tuition is a likely source, Villarreal believes, because universities’ ability to absorb budget cuts without passing them on to students will be limited.

“The data demonstrate that Gov. Rick Perry’s recent call for making colleges more affordable, including a fouryear degree that costs $2,500 per year, is in conflict with his own budget proposal,” Villarreal said.

In the fall of 2003, just after the Legislature and Perry deregulated university tuition, the average tuition and fees for a fulltime undergraduate Texas resident at a statesupported university was $1,934 per semester. At UTAustin, the comparable figure was $2,721, and at the main Texas A&M campus, $2,357.

In the fall of 2009, after six years of repeated tuition increases from boards of regents, the statewide tuition and fees average was $3,323 per semester. At UTAustin, it was $4,468, and at the main A&M campus, $4,343.

Is it starting to sprinkle on the governor?

I’m not sure, and it is risky to mine political statements for nuances. But, hey, there is little point in writing a blog without occasionally engaging in speculation. So, here goes.

On Jan. 11, the day he was sworn in to begin his new term, Gov. Rick Perry, in an interview with the Houston Chronicle, strongly repeated his opposition to spending any of the state’s $9.4 billion Rainy Day Fund to help bridge the huge revenue shortfall.

“We will craft a budget that meets those revenue projections and not raise taxes nor get into the Rainy Day Fund,” he said.

The governor also addressed the Rainy Day issue during his State of the State speech earlier this week.

He said then: “Setting aside resources for a rainy day has given us a resource that other states would love to have, and some in our state would love for us to spend dry. Emptying the savings account to pay for recurring expenses is a bad idea, whether it happens at home, the workplace or in our state budget. That approach would not only postpone tough, necessary decisions, but also leave us illequipped to handle bigger emergencies in the future. Therefore, we must protect the Rainy Day Fund.”

Now, if you are still with me after that long discourse, there are some subtle differences between the two statements. In the first, the governor pretty flatly says he doesn’t want any Rainy Day money spent to balance a new budget. In the second, longer statement, he tries to convey the same message, but he dances a bit, which is why the quote is so long.

The bottom line of the morerecent statement is that Perry wants to “protect” the Rainy Day Fund, which could be setting the stage for an amended, followup position sometime this spring that the Legislature can “protect” the fund as long as it doesn’t spend all of it.

Or, this may simply mean that I don’t know how to read.

In any event, thanks to the devastating cuts laid out in the initial budgetary proposals, the pressure is building to spend at least part of the $9.4 billion tucked away in the savings account. The Texas Association of Business, one of the governor’s major supporters, supports spending $6 billion of the total. And Republican budgetwriters are openly calling for Rainy Day expenditures.

The mostoutspoken so far has been state Sen. Kevin Eltife, RTyler, who bluntly said yesterday: “It’s insane not to use the Rainy Day Fund. We also have to find additional revenue.”

TSTA urges the Legislature to spend all $9.4 billion in the Rainy Day Fund (at least part of that will automatically be replenished in time for the next budget cycle). But this would only begin to take care of a shortfall as deep as $27 billion.

The Legislature also must enact a new, equitable source of revenue that not only will cure the $10 billion, biennial deficit in the school funding system but also provide future, adequate support for public education and other state services.

Speak up! Tell the governor and your legislators that you and your children can’t afford the alternative.

Make some noise!