Legislative Update

Texas’ budget problems a long time in coming, not just a recession issue, and won’t be easily solved

Posted by Jon Weist, on Wed September 01 2010 at 02:49 PM

State Budget Problems Not Just Caused by Recession, Senator Watson says

As if all the bad news about Texas’ budget problems hasn’t been published, discussed and rehashed until we’re just tired of it, Austin State Senator Kirk Watson told about 120 Chamber members and their guests last month that the problem isn’t just the down economy, and that an economic recovery isn’t likely to make things as much better as they need to be.
Watson, who is not a member of the Texas Senate’s Finance Committee, but who has a remarkably detailed account of how things got to be the way are, laid out a scenario that shows the state has really not collected enough money to pay for the things it needs for most of this decade. Instead, he argued that diversions of money supposedly dedicated for specific items, use of “emergency” savings accounts, immersion in a vast sea of tax-supported debt and a little outright budget trickery have kept Texas going since the budget crisis that greeted the new Republican majority in 2003.
In a non-partisan but detailed – and surprisingly engaging, given the subject matter— presentation, Watson demonstrated how this “structural” deficit isn’t going to be overcome by just surviving the $18 billion shortfall that will greet lawmakers when they return in to Austin January 2011.
A former mayor of Austin, former chairman of the Austin Chamber of Commerce and a former member of the now-defunct Texas Air Control Board, Watson advocated more transparency in the state budget and better and more frequent revenue projections from the Texas Comptroller’s Office. He took a surprisingly hard line against the kind of short-term relief that has bailed out the state before, saying he would vote against dipping into the state’s $9 billion “rainy day fund” to make up the shortfall if nothing else changes about the process.
As an example, he noted that a portion of sales tax collections for sporting goods is supposed to be reserved for use in the state’s vast but underfunded parks and recreation system. The money is collected, set aside, and used to measure total state revenue when it comes to figuring out if the budget is balanced. What the money isn’t used for, however, is improving the parks and recreation system.
Texas only balanced its budget two years ago – the budget that is in effect now through the end of August next year – by rolling over unspent cash from previous years, diverting money from holdings that were dedicated for another purpose, and by accepting a few billion in stimulus money from the federal government.
Watson suggested there would be no stimulus next time, further exaggerating that projected $18 billion shortfall. He said that leaves unused cash, savings or new revenue sources to make up the difference.
One of those sources, he said, could very well be an expansion of the footprint of gambling in Texas.
“You’re going to hear more about gambling this session than you have ever heard before,” he said, while not offering an opinion about whether or not supports such a move.
Texas cannot cut its way out of the projected shortfall, he said, because most of the state’s general fund budget goes for two things that are already underfunded, public education and Medicaid. A great deal of the money the state collects is also dedicated to paying off bonds issued in the last few years as a way to finance improvements without having cash on hand. Watson noted that 10 years ago, Texas was a pay-as-you-go state, but keeping up with growth put pressure on the budget. With a mostly conservative legislature that doesn’t want to increase spending or raise taxes to pay for current spending, going into debt was the only viable option to pay for service demands generated by the very growth Texas leaders celebrate.
To view Senator Watson’s presentation, click here.

Gambling gaining momentum, transportation goes into a ditch

Posted by Jon Weist, on Fri July 23 2010 at 12:00 PM

As the heat of the summer settled over Austin in the last three weeks, state leaders have given a few not-so-subtle signals about where they are regarding the state’s chronic underinvestment in transportation infrastructure and the measures they’re willing to consider to address the projected $18 billion budget shortfall that will face the Legislature next January.

If the number of legislators who show up means anything, then the early July hearing by the ho-hum sounding Licensing and Administrative Procedures Committee demonstrated that there is a lot of interest in licensing, particularly licensing some form of gambling in Texas beyond pari-mutuel wagering and the Texas Lottery.

The nine-member committee was often outnumbered by legislators who dropped by to sit in on what will likely be the interim’s only mention of commercial gaming in Texas. Beyond those who have always advocated trying to recapture Texas gambling money that escapes to adjoining states, state budget officials indicated by their mere presence that they’re looking for revenue anyplace they can find it. House Appropriations Committee Chairman Jim Pitts of Waxahachie stayed for most of the hearing. Pitts is one of a handful of legislators who will have the final say over what the next biennium’s budget looks like.

As for the actual testimony, there was near unanimous agreement that a lot of Texas money goes to Louisiana, Arkansas, Oklahoma and New Mexico, both to full-blown commercial casinos and to video gambling terminals at horse-racing tracks, so-called “racinos.” Consultants supporting the racing industry estimated that about $2.7 billion a year goes to other states, a figure no one challenged . Click here for their report (PDF)

The difference between those two types of gambling sets up the first hurdle for Texas lawmakers – deciding what would be best for Texas. Some pragmatists suggest there is room for both, arguing each draws a distinctly different type of patron.

Horse-track enthusiasts argue they could be up and running quickly, providing revenue to the state through what were once called “slot machines” before the next two-year budget expires. Casinos, they argued, will take longer to build and won’t make a dent in the state’s shortfall in the next session. They also acknowledge a sober truth about horse racing in Texas: It’s dying. Nearby states where the purses paid to race winners are richer are drawing the most competitive horses, owners and trainers. Those purses are supported by money from the video gambling that co-exists at the race track.

As if to punctuate that notion, Rep. Kirk England of Grand Prairie attended part of the hearing – the part where the track owners testified – but he wasn’t on the panel when his father, Grand Prairie Mayor Charles England, also showed up to support the racino option. Lone Star Park in Grand Prairie is owned by the city, and it has been struggling for the last few years.

Revenue estimates for the various options are all over the place. John Heleman, the chief revenue estimator in the Texas Comptroller’s office, offered no concrete estimates of what Texas might expect from various gambling choices, but he did present some ranges based on activity in other states (click here for the report), and not just those bordering Texas. Curiously, he offered no figures showing what the casino industry contributes in direct taxes to Las Vegas or to Nevada, a number that is certainly available even if Vegas, given the scope of the industry there, is not an apples-to-apples comparison.

Some committee members chastised Heleman for saying that it would be difficult for legalized gambling to clear the necessary requirements in time to provide any meaningful revenue in the next two years, but committee Chairman Ed Kuempel of Seguin said that wasn’t a reason to wait for legalization.

“2013 isn’t going to be a heckuva lot better than 2011,” He said. “If you just put it off two more years, then you’re still two years behind.”

Supporters of the casino industry pushed for a comprehensive bill that addressed both racinos and several large, destination-resort casinos similar to those that populate the Las Vegas Strip. They argued those casinos can only be supported in the state’s large metro areas, and that for many of the biggest gamign companies, Texas is the only place in the United States that they’re interested in.

“Texas is like another country,” said Jack Pratt, a former casino owner and consultant who has been in the business for 50 years. “Those companies have very little interest in any other state.”

Pratt and representatives of the Las Vegas Sands company, owner of the Venetian casino and several behemoth resort casinos in Singapore and China, said the economic impact of the large resorts is much greater than the tax just on gaming proceeds. Figuring in meetings, hotel rooms, gift shops and food sales, they argue that in some places in Vegas, only 16 percent of the revenue is generated by gaming.

Pratt, who lives in Dallas, will speak at the Chamber’s Policy and Advocacy Board Meeting August 18. He said in a conversation after the hearing that if gaming is approved next year, the state could realize some revenue during the two-year budget cycle from licensing fees, which could be extremely lucrative.

Approval of an expansion of gambling in Texas would require a constitutional amendment – a vote of two thirds each of the Texas House and Senate – and a public vote in November of 2011. Gaming supporters say getting a bill out of the Legislature will be the hard part; all public opinion polling points to easy passage of an amendment if it gets to the voters.

If gaming appears to have some momentum, efforts to improve revenue for the state’s increasingly underfunded highway system were thrown into neutral if not reverse last week. On Wednesday, July 14, Lt. Gov. David Dewhurst announced a series of changes in committee assignments and chairmanships, the most significant being the removal of Dallas State Senator John Carona as chairman of the Senate Transportation and Homeland Security Committee.

Carona has been a fearless advocate for increasing revenue – including the motor fuels tax – to provide funding for a system that, increasingly, is projected to fall far short of being able to meet the state’s needs in relieving congestion, accommodating growth or even being able to meet its current road maintenance obligations. He has carried the bill the last two sessions to increase funding, challenging state leadership and the no-new-taxes-ever-for-any-reason crowd along the way.

Dewhurst hasn’t explained the move other than to note some reassignments were necessary because of the resignation of Senator Kip Averitt of Waco. And there are some background hints about some other discontent, but very little public discussion. In any case, replacing Averitt as chair of Natural Resources didn’t require triggering all the dominos that fell. Carona was taken completely off of Transportation and made Chairman of the Business and Commerce committee, itself a powerful and important committee. Opinions about the move vary, but most insiders believe it was a clear signal to transportation advocates that state leadership wants nothing to do with addressing the transportation issue despite it being a high-profile, major item for most metropolitan areas for the last four legislative sessions.

Carona acknowledged as much when he accepted the new chairmanship, saying the leadership wasn’t going to do anything so he might as well go where he can be productive.

Transportation remains a critical issue on the Arlington Chamber’s legislative agenda, and the Carona expulsion is a definite setback. While committee vice-chairman Kirk Watson of Austin is also an aggressive advocate, it was important to have Carona, a Republican, leading the charge. Watson will be speaking at a Chamber Legislative Luncheon on August 19. Click here to sign up for that luncheon.

Senator Tommy Williams of The Woodlands replaces Carona as chair of Transportation. Williams’ views on the issues are largely unknown, though at a joint meeting of the Transportation and Finance committees earlier this year, he wondered aloud why advocates who had pushed for a menu of fees for a local option transportation funding mechanism in previous sessions didn’t just ask for a sales tax increase. He must have not been paying attention when North Texas lawmakers, led by Carona, tried exactly that four years ago, and were thrashed by business interests who see raising the sales tax – if it were to ever happen – as their initiative to bolster state programs they benefit from.

For a complete list of the new committee assignments, click here.

For transportation advocates, the Carona action makes what was already a steep, uphill climb tantamount to scaling s shear rock wall without any climbing gear. Still, as with other items on the Chamber’s legislative agenda, it’s important to keep advocacy for the issues in front of lawmakers even if there is no will to address the issues this time around. It isn’t like the problems are just going to go away no matter how much Dewhurst, Perry and others want to avoid them.

Tax on businesses for unemployment comes under fire at Senate Committee

Posted by Jon Weist, on Fri May 07 2010 at 02:03 PM

Most business owners already know that the tax they pay into the Texas unemployment system has almost doubled from last year. Last week, at what on paper appeared to be a pretty routine meeting of the Texas Senate Economic Development Committee, that increase provided for some lively commentary as senators rehashed the state’s decision during the previous legislative session not to accept federal stimulus funds for unemployment insurance.
Texas Workforce Commission Executive Director Larry Temple noted that the state’s unemployment fund, projected during the session to last through October of 2009, was actually chewed up by the end of last August. The recession hit Texas late, but hit it hard when it finally showed up.
The state tax on employers went from .99 percent to 1.07 percent, Temple said, mostly to pay off bonds that the state floated to replenish the fund. That comment led directly to Senator Kevin Eltife, a Republican from Tyler, to launch a broadside aimed more at Governor Rick Perry and Republicans in the Texas House than anyone in the hearing room.
“We should’ve taken the money,” Eltife said, referring to an available $550 million in federal stimulus funds.
The Senate voted by a wide majority to accept the funds, with only the most partisan of Republican senators not going along. However, resistance was fierce in the House, with opponents arguing it raised state costs in future years because of federal “strings” that were attached. Proponents argued many of those future provisions were optional and could be eliminated at a later time. The measure ultimately failed when the House went into a late-session stall so Democrats could kill a voter ID bill. There were enough votes in the House to accept the money, though probably not enough to overcome a gubernatorial veto.
“It was insane not to take the half-billion from the federal government,” Eltife said, “instead we have increased the tax burden on small business. To me, this is all about the numbers, not politics. There are organizations that try to spin it differently, and they’re flat wrong.”
Despite repeated questioning by Eltife and Senator Kirk Watson, a Democrat from Austin, Temple wouldn’t go as far as agreeing with their comments about the funding. Temple, an executive branch appointee, probably didn’t want to deal with Perry if he conceded the point to the committee. Temple would only go as far as acknowledging that the federal funding would have reduced the state’s borrowing.
On another matter also affecting the business agenda, Temple said the state’s mandatory 5 percent, across-the-board expenditure cut was being taken by TWC entirely from the Skills Development Fund. The fund is one that business interests, including the Arlington Chamber, routinely support and even encourage enhanced funding to train or re-train a homegrown work force.
The hearing also provided the first opportunity for senators to question the state Comptroller’s office about the ill-fated rollout of its appliance rebate program. The program was designed as a cost- and energy saving measure, allowing residents to get a state subsidy to replace inefficient washing machines, dishwashers and refrigerators. However, the day the web site to reserve a coupon for the rebate went live, it crashed, and those who called the state’s hot line spent up to seven hours on the phone without getting through.
Comptroller staff members said the program was run by Helgeson Enterprises, a Minnesota-based company that ran similar programs in other states. Between the time Helgeson received the state’s bid and the Texas program was launched, problems with its operations in Iowa and Minnesota had become known.
State staff members said they investigated what went wrong with those launches and thought they had provided for fixes to keep it from happening in Texas. Sadly, that wasn’t the case, and most committee members took a shot at the program. Senator Chris Harris, Republican of Arlington and the committee chairman, asked why Helgeson wasn’t dumped after problems showed up elsewhere. Senator Judith Zaffirini, Democrat from Laredo, asked what repercussions there would be for the vendor. Neither question received a definitive answer.
Since the Comptroller is an elected official, the staff presence was all about minimizing the PR damage, repeatedly acknowledging that the program’s launch “didn’t go smoothly.”
Watson sparred with the staff for awhile, but he finally had enough.
“Would you agree with me that the statement “the launch didn’t go smoothly” is a gross understatement?” he asked at one point.
The Senate Economic Development Committee has three remaining interim charges to carry out, including a review of the state’s current economic development programs. While most Chambers of Commerce continue to support the large state programs, such as the Enterprise Fund and the Emerging Technology Fund, there is considerable frustration about the way those funds have been used and the conditions under which they have been granted. Both funds are allocated at the discretion of the Governor’s Office, which came under fire in January for continuing subsidies to businesses that had not lived up to their job-creation commitments. Many of those companies have been assessed fines that are very small percentages of the state’s overall subsidy, and in one case the company paid no penalty at all.

House Transportation Committee keeps up pressure on TxDOT; Speaker releases interim charges

Posted by Mark Tunnecliffe, on Mon November 23 2009 at 02:52 PM

The House Transportation Committee met last week in a meeting that may, unfortunately, be a sign of things to come, at least as far as relations between lawmakers and the Texas Department of Transportation go.

The hearing, in Austin November 16, addressed largely inside issues, a continuation of dialogue, arguments and posturing about how TxDOT operates and the very negative attitude committee members have about those operations.

Chairman Joe Pickett lambasted officials for sending out a the-sky-is-falling news release about the loss of federal money, when they knew all along that loss was coming. In technical terms, it’s called a “rescission,” which amounts to the Federal Highway Administration taking back – actually, not ever sending – federal gas tax funds that the state highway department thought it was getting.

For a lot of complicated reasons—TxDOT accounting and allocation of money is not for the faint of heart to delve into—most rescissions haven’t affected actual projects. TxDOT officials took their lumps and patiently explained that continuing federal cuts would eventually stall projects, and push planning, engineering and other pre-construction aspects of other projects farther into the future.

Before they even got to that, committee members blasted TxDOT for the way it transferred money and employees to the newly created Department of Motor Vehicles, which will handle vehicle registrations so TxDOT can concentrate on construction. The Department – represented last Monday by the chairman of its board, Victor Vandergriff of Arlington – just started in business November 1, operating out of old TxDOT offices and using what used to be TxDOT equipment.

Because of the vagaries of things like property insurance and computer licenses, simply moving people out of one agency and into another, taking their desks and chairs and computers and coffee pots with them, is not 100 percent cost-neutral. The reductions at TxDOT don’t match up precisely with the budget of the new agency. Some of that seems to be beyond the new agency’s control, and in fact some of the additional cost was created by lawmakers themselves – not the current ones – years ago when they allowed TxDOT, and TxDOT only, to be self-insured for property damage. A new agency that is not part of TxDOT cannot, apparently, ride on the former agency’s coattails for insurance, but most instead go out and buy its own.

Nevertheless, some committee members had a grand time shouting “bait and switch” at TxDOT, and in general displaying a lack of trust that will be present in any transportation policy discussion in the interim and in the next legislative session.

At the end of the last week, House Speaker Joe Strauss issued 32 pages of interim charges to House committees. No word yet on when Senate interim charges will emerge from Lieutenant Governor David Dewhurst’s office. Maybe soon, since his Senate ambitions seem to be on ice while Senator Kay Bailey Hutchison decides when next year she’ll step down, whether or not she wins the Republican gubernatorial primary in March.

A list of the full House interim charges can be found by clicking this link.

Arlington Chamber of Commerce, Arlington TX