1. The Big Picture about Kids Texas Center for the Judiciary F
The Big Picture about Kids Texas Center for the Judiciary F. Scott McCown, Executive Director Dick Lavine, Senior Fiscal Analyst Eva DeLuna Castro, Senior Budget Analyst

2. Lots of Kids
Second largest child population, totaling over 6.1 million under the age of 18
Largest growth in child population between
350,000 additional children
183,000 more than California
By 2040, school enrollment projected to double

3. Our Changing Demographics

4. Great Need for Public Services
Texas
US Average
rank
% of Population under 18, 2002
28.0 %
25.3 %
3rd
Child Poverty Rate, 2003
22.8 %
17.7 %
8th
Elderly Poverty Rate, 2003
13.0 %
9.8 %
7th
% of Under-65 Population with No Health Insurance, 2003
26.9 %
17.6 %
1st
% of Residents Aged 25 or over with at least a High School Diploma, 2003
77.8 %
83.6 %
49th
% of Residents Aged 25 or over with at least a Bachelor’s Degree, 2003
24.5 %
26.5 %
27th
Source: U.S. Bureau of the Census, March CPS and American Community Survey

5. What State Government Pays For
Source: U.S. Bureau of the Census, State Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $70.3 billion.

6. What Local Government Pays For
Source: U.S. Bureau of the Census, Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $77.1 billion.

7. Comparing to
Final budget: $138 billion in All Funds
This is 9% more than in , less than expected growth in population and inflation
Nationally, state spending per resident has been about 50% higher than Texas state spending, and this budget will leave Texas near the bottom in spending per resident
As a percentage of the economy, since 1991, state spending has been roughly 7%, and this budget will be about the same

8. 2006-07 based on SB 1, 2005 Regular Session (excludes vetoes and subsequent budget actions)

9. Public Education Spending
Texas spent $7,335 per student
Texas ranked 34th among the states
Average state spending was $8,208 about 12% higher than Texas
Costs of living adjustments are faulty
Austin: % of U.S. Average
Dallas: % of U.S. Average
Houston: 96.1% of U.S. Average

11. School Funding in Next State Budget

12. Price Tags
Biennial cost of public school enrollment growth = At least $1.5 billion
Biennial cost of 3% inflation for public schools = At least $2.4 billion
“Ending” Robin Hood = At least $2.3 billion
“Buying down” local school property taxes by 10 cents per $100 taxable value = At least $2.2 billion
Biennial cost of one candy bar per year per child is $4.3 million

13. From a Taxpayer’s Point of View
Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash Report.

14. From the State’s Point of View: All Revenue

15. From the State’s Point of View: Taxes Only

16. Our Tax Base is Inadequate

17. Indicators of Ability to Pay
Texas
US Average
rank
Per Capita Personal Income, 2003
$29,076
$31,459
29th
State and Local Taxes as a Percent of Personal Income, 2002
9.3%
10.2%
41st
Source: CPPP, using data from Bureau of Economic Analysis and the Census Bureau.

18. Households with the Lowest Income Pay the Highest Percentage in State and Local Taxes

19. Not Taxing Where the Money Is

20. Revenue Options
Cigarette tax: $1/pack increase raises $1.7 billion biennially
Video Lottery Terminals: $1.1 billion biennially. “Crack cocaine” of gambling
Revised Franchise Tax (Business Activity Tax): Pre-tax net income, add back compensation minus first $30,000 per job times 1.95%
Sales tax rate increase — but this is extremely regressive, and TX already has one of the highest rates
Sales tax base expansion (to services not covered now)

21. If We Replaced Current School Property Taxes with Sales Taxes21

22. House Proposed Tax Change (H.B. 3)
Source: CPPP Policy Page 232, Tax Equity Note Confirms that Most Texas Families Would Pay More Under HB 3, the “Tax Relief Bill”, March 2005.

23. The Texas Constitution Article 8 - TAXATION AND REVENUE
Section 24 - PERSONAL INCOME TAX; DEDICATION OF PROCEEDS
(a) A general law enacted by the legislature that imposes a tax on the net incomes of natural persons must provide that the portion of the law imposing the tax not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of imposing the tax.
(b) A general law enacted by the legislature that increases the rate of the tax, or changes the tax, in a manner that results in an increase in the combined income tax liability of all persons subject to the tax may not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of increasing the income tax.
(f) In the first year in which a tax described by Subsection (a) is imposed and during the first year of any increase in the tax that is subject to Subsection (b) of this section, not less than two-thirds of all net revenues remaining after payment of all refunds allowed by law and expenses of collection from the tax shall be used to reduce the rate of ad valorem maintenance and operation taxes levied for the support of primary and secondary public education. In subsequent years, not less than two-thirds of all net revenues from the tax shall be used to continue such ad valorem tax relief.

24. TEXAS CONSTITUTION (Cont’d.)
(g) The net revenues remaining after the dedication of money from the tax under Subsection (f) of this section shall be used for support of education, subject to legislative appropriation, allocation, and direction.
(h) The maximum rate at which a school district may impose ad valorem maintenance and operation taxes is reduced by an amount equal to one cent per $100 valuation for each one cent per $100 valuation that the school district's ad valorem maintenance and operation tax is reduced by the minimum amount of money dedicated under Subsection (f) of this section, provided that a school district may subsequently increase the maximum ad valorem maintenance and operation tax rate if the increased maximum rate is approved by a majority of the voters of the school district voting at an election called and held for that purpose. The legislature by general law shall provide for the tax relief that is required by Subsection (f) and this subsection.
(Added Nov. 2, 1993.)

25. How Would An Income Tax Work?

26. A State Income Tax, With Property Tax Reductions, Would Benefit Most Texans

27. Texas:
One and Indivisible