This piece originally appeared in the Midland Reporter Telegram on July 31, 2016.
Although the 2017 legislative session in Texas doesn’t start until January, budget talks are heating up around Austin. To harm families’ budgets the least while funding key budget areas, the 85th Legislature should pass a historic second consecutive conservative budget.
The tax burden on Texas families has been rising for years. For example, average families of four pay $1,600 more in taxes this year than increases in the government’s cost of providing basic goods and services since 2004. This leaves less money available for families to put food on the table, save for a rainy day, and send their kids to college.
The $1,600 amount is derived from the increase in spending since 2004 above the compounded increases in the key metric of population growth plus inflation. To put it simply, state government spending has increased by more than the cost to fund the government’s expenditures on basic goods and services for a changing population and general cost of those items.
At a time when things have become a little more difficult with less oil and gas activity in Midland, every dollar counts even more. Finding a way to keep dollars in their pockets is essential. That’s why the Foundation recently joined 12 other member organizations of the Conservative Texas Budget Coalition to set the marker for a 2018-19 conservative budget.
What is a conservative budget?
It’s a total budget, which includes state and federal funds, that increases no more than population growth plus inflation of 4.5 percent during the most recent two fiscal years. After adding this growth rate to expected expenditures in the current budget period, the limits on the total budget is $218.5 billion. This limit amount is a $9.4 billion increase from the prior budget that can be prioritized as legislators see fit.
Note that we are not asking legislators to cut the budget but rather get the spending trend back on track to funding only basic goods and services.
Given the slower economic growth statewide, especially in oil and gas dependent areas like Midland, state government leaders recently issued a letter to state agencies requiring them to include in their appropriations request a four percent cut from their budget. They also asked agencies to provide budget information by program that will help with conducting zero-based budgeting throughout the legislative process.
We applaud this action as it will help legislators deal with a potentially tight budget next session, as there’s likely to be less revenue available than last session, and increase budget transparency, which the Foundation has recommended for years.
Although a tight budget session may make it easier to pass a conservative budget, the tax burden on Texas families should be reduced. The tax cut with the biggest bang for the buck is the business franchise tax.
For example, the 84th Legislature cut the margin tax by 25 percent last session and the Comptroller predicted a corresponding drop in revenue during the current budget cycle. Interestingly, the recent monthly revenue report shows that the trend in franchise tax collections through June of the current fiscal year indicates that the decline is not as large as forecast. This supports the Foundation’s research that shows substantially more personal income and private sector jobs when this tax is cut and ultimately eliminated.
When hard times are already on many in Midland and statewide, legislators must be good stewards of taxpayer dollars by helping keep the size and scope of government from crowding out the productive private sector—the best economic stimulus.
Texas must lead the way by continuing to provide a model that the federal government and other states would be wise to follow. Last session the Legislature passed a conservative budget and cut taxes. Families in Midland and across Texas deserve a second round of this dynamic combination to provide vast opportunities for them to succeed.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.