Comptroller: Remember Responsibilities in Tax Cut Debates

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Comptroller Glenn Hegar may have given the House a new weapon in the fight over tax cuts by reminding the state leadership that there are obligations that, if not adequately addressed, might harm Texas’ bond rating. One of those items is the rapid growth of state debt service, which has increased by 54 percent over the past decade and now requires $5 billion in expenditures. Some in the House leadership have told me they would like to forego tax cuts in favor of spending the money on reducing the state debt load.

Hegar’s May 4 letter was neutral on the House sales tax cut proposal and the Senate’s property tax cut. But he warned Governor Greg Abbott, Lieutenant Governor Dan Patrick and Speaker Joe Straus that final budget negotiations should not just focus on cutting taxes.

As Comptroller, I want to emphasize that in addition to tax cuts, it is also important to consider the longterm challenges affecting the state’s balance sheet and credit ratings. Although these issues are long-term in nature and extend beyond the upcoming two year budget horizon, they must be addressed to ensure the state’s continued good financial health and condition. Bear in mind that the state currently enjoys the highest credit ratings from the major rating agencies, which translates into lower borrowing rates for state issued obligations and less costs to taxpayers.

Items on Hegar’s list include:

  1. A need for $5 billion in highway funding for bridge and roadway maintenance. At present negotiations are under way for the final version of legislation to dedicate half the motor vehicle sales tax revenue to highways.
  2. Unfunded liabilities in the retirement funds for teachers and state employees. HB 9 by Dan Flynn is meant to put the employee retirement system on the path to solvency. Currently, it has passed the House and is pending in the Senate State Affairs Committee. House budget writers have promised to fully fund $758 million in the teacher system’s health care program.
  3. Texas general obligation debt has grown from $7 billion to $15.09 billion over the past decade, Hegar wrote.
  4. The Texas Tomorrow fund guaranteed college tuition program has an unfunded liability of $568 million and will start seeing shortfalls in 2019. Because the fund has the full faith and credit of the state through the Constitution, any shortfalls will become an automatic draw on state general revenue.
  5. Deferred maintenance of state facilities with a cost as high as $1.5 billion.

The House and Senate budget plans will leave almost $19 billion on the table because of an unwillingness to bust the spending cap. But these are one-time expenditures that would go a long way toward investing in the future of the state. They also are the responsible adult thing to do. 

UPDATE: Statement from Straus: “The House has worked to address our long-term obligations throughout this session. We have addressed shortfalls in retired teachers’ health care and the long-term solvency of the state employee pension system, and we’ve also voted to put more resources into transportation and deferred maintenance. In addition, the House has approved a constitutional amendment that would allow the state to retire debt more quickly. The House’s record this session reflects our commitment to a disciplined, transparent budget that invests in key priorities.”

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  • WUSRPH

    Is Bullock ghostwriting Hegar’s letters? Actually, he is just getting on record so he will look better in the post-session “reviews”…..but, whatever the purpose, using this approach to remind the legislature—and more importantly the public—of unmet needs provides a service.

    • John Johnson

      Agree. The can kicking has got to stop. As I have said before, if we don’t end this charade, our grandchildren are going to hate us. We simply need to bite the bullet now and pay down debt. Returning, on average, $200 to the average Texas family is simply putting a smiley faced bandaid on a gouging wound.

  • dave in texas

    it is also important to consider the longterm challenges affecting the state’s balance sheet and credit ratings.

    To a good portion of this legislature, long term doesn’t extend past the next primary.

    They also are the responsible adult thing to do.

    Good luck with that.

  • scottrob

    I know at least one state rep (Lyle Larson), has called for reduction in debt over tax cuts. He is the only one I have heard of. Of course, this is true fiscal conservatism, i.e. sober look at needs, paying your debts, invest in future, balance the budget, etc. Which is the opposite of what most today’s legislature members are: fiscal frauds.

    • r.g. ratcliffe

      I guarantee, Larson is not the only one.

      • dave in texas

        Is there a reason none of those folks are speaking up, other than the threat of a primary challenge? I know I’ve dished a lot of snark lately about the whole scared-of-a-primary deal, but honestly, I’m completely baffled by the complete lack of pushback (other than some minor tinkering around the edges) on the budget-busting proposals put forth by the House and Senate.

      • WUSRPH

        In fact the House has passed HJR 8 by Otto that would lower the cap on the Rainy Day Fund and use the excess to reduce state debt. The Leg. could also appropriate money to do an early call on some of the bonds in the General Appropriations Act if it wanted to do more about the state debt run up during the Perry years.

  • http://www.fortbendconservative.org/ John Bernard Books

    I am for reducing the debt the democrats have run just like Obama, and I’m for tax cuts. Yes thats right that means less for illegals and the looters.

    • Ron Kabele

      How would you split it up between property tax cuts, sales tax cuts, or debt reduction? I would set aside the money for debt reduction.

  • WUSRPH

    Speaking of tax cuts:

    The House Way and Means Committee is to hear the Senate’s three major tax relief/cut bills on Tuesday, May 12 BUT there is yet no official sign that the Senate will return the favor by hearing the House’s two tax cut bills, HB 31 and HB 32. However,because no notice has been posted of a hearing date in the Senate, does not mean they will not be heard. The fact that the House has a 5-day notice requirement for a public hearing and the Senate only 24 hours, means that the Senate could announce the hearings on Monday and still hear them next week..

    The three Senate measures set for a hearing are:

    —SJR 1—the measure increasing the homestead exemption on residential property that has been strongly advocated by Lt. Gov. Patrick. In fact, he has said he will insist on some sort of property tax relief this session;

    —SB 1–the implementing bill for SJR 1; and

    —SB 7—which cuts the rate of the margins/franchise tax.

    The panel will also consider a number of other senate measures dealing with taxes
    including SB 1760 by Creighton that would require that to exceed the so-called “effective tax rate” local governments would have to have the measure pass with at least 60% of the votes on the governing body

  • WUSRPH

    That Texas Tomorrow Fund was one of the biggest legislative Ponzi schemes of all time. It was supposed to be totally self-financing with the investment of the deposits made by parents and more deposits covering every cost. In fact, John Sharp got it passed with a pledge that NO state money would ever be required but, the very next session,he pushed thru a constitutional guarantee. Even then it was supposed to wind up costing us only a few million at the worst. but, of course, no one at the time counted on Perry & company later pushing thru legislation that has resulted in double or triple tuition costs. That is what has run the bill to the state to at least 1/2 BILLION.