I decided to run for the Texas State House because the last ten years taught me that we need better elections and more accountability.

But my first real policy love was taxes and budgets - it's important the government raise and spend money wisely!

So last Monday when the Texas Comptroller released the updated 2020-2021 Certification Revenue Estimate, I knew I'd have to write about it.  

What's the "Certification Revenue Estimate"?

Since politicians like to make crazy promises to get elected and we don't have a credit card, voters in 1850 decided the Legislature needed a auditor.

Enter Glenn Hegar, our Texas Comptroller. Today, the Comptroller's job, among others, is to project just how much money there is to spend in the budget.

Every January before the Legislature meets, the Comptroller will release the Biennial Revenue Estimate, AKA the two year budget limit. It's not set in stone, but it's a fairly conservative estimate.

This is the estimate of revenues for the fiscal years ending August 31, 2020 and August 31, 2021

Now since it's an estimate, the Legislature wants to know whether we're on track to hit those numbers. That's where the Certification Revenue Estimate comes in. In October after the Legislature meets, the Comptroller will update the numbers and see whether there were any changes. Usually any changes are minor.

Not this time. Instead of waiting till January for the next check-in, Hegar felt it was important for him to get the Legislature and Governor prepared for the "new normal".

The Bad News: Texas Tax Revenues Dropped A Lot

I was visiting an empty shopping center. I hope that people responsible for monitoring the security cameras feed don’t care about anyone photographing a trolley ;)
Photo by Paweł Czerwiński / Unsplash

Texas famously does not have a state income tax. Instead, we have a state sales tax, a business tax, and a bunch of other smaller taxes.  

According to the Comptroller, due to the COVID-19 Stay-at-Home orders, we've all been spending less and paying less in taxes. Our sales tax revenues are going to be $7.5 billion less than his last estimate. Overall, Texas will have $11.57 billion less to spend than expected (or about 9.7% less).

Now numbers that large can be hard to think about. So here's some context.

Back in May 2019, the Legislature decided to spend $6.5 billion on public education for new programs like full day pre-K for low-income families and raises for high performing teachers. This was a historic investment in our children.

Now that we have less money, those programs are at risk of being cut.

bethbap kids cars toys road carpet
Photo by BBC Creative / Unsplash

It Gets Worse: Property Taxes

In the same report, the Texas Comptroller said that, if nothing changes, he expects the State to be short $7.47 billion.

But wait, didn't he say that revenues dropped by $11.57 billion? What gives - where'd the extra $4.1 billion come from and can we get more?

As it turns out, Congress sent Texas a check to cover specific spending related to COVID-19. Some of that money covered the salaries of people we already had on staff but were working on other projects before we moved them over to COVID-19 - think state workers at the Texas Health and Human Services Commission. They were already hired and now we got some extra money to cover their salaries.

If that was only it, it'd be great.

Unfortunately, remember how I said that Texas does not have a state income tax? Well we do have local property taxes. In fact, the first pot of money that our K-12 school districts use are those local property taxes.

Then, if that money isn't enough, the State will pitch in to make up the difference so every child gets a proper education (as our State Constitution mandates).

The Comptroller's report said that the State will get to send less money to local schools because of

increased projections of local funding from property tax revenues

That's right: the Comptroller says that based on current law, during a pandemic, the State is going to save some money because your property taxes are going to be higher than they expected.

Photo by Breno Assis / Unsplash

If you weren't upset before, you should be now.

Bad Assumptions

On top of all of this, the Comptroller's Report presumes that we will open the economy up in the fall, not have a second/third COVID-19 wave, and be back up and running pretty quickly. I don't know about you, but that seems unlikely.

And on top of that, this past Saturday, emergency unemployment benefits expired for the 3 million Texans that had filed since March 15. Though some have gone back to work, that's still a staggering number compared to what we've experienced before. The Comptroller put together a nice graph to compare that drop to previous recessions.

If you look at the Texas 2020 (green) line, you'll see that it dropped much faster than any of the other lines except for the US 2020 (pink) line. And while 2020 is recovering faster than the others have before, we've still got a long way to go.

An Avoidable Problem

I wrote about this budget crisis before, but I hoped I was wrong. Back in April there was still a chance that Congress might do the right thing and send Texas families, our State, cities, counties and schools enough money to make up for the drop in taxes.

In fact, they could still do it - real long term interest rates are still negative. That means that Congress can borrow $100 and pay back (with interest) $98.02 in 2025. That's a great deal, especially since we know the money would be put to good use.

Unfortunately, it looks like they aren't going to send the money.

What does that mean? The Governor, Lt. Gov. and Speaker of the House have asked all the State Agencies to find 5% of their budgets that they can cut. But chances are they'll have to cut more than 5%. And even then, most Agency budgets aren't that large. In order to really come up with the money, they'll have to cut from the two biggest line items: education and healthcare.

So much for the ground breaking public education reform last year. Or healthcare during a pandemic.

Thanks for reading through the whole thing. I know it was a lot to process.

Shoot me your questions and I'm happy to answer any specifics you might have - [email protected].