1. A Balanced Approach To Meeting the Needs of Texans Dick Lavine lavine@cppp.org Center for Public Policy Priorities January 28, 2011

2. The Texas State Budget for 2010-11 Total: $187 billion; 76% for Education or HHS Only $82 billion is actual GR; plus, $8 billion federal ARRA used as GR

3. Why Is There a $27 Billion Shortfall?

4. Or Is It a $33.5 Billion Shortfall? RequestedRecommendedShortfall HHS$ 31.0 billion$ 20.0 billion- $11.0 billion-35% Education 56.4 billion 41.7 billion - 14.7 billion-26% Criminal Justice 9.2 billion 7.5 billion - 1.7 billion-19% The rest 10.2 billion 4.1 billion - 6.1 billion-60% TOTAL$106.8 billion$ 73.3 billion- $ 33.5 billion-31%

5. The Recession Has Caused Sales Tax Revenue to Plummet Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2011

6. 2006 School Tax Cut Created A Structural Deficit 2008-2009 Predicted Cost of Property Tax Reduction$14.2 B Predicted Amount of New Revenue$ 8.3 B Predicted Shortfall$ 5.9 B 2012-13 Minimum Cost of Property Tax Reduction $14.2 B Forecast of New Revenue$ 4.5 B Likely Shortfall$ 9.7 B

7. In 2003, State Budget for 2004-05 Balanced with Cuts and New Revenue Revenue measures: $1.8 billion Cost shifting: $1.9 billion Accounting changes: $1.2 billion Rainy Day Fund: $1.3 billion Federal Fiscal Relief: $1.4 billion Cuts to 2003 budget: $1.4 billion Cuts to 2004-05 Budget: $6.6 billion Estimated General Revenue Shortfall of $15.6 billion

8. How Texas Faced the 1986-91 Crisis Other Taxes Had to Replace Falling Oil & Gas Revenue

9. Funding a Balanced Approach: Spend the Rainy Day Fund Potential Revenue for 2012-13 Beginning balance$8.2 billion Growth during 2012-13$1.2 billion Total Rainy Day Fund$9.4 billion

10. Funding a Balanced Approach Next Steps Enforce existing tax laws Eliminate wasteful exemptions Raise existing taxes Adopt new taxes

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