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The State Budget Surplus: The State Budget Surplus: Fact or FictionFact or FictionRotary Club of Dallas

January 24, 2007 Eva DeLuna Castro, Senior Budget Analyst

deluna.castro@cppp.org (512) 320-0228 x 103

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Quick Texas Budget Facts • Legislative process, not executive (gov.)• Biennial, not annual (fiscal year starts in September)

• Cash basis of accounting, not accrual

• Availability of General Revenue (GR) is what matters, not All Funds 2006-2007 cycle: $142 billion in total spending, but 34% ($48 billion) is federal funds, and 18% is constitutionally or statutorily earmarked (“Other” or “GR Dedicated”).

All-funds spending is about $3,000 per capita, annually; Texas perennially ranks 49th or 50th among the states in spending (same for per-capita state taxes).

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How Much Money Will There Be?

For 2008 and 2009, the Comptroller estimated that legislators will have

$82.5 billion available for general purpose spending(of that, $7 billion is 2006-2007 revenue that won’t be spent by August 2007 — the current budget cycle’s “ending balance”)

plus

$8.1 billion in the Property Tax Relief Fund

and

$4.3 billion in the “Rainy Day Fund” (5% of revenue)

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How Much Are We Already Spending? For 2006 and 2007, the Comptroller reports

$68.2 billion in general purpose spending,

but:

In addition to that, almost $600 million out of the “Rainy Day Fund” is being spent on child protective services (CPS) reforms

And $82.5 B revenue, 08-09 - 68.2 B spent, 06-07

$14.3 billion “surplus”

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Why Isn’t That Really a “Surplus”?

$14.3 billion

Revenue in Excess of 2006-07 Spending

Needed for K-12 (full cost of tax cut;

enrollment, other HB 1)

Higher Ed: formula funding changes for

enrollment, costs

$4.5 billion$1.7 billion

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But Wait ! There’s More

Health & Human Services: entitlement caseloads & costs; General Revenue

for CPS

“Truth in Spending” (GR dedications for parks, System Benefit Fund, etc.)

OTHER: Prisons; Business/ Eco. Devel.;

Judiciary; General Govt.; Worker Pay/Benefits

$3.7 b>$2.5 b

$1.9 b left

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2010-2011 Budget: $5.8 Billion Gap Between Tax Cut Cost & Revenue

$0.5

$4.1 $4.2 $4.4 $4.7

$7.6$7.3$6.9$6.6

$2.1

$0.0

$2.5

$5.0

$7.5

$10.0

2007 2008 2009 2010 2011

Cost of property tax cut

Revenue from special session tax changes

Billions

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From Taxpayer’s Point of ViewMajor State & Local Taxes in Texas, 2006

Local 7%

City 7%

State 25%

Other State Taxes21%

School District28%

County 7%

Special District 5%

Sales Tax 32%

Property Tax 47%

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