Money Makes the World Go Round
Talking dollars and cents with state comptroller Susan Combs.
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JAKE SILVERSTEIN: You recently released the revenue estimate for 2014–2015, and it shows the state to be pretty flush: $101 billion available. Are good times here again?
SUSAN COMBS: Good times are here, but we have huge volatility. Let’s talk about two indicators: oil and gas and housing. Oil and gas has been hugely positive, but it could also turn negative. Housing had 162,000 single-family permits at its all-time high, in 2005. That plummeted to 60,000 permits, but it’s now back up to 75,000. It’s sort of like Whac-A-Mole. What has not had volatility is you and me shopping, having dinners out.
JS: Two years ago, you projected that revenues for the current biennium would be around $73 billion. It now turns out that revenues are around $90 billion. That’s a pretty significant swing, especially when the state had to make a lot of cuts to services last session. Can you help explain to the average taxpayer what accounted for that?
SC: We were looking at three kinds of recoveries: a V-shaped recovery, a U-shaped recovery, and an L-shaped recovery. We decided we weren’t going to be lucky enough for a V, so we talked about a U. Well, then housing sat there. Housing had been the big driver, so we were worried about whether the U was going to turn into an L. Luckily, the V did come back.
JS: Would you say the revenue projection was a conservative estimate back in 2011?
SC: I try to be conservative because I don’t want to let people think there’s a lot of money and then find that there’s not. The good thing was that we had money in the Rainy Day Fund. When they created that in the late eighties, it was because they’d lost their shirts; it’s to help stabilize.
JS: But of course you have to be able to spend from it in order for it to be helpful. You hear some people grousing that if the state had been less conservative in our budgeting in 2011 and more willing to use the Rainy Day Fund, we wouldn’t have had to make, say, the cuts to public education that were made. Do you think we were too conservative in our budgeting in 2011?
SC: As an agency head, I got a letter telling us to cut our budget, which we did. In fact, we now have fewer employees here than when I started. But with respect to the choices that [the Legislature] made: there were differences of opinion. They had the Rainy Day Fund to use if they so desired. That was their choice.
JS: And they chose not to, and now there’s an $8.8 billion surplus.
SC: But we didn’t know that then.
JS: Is part of the challenge that we’re doing two-year budgets in a time of economic uncertainty?
SC: I’m very aware of that. But I’m obligated to do biennial budgets. I think we should note that revenues are posted every month, and anybody can see them. I’ll give you the information. It’s the Legislature’s choice to decide what to do with it.
JS: Would you say that the budget determines policy rather than policy determining the budget?
SC: Not necessarily. I think that they’re coequal. If I have twelve bucks, then I’ll have to prioritize if I’ve got policy that wants to go to fourteen. If I have extra money but I have a constitutional spending limit—well, that’s the conundrum they’re going to have this time. They have a lot of money, I think, in the Rainy Day Fund. And I don’t know where the intersection is going to be on policy and money.
JS: Let me ask you about a different aspect of our financial picture, which is debt. You wrote an op-ed in the Wall Street Journal titled “Debt Excess Even Lives in Texas.”
SC: Did you like the homage to the old song “All My Ex’s Live in Texas?”
JS: Yes! You need to sing it.
SC: No, I don’t! People beg me never to sing.
JS: That headline is going to come as a surprise to a lot of people who think of Texas as a place of austere budgets. But you’re not talking about state spending.
SC: Let me go back to the genesis of this: I did forty town halls, and I would say, “How many of you in this room know how much you owe at the local level?” Not a single person knew. So we published these reports [on public debt at the local level].
JS: Your takeaway was that local debt is growing. But isn’t it growing because state funding has been cut and this pushes costs onto local governments for things like infrastructure and education?
SC: I would take issue with that. A lot of debt is construction debt. When I see construction costs for city halls, and the cities don’t want to tell anybody what they’re doing, well, that is not a state problem. I’m not going to blame the state legislature for the choices people make in cities.
JS: Although in some cases, if the state’s not going to fund—
SC: It depends on what you think the state’s role is. Do you think the state should pay for city hall?
SC: Okay, so they shouldn’t pay for that. What should they pay for? That’s the crux of the question. If you want to build a $60 million football stadium—
JS: You’re referring to the high school football stadium in Allen.
SC: I just thought that was stunning.
JS: It passed with 63 percent of the vote.
SC: If you want to build an 18,000-capacity stadium for your high school, fine. But did they know what they already owed?
JS: Which is what you’re advocating for, right? Reforms such as having more information about existing debt right there on the ballot when there’s a bond election.
SC: I’m pretty perky about that. I really get excited about it. I’ve got bills being drafted in the House and the Senate, and I had bond lawyers get kind of ashen-faced about it and say, “Oh my goodness, if we tell people how much they already owe, they won’t vote for any more debt.” There is no such thing as a free lunch in all this.
JS: One cornerstone of the state economy is the perception that Texas is business-friendly. Some of that friendliness comes in the form of incentives and tax breaks that we use to lure companies here. Do you think we spend money and give tax breaks that we actually don’t need to?
JS: The new Formula 1 track outside Austin had its first race in November. You helped seal that deal with incentives from the Major Events Trust Fund.
SC: The money was given after the event, and it was $25 million [that came from increased tax revenues produced by the event]. The F1 folks spent between $250 and $350 million, which is going to generate probably $3.5 million in property taxes for Del Valle ISD and about $1.5 million for the City of Austin. I think F1 was an enormous success. Compare it to the Super Bowl. This is a national event that only happens in one place and that brings in folks from outside.
JS: There was some controversy about your office’s involvement in getting F1. Did you feel vindicated when the race seemed to be successful?
SC: I had a blast. The day was beautiful. I ran into people. I had a hot dog. I was very, very happy to be there.
JS: If you run for lieutenant governor, are you going to drive around the state in a race car?
SC: You can’t do that. It’s extraordinarily expensive. You would never do that.
THIS INTERVIEW HAS BEEN EDITED FOR CLARITY AND LENGTH.