A hole in the heart of Texas

[The_Dude 1,142]

A hole in the heart of Texas

IN 2008 the Texas governor’s mansion, in downtown Austin, was badly damaged in an apparent act of arson. The culprit remains unknown and at large. Rick Perry was not there, having moved into a rented house the year before while the mansion was being restored. There he remains.

In recent months the size and splendour of the rented house have become another flash point. Bill White, the Democratic candidate for governor, is attacking Mr Perry for extravagance on the taxpayer’s dime. The governor enjoys seven bathrooms, and the household subscribes to Food & Wine magazine. Quite yuppie under the best of circumstances; and, under current circumstances, it looks worse. The state will face an $18 billion budget shortfall over the next two years, and everyone has to tighten their belts.

Texas has been fearing a shortfall for some time. The state has done relatively well during the recession, and its cities continue to lead national lists of the places most poised for a quick recovery. But nowhere is immune from a global downturn, and since the beginning of this year the budget for the next two years has become a growing worry. Sales-tax receipts dropped for most of 2009 compared with the year before, and as Texas has no state income tax and low taxes on business, there was not much of a buffer. A wad of federal stimulus dollars, which has helped pay for services this year, is running out. And as the state’s population has been growing, so have its obligations.

Mr White’s campaign adds that the budget deficit is partly caused by a 2006 effort to reform school funding. The state, in an attempt to reduce local property taxes, planned to raise more money for schools through a tax on business profits. That tax has not raised as much money as expected, leaving the state short of several billion dollars every year.

The projected size of the two-year shortfall has been creeping up, from $11 billion to $15 billion; $18 billion is last month’s estimate from the state’s Legislative Budget Board. Democrats worry it could be even larger, perhaps $20 billion. The $18 billion figure is already around 10% of the state’s budget for the next two years.

Texas still has a sizeable amount, some $8 billion, in its rainy-day fund, although many lawmakers are reluctant to touch it, reasoning that the subsequent budget cycle could be even harder than the pending one. And some budget-watchers have gently suggested that this might be an appropriate time to look for ways to raise revenues. Eva DeLuna Castro, an analyst with the Centre for Public Policy Priorities, points out that the Texas economy is growing in services rather than goods. As services are not, for the most part, subject to sales tax, revenue flows will not keep pace with growth. Surely some consumer services can be taxed, she says, without distorting economic activity too much.

This being Texas, the cuts have already started, and they will be harsh, particularly in higher education, health care and prisons. In February Mr Perry, along with the lieutenant-governor and the speaker of the Texas House, all Republicans, directed state agencies to find ways to cut their budgets by 5%. A few months later they demanded another 10%. As Texas already runs a tight ship, in keeping with its low-tax, low-spend philosophy, this means cutting to the bone rather than trimming fat.

Mr Perry, for the most part, has downplayed the gravity of the situation. Until quite recently he was saying that he was not even sure there would be a shortfall, despite the cuts he had demanded. It was an odd stance, but not inexplicable. The budget cuts will have to go through the state legislature, which does not meet again until January. The elections, of course, are in November.

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So I guess Texas really isn't recession proof. Cutting education by 15%? That's a great way to improve your state

[Obama 2012 1,714]

So I guess Texas really isn't recession proof. Cutting education by 15%? That's a great way to improve your state

I'm pretty sure UT with its TV deals and the other Big 12 schools can do without state funding in some areas... Trust me, they make more than enough.

Services should be taxed the same way as any other sale. That shouldn't be a big deal. Even if it's just the State sales tax of 6.5%. The cities don't need to add theirs on necessarily, though it might help.

Cuts have to happen when you overspend on certain things and when people aren't buying as much.

The amusing part here is the state is growing, but it's the government that's losing money. Kind of funny when you think about it. People are doing ok, the government is not.. hmmmm

[Darnell 8,479]

I dunno, I question anything Mr. Perry does - as mostly - I can't find 'logic' inside of his 'outward decisions'.

But that's me. I gave up being a Republican ages past, when Mr. Bush became the Governor. Perry, if this is even possible, seems to have more of the same 'problems' , just in wider scope and deeper depth, than Mr. Bush.

I like a good comedy, always, but when it's at this level, it's no longer a comedy.

Perry has many problems. IMO, this 'rental property' is very small, in scope.

[Gary and Alla 3,696]

Th ebig question...

WHY is a liberal HAPPY about bad economic news?

[Darnell 8,479]

Gary - if that was directed at me - sorry, I'm no liberal. A lot of other things, sure, but a liberal ? no way

[Trumplestiltskin 5,791]

The big question - why so many assumptions, Gary?

It's a reasonable article and I see no expressions of delight in Rob's posting of it.

[elmcitymaven 9,712]

The big question - why so many assumptions, Gary?

It's a reasonable article and I see no expressions of delight in Rob's posting of it.

Agreed -- it sounds more like outrage at excessive spending in a time of economic downturn.

[Nina~ 431]

I'm pretty sure UT with its TV deals and the other Big 12 schools can do without state funding in some areas... Trust me, they make more than enough.

Services should be taxed the same way as any other sale. That shouldn't be a big deal. Even if it's just the State sales tax of 6.5%. The cities don't need to add theirs on necessarily, though it might help.

Cuts have to happen when you overspend on certain things and when people aren't buying as much.

The amusing part here is the state is growing, but it's the government that's losing money. Kind of funny when you think about it. People are doing ok, the government is not.. hmmmm

Paul, do you know how a "state-funded" university works? The state subsidizes the cost of tuition for residents, ie the state government (tax payers) pays approximately half the costs of every student paying 'in-state tuition'. State money is a huge deal for public universities.

[Trumplestiltskin 5,791]

Agreed -- it sounds more like outrage at excessive spending in a time of economic downturn.

What is quite interesting is that a fair few people were crowing the other day about some articles about how Texas seemed to be weathering the recession (no mention from Gary about that of course) and that this represented a "triumph" of "conservative economics". Surprise surprise to see that that things are not quite so rosy as has been claimed.

What we need here is more fact and less rhetoric.

[The_Dude 1,142]

The point of posting this article was to counter the misleading and wrong threads that others have posted about Texas being "recession proof". Texas is getting hit just like everywhere else.

Paul, the reference to education was about the public school system, not the university system. That is a whole other story.

[elmcitymaven 9,712]

What we need here is more fact and less rhetoric.

Don't forget -- you don't need to prove a fact. Facts is facts.

[Obama 2012 1,714]

Paul, do you know how a "state-funded" university works? The state subsidizes the cost of tuition for residents, ie the state government (tax payers) pays approximately half the costs of every student paying 'in-state tuition'. State money is a huge deal for public universities.

and my point was, UT doesn't need that money. UT makes more money in a year than some Universities could hope to make in a decade.

[Obama 2012 1,714]

The point of posting this article was to counter the misleading and wrong threads that others have posted about Texas being "recession proof". Texas is getting hit just like everywhere else.

Paul, the reference to education was about the public school system, not the university system. That is a whole other story.

Just because people are spending less, doesn't mean Texas is worse off than thought either. It could just be people are more conservative with their spending here as well and being very careful. --- You go to any shopping mall in DFW on a weeknight, Weekend, and movie theatres, shopping centers, restaurants, etc. you wouldn't think so... Hell, they're busier than ever...

The public school system makes enough money through property taxes in their local communities, the state lottery, etc. - There's plenty of places that schools can cut back on spending that have nothing to do with education itself. - Start making parents pay for things like football instead of it being part of the school's budget. We love football in Texas, but sometimes things just aren't as affordable.

[Staashi 371]

Just because people are spending less, doesn't mean Texas is worse off than thought either. It could just be people are more conservative with their spending here as well and being very careful. --- You go to any shopping mall in DFW on a weeknight, Weekend, and movie theatres, shopping centers, restaurants, etc. you wouldn't think so... Hell, they're busier than ever...

The public school system makes enough money through property taxes in their local communities, the state lottery, etc. - There's plenty of places that schools can cut back on spending that have nothing to do with education itself. - Start making parents pay for things like football instead of it being part of the school's budget. We love football in Texas, but sometimes things just aren't as affordable.

But this is the point - Texas, as I recall, doesn't have a state income tax - just like my state - Florida. If people do not spend money which covers state sales taxes, buy homes and cars, which are subject to doc stamps and registration fees, etc., etc. they will be up a creek without a paddle - money will dry up. Hence, your state is going to be suffering tremendously very soon. Whenever a state begins to speak of severe cuts to education, healthcare and especially prisons (which in Texas is the equivalent of saying that there is no Jesus) it is in dire straits. Just sayin'.

[Obama 2012 1,714]

But this is the point - Texas, as I recall, doesn't have a state income tax - just like my state - Florida. If people do not spend money which covers state sales taxes, buy homes and cars, which are subject to doc stamps and registration fees, etc., etc. they will be up a creek without a paddle - money will dry up. Hence, your state is going to be suffering tremendously very soon. Whenever a state begins to speak of severe cuts to education, healthcare and especially prisons (which in Texas is the equivalent of saying that there is no Jesus) it is in dire straits. Just sayin'.

If people cut spending, government needs to cut spending.

The misconception that everyone has is that it has to be 'business as usual' for the state no matter how much they spend or raised their spending over the years. Sometimes you have to make cuts as well.

As I said, I don't see how the state is losing money other than mis-managemnt of said funds. Shopping is through the roof, at least in the major cities. DFW is growing and busier than ever, Houston the same, Austin and San Antonio... Not too sure about El Paso... Even a lot of the smaller communities have been growing and new business has been popping up.

I did note though, if services aren't being taxed, then they should be. This is an area of income they should be getting as it's still a sale...