Sen. Robert Duncan will reconvene his Finance subcommittee later this week to start a first round of discussions on where to find additional budget revenue.
With an austere budget passed in the House over the weekend, the work of the budget turns to the Senate, which has been far more generous in funding various articles in the new budget and more inclined to talk about finding even more revenue for problem spots in the budget, such as student financial aid.
The goal of Duncan’s Fiscal Matters subcommittee was to find $5 billion in non-tax revenue. Today, Duncan declined to put a number on what his committee work groups had found in their search so far. But he noted the group had made “some progress” toward closing the budget gap.
Ogden, who rolled out his own bill to cap spending on school district tax breaks in Senate Finance yesterday, reiterated his position today that the state’s current tax-and-spend policies ultimately were untenable and must be addressed.
“You have a system where statute after statute forces you to spend, while we continue to collect less and less in taxes,” Ogden told reporters today, alluding to tax abatement deals that continue to cost the state money. “That creates a system that is fundamentally unstable, and sooner or later, we’ll have to fix it.”
Businesses already pick up the tab on most of the state’s taxes, Ogden said. The state’s tax system needs to be uniform and equitable with a rate as low as possible.
“A lot of my criticism, as we continue to carve out exceptions, is that we’re basically subsidizing one group at the expense of everybody else,” Ogden said. “As a matter of philosophy, I don’t like it.”
The biggest component of that problem is the failure of the business margins tax, Ogden said. The tax needs to be fixed sooner rather than later, and Ogden suggested a constitutional amendment to return to a franchise tax as one potential fix.
Ogden pointed to Duncan as the point person on addressing a fix for the margins tax. Duncan, in turn, said his subcommittee would be meeting late this week to lay out an initial round of additional revenue sources that had the most consensus among committee members. That will be followed by more negotiation among the committee members, with the goal of laying out a second round of funding options sometime next week, Duncan said.
In the meantime, Chair Rep. Jim Pitts (R-Waxahachie) has announced his own revenue-finding mission for this week, with the goal of turning up another $3.5 billion in non-tax revenue on the House side of the ledger.
Dewhurst, in his comments to reporters after the Senate session today, noted he had never been a fan of the margins tax and knew early on it would underperform, telling Senate caucuses that revenue estimates were “wildly exaggerated.” Dewhurst also was critical of a tax on businesses that were losing money and one he considered to be excessively burdensome to start-up businesses.
While not expressing direct support for returning to the franchise tax, Dewhurst noted that he and Ogden had preferred broadening the franchise tax in 2005, choosing to tax across more businesses but at the lowest rate possible.
An actual school finance fix, Ogden noted, will be a two-pronged approach requiring both appropriations in the budget bill and some type of school finance bill that matches those appropriations. Sen. Florence Shapiro (R-Plano) will carry the bill that will serve as that vehicle, and Sen. Kel Seliger (R-Amarillo) has suggested he might propose a substitute to her proposal, one that is more favorable to school districts with low property wealth and low target revenue.
The Senate’s additional $6 billion commitment to public education in its budget, Dewhurst noted, closes the $3.2 billion structural deficit hole created by the use of stimulus funding for ongoing expenses and provides an additional $1.5 billion above funding levels in the current biennium, which Dewhurst said just about covers the cost of student enrollment growth.
Once the supplemental bill is passed, the rainy day fund will sit at about $6.5 billion. Neither Lt. Gov. David Dewhurst nor Ogden, interviewed after today’s Senate session, were inclined to discuss how much they might be willing to pull out of the state’s rainy day fund to cover a growing list of expenses that the Senate appears far more ready to approve than the House.
Dewhurst predicted the rainy day fund could grow by another billion a year given current growth projections, and Ogden said better-than-anticipated prices on oil would probably lead him to request an updated figure on the fund’s balance from Comptroller Susan Combs.