What to Watch in the Texas State Budget

Jan 23, 2015

Credit Todd Wiseman & Stuart Seeger/Texas Tribune

Agenda Texas is KUT's weekly report on the Texas Legislative session. Each week we'll take a deeper look into the policies being considered and explain what they could mean for you and your life. From transportation to education to the environment and everything in between.

Two weeks down in the 84th Texas Legislature. This one was filled with the pomp of Inauguration Day, and the curious circumstance of the Texas Senate's rules for bringing up a bill. But today's Agenda Texas talks about the state budget.

Out of the billions and billions spent, there are two numbers to focus on to help understand it all.

Big Numbers

"The all funds, everything included. In this case the Comptroller said it's going to have $221 billion available. And then the general revenue and general revenue related which is the $113 billion number," former Texas House budget writer Talmadge Heflin says. 

So where does that money come from? The difference between general revenue and all funds, is mostly made up by $73 billion in federal money. But that money mostly passes from the feds, through the budget, and to dedicated purposes, meaning state lawmakers have little control over it.

For control, you need to look at that $113 billion in general revenue. In his Biennial Revenue Estimate, Texas Comptroller Glenn Hegar said about 55 percent of that comes from sales taxes.

"Sales tax revenues have been higher than anticipated thanks in part to a robust oil and natural gas sector during the last 15 months. Other revenue sources such as motor vehicle sales taxes have exceeded forecasts as well," Hegar said.

That vehicle tax brings in about nine percent of state revenue. Oil and natural gas production is another nine percent. Five percent comes from the state's business franchise tax, and so on. But even that money comes with some restrictions.

"The money that is collected from the tax that you pay when you fill up your tank, is dedicated three-fourths to building roads or mobility and a fourth to education," Talmadge Heflin says.

So the dedication, in this case a constitutional one, meaning lawmakers can't spend gas taxes on healthcare. So when you hear someone say lawmakers have $113 billion to spend, just remember, they can spend it, but don't always get to say how.

Paying for Tax Cuts

One thing the state's Republican leadership would like to see funded this session is tax cuts. But democrats and social service advocates worry the cuts could end up cutting state services. Dick Lavine tracks state tax policy for the left leaning Center for Public Policy Priorities. He says to think about tax cuts, you need to think about how that forces the state to make up for the lost revenue. Like with a proposal to lower property taxes by increasing the state's homestead exemption.

"Every $10,000 increase in the homestead exemption would cost the state $1.3 billion to make it up to the school districts for that lost revenue," Lavine says.

And if lawmakers want to cut or even eliminate the state's business tax, that's projected to bring in $9.5 billion over the next two years, with half of it going to pay for schools.

Then there's the effort to end gas tax diversions. That's not a tax cut. It just means making sure all of the gas tax collected is going to pay for roads.

"Moving the gasoline tax from one pot to another is, as they say, rearranging the deck chairs on the Titanic," Lavine said.

In other words, ending the diversion may help out the department of transportation, but it will force lawmakers to use other money to pay for the budget hole left behind, or they'll have to cut the budgets of those agencies that, for now, are benefiting from the diversions.