Many Americans are recovering after the economic collapse that began in March due to the COVID-19 pandemic and shutdowns by state and local governments.

While the strength of that recovery has weakened, a sound policy approach will help support a safe, expedited, and less debt-riddled rebound so Americans have more opportunities to prosper.

https://www.texaspolicy.com/the-ginn-economic-brief/

​Today, the Texas Public Policy Foundation released five papers that together form a responsible strategy for the state’s immediate and long-term economic growth.

“These five approaches make for good economic policy anytime,” said TPPF Chief Economist Vance Ginn, Ph.D. “But they are especially important as the state recovers from government-imposed shutdowns. Together, these strategies will help return Texas to the prosperity we saw before COVID-19 and help get us there fast.”

The Five-Step Strategy is:

1. Pass a Conservative Texas Budget
2. Reduce Government Spending
3. Reduce Regulatory Burdens
4. Reject Increased Taxes
5. Use the Rainy Day Fund Responsibly

“During the shutdown, the state suspended some rules and regulations, proving they weren’t essential for health and safety in the first place,” said Rod Bordelon, TPPF’s Policy Director for the Remember the Taxpayer Campaign. “Instead of waiting for the crisis to end to re-evaluate these regulations, we should repeal them now and review others in an ongoing basis so that Texans aren’t held back by unnecessary restrictions.”

The Responsible Recovery Agenda also stresses that budget writers should avoid seeking additional state revenue through increased fees and taxes.

“Raising taxes is a costly endeavor — even more so in a recession because it distorts behavior at a time when the economy is weak, delaying recovery and leading to even greater economic stress,” said Benjamin Priday, Ph.D., Economist at TPPF. “Legislators should close budget gaps first by strategically employing the Rainy Day Fund and by trying to find ways to reduce spending.

The Responsible Recovery Agenda is a comprehensive approach to addressing the budget challenges Texas faces in the wake of COVID-19 shutdowns while also preserving the success of the Texas Model, which has strengthened the state’s economy.

​For a historical look at the budget and other ways to improve the budget process, the Foundation also released The Real Texas Budget report.

​Texas’s Economic Stabilization Fund (or “rainy day fund”) is a valuable tool for covering unexpected shortfalls in tax receipts, like those during the COVID-19 pandemic, but it should be used sparingly, and budget reductions should be prioritized instead.

Key points:

• Texas ranks high in economic growth and must maintain a balanced budget, but the current economic situation could strain Texas taxpayers’ ability to pay for the state budget.
• Texas must exercise fiscal restraint and find responsible budget reductions before it taps into the state’s rainy day fund.
• Texas state leaders have appropriately begun the process of finding savings in the budget, but additional savings are likely needed and should be realized before using taxpayer money in the rainy day fund.

https://www.texaspolicy.com/texass-rainy-day-fund-how-to-use-it-responsibly/

The COVID-19-induced recession in Texas has strained the ability of many Texans to pay taxes to fund the state’s budget. The Legislature should consider prioritizing budget reductions to cover any potential budget shortfall.

Key points:

• Texas usually ranks high in economic prosperity and must maintain a balanced budget, but the COVID-19-induced recession has put pressure on taxpayers to fund the tax receipts needed to cover the state’s budget.
• Texas must prioritize fiscal restraint by finding responsible budget reductions to deal with any potential budget shortfall.
• Statewide elected officials have appropriately begun the process of prioritizing budget cuts by directing some state agencies to identify 5% reductions in their existing 2020-2021 budgets, but additional cuts may be necessary.
• As with past shortfalls, the Legislature should work with state agencies and adopt zero-based budgeting to prioritize program spending and identify responsible spending cuts while maintaining necessary services.

https://www.texaspolicy.com/prioritizing-texas-budget-reductions-amid-deficits-due-to-the-covid-19-induced-recession/