This Budget’s For You

July 24, 2008

A very young, relatively new speech and drama teacher was starting her first year at our high school when I was a freshman there.  She decided we needed a debate team, even though we’d never had such a thing.

So she looked out at the kids in her speech class and picked a few loud-mouthed, hyper-opinionated, remarkably charming students to be part of her inaugural team.  Thus began my career as a debater.

It was the single best educational experience I had, for a number of reasons.  One lesson, which I’m constantly reminded of, was that some people use a lot of words but never really say anything.  You listen intently and comprehend the individual words they’re using.  You recognize that the sentences have subjects, verbs, and such.  You may even be impressed with what sounds like eloquence.  But they’re really communicating nothing at all. And it’s probably a sure sign that they’re trying to put one over on you.

Even as high school students, we knew the game these folks were playing:  If you can’t baffle ’em with brilliance, befuddle ’em with bull.

A Rigged System

That phrase describes how Texas deals with its budget, which is one of the biggest frustrations I’ve found being in government.

Naturally, it’s a big budget, almost $168 billion over all funds.  Texas is a big place with lots of needs, so there’s no surprise that it’s complicated.  You’d expect intricacies.  Heck, with that kind of money at stake, you’d even be surprised if raw politics weren’t part of the process.

The frustrating part is that the system is so closed and filled with so many gimmicks.  It’s drawn up in pieces by a small group of officials so that even most legislators don’t have much say in what gets funded.  Money gets stashed in all kinds of out-of-the-way accounts and often doesn’t get spent on the things it was meant to pay for.  The leadership refuses to invest in money-saving strategies, instead choosing to play political games.  And it’s nearly impossible at times to get information that would help us make vital decisions about what Texas needs and what it can afford.

Much of the time, the events at the Capitol are so chaotic, and the issues in a budget hearing are so boring, that people don’t really notice how little they know about their state’s finances.

But Monday’s meeting of the state’s Business Tax Advisory Committee – and the obvious lack of answers to big questions – sort of stood out.

New Money, New Problems

This committee, on which I’m one of two Senators appointed by the Lt. Governor (the other is Chair of the Senate Finance Committee), was formed to study the new business tax – also known as the “margins tax.”

Those of you with long memories (and a particular interest in government finance) will remember that the Legislature created the margins tax in the spring of 2006, a few months before I was elected to the Senate.  The ostensible goal was to balance the tax burden over a larger group of businesses, and to fund a property tax cut (or some of one, anyway).

There are at least a couple of problems with what came out of that process.

One is that the margins tax isn’t going to bring in enough money to pay for the property tax cuts.  It was projected to come in several billion dollars short in this budget, and there’s plenty of reason to think it won’t even make it that close.

The leadership has hoarded funding in several accounts to cover this deficit – amazingly, some officials look at this squirreled-away money and somehow declare that it represents part of a budget “surplus.”

Then there’s the fairness issue.  Small businesses have been particularly outspoken in saying the margins tax is taking an undue toll on them.  Many say their tax bills have gone up several times over, and business owners complain that their obligations don’t subside even if they lose money.

And another enormous problem is that there simply isn’t enough information to know what’s right, what’s wrong, and what the state can do about it.

Want Answers? Hold Your Breath

Even the Business Tax Advisory Committee can’t get information about what the margins tax will mean for the budget and the economy.  The first round of tax payments and extension requests arrived a month ago.  But the Comptroller, Texas’ main money manager, says it won’t be possible to estimate what the tax will bring in, and how it will affect different businesses and the budget, until the final filings roll in four months from now.

That will be in mid-November – two weeks before Thanksgiving, eight weeks before the start of the legislative session, and not a lot of time for anyone who wants to take a serious look at tax policy.

Now, I know this is a new tax and it takes some time to see exactly how it functions in our massive state economy.  And I understand that it would be a problem if legislators were making plans based on half-baked information that was only going to change in a couple of months.

So maybe the worst you can say about these margins tax uncertainties is that they’re merely emblematic of the lack of transparency surrounding the budget, not to mention the lack of information available to anyone who wants to at least consider changes in the way Texas does its business.

Someone might ask why we even have a Business Tax Advisory Committee if there’s no information with which to advise.