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Texas will likely receive roughly $40 billion in taxpayer money provided by Congress through the American Rescue Plan Act (ARPA) for a number of budget areas: roughly $12 billion to public schools, $10 billion to local governments, and $4 billion to infrastructure projects (i.e., water, sewage, and broadband). Texas looks to also receive $17 billion in more flexible funding to state government.
Approach Depends on Restrictions There are restrictions on how state and local governments can use the ARPA funds, but we will not know details on these restrictions until the U.S. Treasury issues guidance. Generally, these restrictions include using the funds for direct or indirect cuts to state taxes or deposits into pension funds. Given these restrictions, if the state is going to accept these funds, the best approach would be to follow a pro-growth, long-term strategy to provide relief to Texans from the struggles imposed by COVID-19 and shutdowns. Recommendations The chosen strategy should keep taxes lower than otherwise, reduce government debt obligations, fund only one-time expenditures, and reject all or most funds with strings attached to avoid expanding government and to reduce the impact on the country’s high spending and debt burdening America. Doing so will help provide relief from the effects of the pandemic and associated shutdowns. Using this strategy would help Texas recover faster and better withstand the onerous policies by the Biden administration to Keep Texas Texan by considering the following options for the $17 billion in more flexible funding.
If Texas accepts some or all the funds, the following uses should be considered: Support Key Priorities
https://thecannononline.com/how-should-texas-spend-covid-19-stimulus-funds/ In response to the Texas Comptroller’s announcement that state revenue would be more than $3 billion higher than expected for the 2022-2023 biennium, the Texas Public Policy Foundation’s Vance Ginn released the following statement:
“The Texas Comptroller’s improved estimate of tax collections from primarily an improving COVID-19 situation and opened economy shows that the Legislature has $3.1 billion more available for the Texas budget. Both the House and Senate have already voted in favor of budgets that cover the state’s priorities and stay within the average taxpayer’s ability to pay for them. Therefore, the responsible approach to addressing the additional tax collections should be to give taxpayers relief—especially more toward property tax relief—to help Texas families and businesses.” The Details: Texas Comptroller Glenn Hegar forecast $115.65 billion available for general-purpose spending in 2022-23, which is up $3.12 billion from January. 72% of Texans say property taxes are a major burden https://www.texaspolicy.com/press/tppf-texas-improved-revenue-projection-should-go-to-property-tax-relief TPPF Conservative Texas Budget: $246.8 Billion
Texas Senate Committee Substitute Budget: $244.7 Billion Texas House Committee Substitute Budget: $240.9 Billion This table provides an apples-to-apples comparison of amounts appropriated for the 2020-21 budget from the Legislative Budget Board’s (LBB) Fiscal Size-Up and each chamber’s 2022-23 appropriated amounts. We compare each chamber’s appropriated amounts with the Foundation’s Conservative Texas Budget (CTB) limits for state funds and all funds (state and federal) based on a maximum increase of 5% in population growth plus inflation over the last two fiscal years. We exclude from the 2020-21 budget the designated $8.3 billion in Hurricane Harvey recovery one-time expenses and $5 billion in general revenue for school district M&O property tax relief in HB 3 from the 2019 session. Likewise, we exclude from each chamber’s version of the 2022-23 budget the $6 billion in general revenue to maintain last session’s property tax relief—which without this allocation would result in school district M&O property taxes rising 7 cents and likely in increased spending—and will exclude one-time COVID-related funding. The exclusion of one-time expenses for a declared disaster recovery is important for budget transparency and for not inappropriately inflating the base by that amount allowing for excessive spending later. Fortunately, the passed versions of the budget by the Senate and the House fall well below the CTB limits in state funds and all funds, and neither appropriates money from the rainy day fund. This must be maintained—with hopefully more tax relief—by the conference committee and Governor Abbott to account for the average Texas taxpayer’s ability to pay for government spending while leaving more money in the productive private sector to let people prosper. https://www.texaspolicy.com/txbudget/ House Bill 1869 is scheduled for floor debate today. The bill would protect last session’s tax reforms by including debt not approved by voters, such as certificates of obligation, in the 3.5% voter-approval tax rate calculation. Under current law, these items are excluded from the tax rate calculation, even though they lead to higher taxes. This loophole gives cities and counties a big incentive to use (and abuse) them.
As you can imagine, the Texas Municipal League has come out strongly against the bill and has even succeeded in softening it somewhat. It may have even mustered the votes to kill it in the House floor. For further explanation, here’s my colleague James Quintero’s testimony before a House Committee: Mr. Chairman and Members of the Committee-- Good morning! My name is James Quintero and I’m a policy director at the Texas Public Policy Foundation. I’m here today to testify in support of House Bill 1869. As we just heard from the bill author, the primary motivation for this legislation is to strengthen the principle of taxation with representation. Its goal is to provide people with the opportunity to participate in the democratic process as their true tax burden rises above a certain level. The core of this idea is already established in state law, thanks to the passage of last session’s signature property tax reform. HB 1869 would simply expand upon those existing concepts by requiring tax-supported debt obligations not approved at an election to be paid through the M&O portion of the tax rate. This sort of change is important from a truth-in-taxation standpoint. But it’s also important from the perspective of good governance. In the decade preceding the reduction in the property tax trigger—which really only took effect this fiscal year—local governments were increasingly indulging in nonvoter approved debt. Consider that from fiscal year 2011 to 2020, CO debt held by cities, counties, and certain special districts grew from $12.87 billion to $15.85 billion. Much of that debt was owed by a relative few too. As you’ll note on your hand-out, the top 20 issuers accounted for approximately 40% of all CO debt outstanding, with places like Bexar County, Travis County, San Antonio, and Lubbock among the most prolific users. It’s too early in the fiscal year to say whether this trend will hold or accelerate; however, what I can tell you is that, under current law, local governments have an incentive to lean more heavily on nonvoter approved debt than they did in the past, since those costs are excluded from the 3.5 percent calculation. Updating the definition of debt for the purposes of truth-in-taxation will eliminate this incentive and, perhaps in some instances, dissuade questionable expenditures in the future. Despite what you may hear today, CO debt is not always need-based or proper. Here are a few quick examples of their misuse in recent years.
https://thecannononline.com/loophole-allows-texas-cities-and-counties-to-blow-past-spending-limits/ |
Vance Ginn, Ph.D.
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