Tuesday, February 24, 2015

Texas Lege playing a dangerous one-upsmanship game with tax cuts

The House, yesterday.

Texas House leaders said Monday they believe they can cut taxes by more than $4 billion, indicating a larger reduction than initially proposed by their Senate counterparts.

House Ways and Means Committee Chairman Dennis Bonnen, R-Angleton, gave the assessment in an interview but didn’t say how much more in cuts is being contemplated.

“We really believe that we ought to be able to do more than $4 billion in tax cuts here in the House,” Bonnen said. “We don’t have a number at this point. We just know that we can do better than that.”

Asked about exceeding $4 billion in tax cuts for homeowners and businesses combined, House Speaker Joe Straus, R-San Antonio, said, “We’re on the same page.”

It’s the first time House leaders have indicated the specific tax cut figure they’re contemplating.

Lt. Gov. Dan Patrick and Senate Finance Chair Jane Nelson, R-Flower Mound, earlier made an initial proposal for $3 billion in property tax cuts and $1 billion in business tax reductions over the next two-year budget period. Patrick said then that there could be more tax relief if additional dollars became available.

The Senate today.

Senate GOP leaders on Tuesday proposed a cut in school property taxes that would be worth about $240 $234* next year for the average Texas homeowner and closer to $275  $263* per homestead the following year.

*corrected at original.

The senators, trying to stay ahead of Gov. Greg Abbott and House Republicans in promising the most tax relief, unveiled a package of tax cuts that would cost more than $4.6 billion in the next two-year budget cycle.

About $2.5 billion of that would go toward increases in homestead exemptions on school property taxes. The rest would go to business tax relief.

It gets worse, as "experts" say there will be more money from more oil at higher prices than is currently sustainable.  Or even plausible.

Number cruncher extraordinaire Dr. Stuart Greenfield says Comptroller Glenn Hegar’s estimate might not be optimistic enough. Among other things, he notes oil production for the fiscal year will exceed one billion barrels. That hasn’t happened since 1978.

Newly elected Comptroller Hegar’s Biennial Revenue Estimate –- the BRE –- has been called quite optimistic by many commentators, especially given the dramatic decline in the price of crude oil. But the release of revenue collections for January indicates his estimate might not be optimistic enough.

Chart 1 shows the year-to-date (YTD) growth rate in tax collections for FY10 through FY15, and both the estimated growth rates from the Certified Revenue Estimate (1.8 percent) released in December 2013, and the current BRE (1.6 percent). Check out the fact that YTD growth in tax collections (6.8 percent) is 325 percent greater than the estimated rate (1.6 percent). The YTD growth rate in total state revenue (8.1 percent) is 80 percent greater than the estimated growth rate (4.6 percent).

The latest estimate of state tax collections are projected to grow by 1.6 percent in FY15 and then increase by 2.4 percent in fiscal 2016 (FY16) and 5.6 percent in FY17. Total net revenue is expected to increase by 4.6 percent in FY15, increase by 1.7 percent in FY16 and then decrease by 1.9 percent in FY17.

I'd really like it if these guys were correct.  I would rather me be wrong and not them, even slightly.  But this is absurd.  Everybody knows this brand of extreme conservatives fixes the facts around their policy, and if the oil companies keep laying off workers in the shale fields, and the barrel price keeps see-sawing back and forth between speculation and reality about supply and demand, at some point the chickens are coming home to roost and we're all screwed and tattooed.  Even Dan Patrick and Greg Abbott (and he hasn't had any relations since that tree broke his back).

If you believe in God, then you better start praying that the price of oil goes up to about $75 dollars pretty quick and holds, and perhaps even rises from there, for the next couple of years.  Because if it doesn't, the traffic that guy in a wheelchair can move faster than -- and the potholes and the classroom sizes and the condition of the state's office buildings and everything else that depends on taxes and spending in Texas -- are going to look like specks on Google Earth compared to the problems we'll have if they have blown the numbers and the budget again.

Sen. Kevin Eltife appears to be the lone voice of reason from the right, but nobody seems to be listening to him.  That roaring sound you hear might be Niagara Falls, and this isn't a canoe we're riding in or even a barrel.  It's a handbasket.

Update: From the comments, Socratic Gadfly reminds me that the judge who ruled the state's education funding schemes out of order on two occasions has scolded the Lege in his valedictory...

Just weeks after stepping down from 23 years on the bench, retired state District Judge John Dietz lambasted state lawmakers Sunday for not having the best interests of Texas' public school students in mind.

"We are dooming a generation of these children by providing an insufficient education and we can do better. It's been our best interests to do better," said Dietz, who has twice in the last two years declared the state method of funding public schools unconstitutional. "It's about time the Legislature take its own advice and take the best interests of the children at heart and do something."

 ... and that the price of oil may be in a historical correction period.

Meanwhile, the International Energy Agency expects crude prices to average $55/bbl for this year, and not to get above $70 for some time. Oh, and $100 oil? Not even on its current horizon.

The IEA story is worth a read right there. Going by Brent prices, which it expects to only get to the low-mid $70s by 2020 (yes!), this is not a one-year slump, it's potentially a multi-year readjustment.

And, the IEA is right to be concerned. Its U.S. counterpart, the Energy Information Agency, says current stockpiles are at an 80-year high for this time of year.

Dan Patrick et.al. need to really start praying harder.


Gadfly said...

You might want to work this into your piece — Judge Dietz pulling both barrels of the shotgun on school finance, as he retires: http://www.chron.com/news/houston-texas/houston/article/Judge-State-school-financing-systems-dooming-6095489.php

Gadfly said...

Oh, and that $75 oil? Hah. IEA says that ain't likely until 2020, like I blogged yesterday: http://socraticgadfly.blogspot.com/2015/02/how-long-before-oil-supply-hits.html

PDiddie said...
This comment has been removed by the author.
PDiddie said...

Both excellent, and to be promoted into the OP in just a moment.

Gadfly said...

Gracias. Good post overall. And, it's really going to be interesting what happens in a few months after Cushing fills up. Both the Texas Lege and some commodities speculators could get burned.