It’s playoff baseball time here in Texas—go ‘Stros! But baseball fans know everything depends on the umpires—as the great Bill Klem said, when asked whether a ball was fair or foul, “It ain’t nothing until I call it.”
It’s time for us to call fair and foul on the Texas Legislature; there were some homeruns, some wild pitches and even some unforced errors. And ultimately, it’s the taxpayers who either win or lose.
To begin with, lawmakers did well in remembering the taxpayer by maintaining a Conservative Texas Budget (CTB), which sets a maximum appropriations threshold based on the average taxpayer’s ability to pay for it (as measured by population growth plus inflation), and passing a stronger spending limit.
There was concern with Congress sending Texas $16.3 billion in mostly discretionary funding through the American Rescue Plan (ARPA). During the recently ended third special session, the Legislature appropriated $13.3 billion of it, with a positive of leaving $3 billion for possible tax relief later.
Another winning play is that the Legislature followed most of the Foundation’s recommendations for ARPA funds.
It sustained the CTB and used the funds for only one-time expenditures which will help avoid any fiscal cliffs like some claimed Texas had after Obama’s one-time “stimulus” funds in 2009. Legislators appropriately used $7.2 billion—about half of ARPA funds—for debt payment and replenishment of the state’s depleted unemployment trust fund after the shutdown recession to avoid a massive payroll tax hike on employers. And they ensured transparency and accountability by requiring that the uses of these funds be posted on a government website and put in a separate account, respectively.
While those actions benefited taxpayers, a botched play was in not providing substantial, broad-based property tax relief.
This could have been done, as there were surplus funds of $6 billion in general revenue and $3 billion in ARPA funds. All legislators needed to do was use surplus funds to reduce school district maintenance and operations property taxes, thereby continuing the path toward eliminating property taxes by 2033.
Instead, lawmakers raised the homestead exemption for school district property taxes by $15,000 to $40,000, funded by about $450 million in general revenue annually. And even this won’t happen unless voters approve this constitutional amendment in May 2022. If passed, more than 5 million homeowners would benefit from average savings of $176—excluding other higher local property taxes. So, no relief for business owners, landlords, apartment owners, renters, and those with secondary properties.
This compromise followed proposals in the Senate that would have provided at least $2 billion in general revenue to lower school district property taxes for everyone and in the House that would have provided $3 billion in ARPA funds for checks to only those with a homestead.
Clearly, the Senate’s version would have been broad-based, even though more could have been added to it. Combining it with HB 90 in the House that would have provided structural reform to eliminate property taxes over time, which died in House calendars, could have provided extraordinary relief. Instead, it appears that lobbyists for the public ed establishment pushed against this pro-taxpayer effort, resulting in little-to-no relief through the increase in the homestead exemption.
A huge unforced error was the wasteful spending of ARPA funds.
The decision to allocate $325 million in ARPA funds to support $3.3 billion in tuition revenue bonds for construction at higher education institutions is at the top of the fouls list. While tuition and student debt continue to rise, the quality of education is declining, and universities are already receiving billions of dollars, this provision is ill-advised.
It’s unfortunate that instead of providing tax relief these funds went to projects like student housing enhancements for the Marine Science Institute at the University of Texas at Austin and $100 million to two state university systems for institutional enhancements.
However, not all state legislators sought to rubber stamp additional funds to a declining higher education system. Rep. Matt Schaefer (R-Tyler) proposed an amendment that sought to connect the amount of money institutions can receive based on the rate of tuition increase. Unfortunately, the amendment didn’t pass, ending an opportunity to curb the fiscal bloat that plagues Texas universities, students, and taxpayers.
Putting this year’s legislative game in perspective there were many hits but also some strikeouts, especially on major property tax relief. But taxpayers did get relief from less government spending than what was available.
The Legislature left about $20 billion in total revenue, including $6 billion in general revenue, and $12 billion in the rainy day fund and $3 billion in ARPA funds on the table. Texas should return much if not all of these surplus funds to struggling taxpayers so they can recover from the shutdown recession, withstand the stagflation by the Biden administration, and actually own their property.
But as with baseball, there’s always next season.