Abby Rapoport | The New Republic
June 21, 2011
Following his media blitz, few articles have cast a skeptic’s eye on the governor’s Texas record. “Texas Governor Calls for Halt of Economic Ruin” read one recent Bloomberg headline. The narrative is appealing: Small-town guy becomes Texas ...governor and makes (the economy) good—all by sticking to conservative principles.But while Texas remains “open for business”—the slogan of his successful re-election campaign in 2010—the state’s Legislature is in the process of a going-out-of-business sale.
The Texas budget for the next two years is a mess of accounting tricks and gutted programs, thanks to an unprecedented budget shortfall. The state’s business tax has not only been unpopular, it also doesn’t generate nearly enough revenue. Operating at a structural deficit, the state has even begun to attack funding in the once-hallowed ground of education. And while Perry has spent a good bit of June on his non-campaign-campaign, state lawmakers from both parties are fighting tooth-and-nail to legislate around his dictums.
In the face of Perry’s promise to veto any use of the rainy day fund, lawmakers turned to accounting tricks like deferred payments to soften the blows to state programs. Fees, too, on everything from getting help collecting child support to registering as a lobbyist, are going up all over the state, and almost nowhere does the budget account for normal growth in social services enrollment. The final budget short-funds Medicaid by almost $5 billion. Legislators had to return for a special session to hammer out the cuts to education, which will likely end up around $4 billion. It will mark the first time Texas has cut funding for public schools since 1949, when the state first took a prominent role in financing them. Even the Texas Association of Business, a conservative, pro-business coalition if ever there was one, has expressed concerns over some of the cuts to schools and early childhood education. “Our state runs the risk of falling short on our commitment to Texas school children and businesses that rely on a well-educated workforce,” the group proclaimed in one March press release.
Of course, many lawmakers didn’t want to use the rainy day fund in the first place, but that’s because they know a dirty little secret: Even after this two year budget period, the state’s fiscal woes are far from over. The Lone Star State has a standing $10 billion shortfall every two-year budget cycle, thanks to a faulty tax system pushed by Perry that fails to balance the budget. Although the governor normally stays away from the state Legislature—sightings in either chamber are rare and exciting—Perry engineered a new business tax in 2006 to replace a prior one riddled with loopholes. Ostensibly a good idea, his new tax nonetheless suffered from the simple fact that it didn’t bring in enough revenue. Furthermore, it turned out to be incredibly complex, leaving many business owners scratching their heads. Those who figured it out, meanwhile, realized that, because the new tax was levied on gross margins as opposed to profits, companies could be losing money and still find themselves on the hook.
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