February 5, 2013
Texas needs an honest budget. We got another reminder of that this week, when a state district judge declared Texas’ school finance system to be unconstitutional, unfair and inadequate when it comes to the needs of our children.
We can build a better Texas by accurately sizing up the state’s needs and by working, transparently and responsibly, to meet those needs. Ending the diversion of dedicated state funds will help create an honest budget. I’m working hard, and making progress, in that effort. This article shows how:
Four years ago, state Sen. Kirk Watson, D-Austin, was alone in the wilderness calling for the end of a little understood but high-dollar accounting maneuver that had helped Texas balance its budget for two decades.
Today, it is all the rage in the Texas Legislature to decry the diversion of public dollars that are collected for a specific purpose but not spent for that purpose. Over the years, nearly $5 billion have accumulated from fines, fees and dedicated taxes that were supposed to be used for trauma centers, vehicle emissions reduction, student loan repayments for doctors and other specific purposes.
Gov. Rick Perry has made ending the practice a central component of his Budget Compact and highlighted the issue in his State of the State address on Tuesday. Republican leaders in both chambers are developing plans to wean the state budget off the so-called dedicated funds.
Watson said he welcomes the bipartisan company on what was once a lonely crusade, but he wants a guarantee that the diversions will stop once and for all. On Thursday, he proposed a constitutional amendment that would put the state on a path to end the practice by 2020.
His amendment would also require that lawmakers vote each time there is a diversion from one of the 200 dedicated funds rather than allowing all the money to be swept away in a single vote. Watson said that would make the practice more transparent to taxpayers but also more cumbersome for lawmakers.
“It ought to be onerous to violate the public trust. It ought to be onerous to break a promise to your taxpayers and the citizens of the state,” Watson said. “What has happened, quite frankly, is that it has become too easy.”
When the diversions started in 1991, the amounts were relatively small but had swelled to $1.6 billion by 2001. A decade later, the total was nearly $5 billion. The money doesn’t get spent on anything; rather it is used to pad the bottom line for accounting purposes only.
If budget-writers hadn’t employed the accounting gimmick two years ago, they would have had to either cut an additional $5 billion in spending or raise taxes.
Two-thirds of the members in both the House and Senate must agree to put a constitutional amendment on the ballot. It’s unclear whether Watson will be able to muster enough support to clear that high hurdle even with the growing consensus that the practice has gotten out of hand.
In the Texas House, state Rep. John Otto, R-Dayton, has been tapped by Speaker Joe Straus to prepare legislation to reduce the reliance on dedicated funds. Otto said Thursday that he hadn’t yet seen Watson’s proposal but worried that a constitutional amendment might hamstring lawmakers if the economy takes an unexpected nose dive.
“I just think this body needs to do it rather than have it dictated,” Otto said. “You don’t know what the financial conditions of the state may be four years from now.”
“I agree with his goal,” Otto said. “The question is how fast can we undo it.”
Watson said his approach would give the Legislature ample discretion to phase out the practice and provide an override mechanism that can be triggered with a vote of two-thirds of the House and Senate.
While the proposal would force lawmakers to address the widely acknowledged problem, it would not “so badly bind that it creates a budget crisis,” Watson said.
At a news conference Thursday, Watson joined state Sen. Craig Estes, R-Wichita Falls, and state Rep. Lyle Larson, R-San Antonio, to promote a bill that would end the diversion of the $250 million in tax revenue that comes from the sales of sporting goods. That money is intended to help state parks, but only a fraction has been used for that purpose.
“If we want to really want deal with the diversion issue, this is the one that has the most profound impact on citizens across the state,” Larson said.
Dedicated funds used to balance the 2012-13 budget
Almost $5 billion has accumulated in more than 200 dedicated funds and used to help balance the budget. The funds with the largest balances include:
System Benefit Fund: $851 million
Fee paid by electric utility customers intended to help low-income Texans defray electricity bills.
Texas Emissions Reduction Plan: $654 million
Some vehicle title and registration fees provide for clean air grants.
Trauma Facility: $388 million
Fines paid for drunken driving and other traffic violations for emergency services and trauma centers.
9-1-1 Service Fees: $164.5 million
Fee appears on phone and wireless bills to pay for 911 services across the state.
Source: Comptroller of Public Accounts