1. A Balanced Approach for 2012-13 United Methodist Women January 24, 2010 Eva Deluna Castro, deluna.castro@cppp.org Dick Lavine, lavine@cppp.org F. Scott McCown, mccown@cppp.org www.cppp.orgdeluna.castro@cppp.orglavine@cppp.orgmccown@cppp.org

2. “Truly I tell you, just as you did it to one of the least of these who are members of my family, you did it to me.” ---Matthew 25: 40

3. Matthew 25: 31-40 is called the Converting Ordinance by John Wesley in his Journal in 1760: It is far better “to carry relief to the poor, than to send it” because this is “far more apt to soften our heart, and to make us naturally care for each other.”

4. Budget Scenario for 2012-13 Local School Tax Cut (GR and PTF) GR for Higher Ed ARRA instead of GR Other GR* GR for HHS Other GR for K-12 GR for Prisons Additional GR Needed $7 b $1 b None $3 b $3.3 b $300 m $700 m

5. 5% Cuts to GR and GR-D for 2010-11 Of the $87 billion (GR and GR-Dedicated) appropriated for 2010-11, only $41.6 billion is “on the table” for 5% cut proposals to be submitted by state agencies If 5% proposal cuts were implemented for the entire biennium: $2.1 billion in cuts ExemptAreas of Potential Cuts

6. Major Areas of 5% Cuts for 2010-11, continued Maximum GR/GRD cut, if implemented for 2010-11 Other HHS (child protective services staff; community care waivers; state schools and hospitals) $513 million Texas Department of Criminal Justice$296 million Public community/junior colleges$93 million Higher Ed Coordinating Board (mostly financial aid)$77 million UT Austin$39 million Texas A&M College Station$36 million UTMB Galveston$30 million UT MD Anderson Cancer Center$20 million Attorney General (mostly child support enforcement)$27 million Group Health Insurance (for state and higher ed employees, TRS retirees) $156 million

7. A Balanced Approach Is Essential for Economic Recovery Every dollar of state spending generates $1.41 of economic activity. 88 cents of that activity is in the private sector. Raising taxes reduces economic activity between 32 cents to $1.02. Cutting spending hurts the state economy more than increasing taxes, especially on those with higher incomes.

8. Best Case Scenario Assuming revenue growth matches growth in expenses Current Budget 2012-13 Budget General Revenue$75.0 billion ARRA$6.4 billion$0 Cash on hand$2.4 billion$0 Property Tax Relief Fund carryover $3.0 billion$0 Permanent School Fund$0$1.2 billion Other adjustments$0.2 billion- TOTAL GR BUDGET$87.0 billion$76.2 billion GAP$10.8 billion

9. Funding a Balanced Approach Easy Money Potential Revenue for 2012-13 Economic growth with no change in revenue system $800 million for each 1% growth Smoke and mirrors Payment delays, etc $1.5 billion

10. Funding a Balanced Approach Spend the Rainy Day Fund Potential Revenue for 2012-13 Biennium Beginning balance$8.2 billion Growth during 2012-13$1.4 billion TOTAL RDF AVAILABLE$9.6 billion

11. Funding a Balanced Approach Eliminate exemptions Potential Revenue for 2012-13 Sales tax on business, professional services Legal, stock or real estate broker, accounting, management consulting – except health care $5.6 billion Eliminate high-cost natural gas exemption $2.3 billion Eliminate recognition of optional percentage homestead exemption $1.0 billion

12. Funding a Balanced Approach Eliminate exemptions Potential Revenue for 2012-13 Eliminate Freeport property tax exemption (constitutional) $850 million Eliminate 10% property tax appraisal cap (constitutional) $650 million Eliminate sales-tax timely filer and prepayment discounts $425 million

13. Funding a Balanced Approach Eliminate exemptions Potential Revenue for 2012-13 Eliminate sales tax holiday$100 million Eliminate gasoline-tax collection allowance $100 million Eliminate CAPCO credits$100 million Eliminate ineffective tax exemptions $100 million Eliminate reimbursement of school taxes for local tax abatements $20 million

14. Funding a Balanced Approach Raise Existing Taxes Potential Revenue for 2012-13 Raise sales tax ½% to 6.75% state/8.75% total, with rebate for families in bottom 20% of income 8 states would have higher state rates $3.0 billion Increase franchise tax rate from 1% to 1.25% Retail from 0.5% to 0.625% $2.1billion Raise gasoline tax by 5 cents per gallon From 20 cents to 25 cents – 23 states now at 25 cents or higher $1.6 billion ($400 million to Available School Fund; $1.2 billion to State Highway Fund)

15. Funding a Balanced Approach Raise Existing Taxes Potential Revenue for 2012-13 Raise cigarette tax From $1.41 to $2.00 per pack 15 states now at $2.00 or above $1.2 billion Raise motor vehicles sales tax by ½% From 6.25% to 6.75% $450 million Raise beer tax From 11 cents to 17 cents per six-pack Last raised in 1984; 15 states would be higher $100 million

16. Protecting Working Families From Tax Increases “Working Families Tax Rebate” Enacted by State of Washington in 2008 Adds 10% to federal Earned Income Tax Credit Available to working families with up to $43,300 annual income (3 or more kids) 2.4 million Texan families received EITC in 2007 – 21% of income tax filers

17. Funding a Balanced Approach New Taxes Potential Revenue for 2012-13 Quality Assurance Fee 1% on revenues of hospitals, surgery centers $350 million Plus federal match of $550 million Soda tax 1 cent per 12 oz can of sugared soft drink $145 million

18. Funding a Balanced Approach Beyond this Session Potential Revenue for Future Budgets State personal income tax$14 billion net (dedicated to education) Eliminate school property tax abatements - Chap 313 $1.2 billion Sales tax on Internet sales$550 million Sales price disclosure$350 million

19. John Wesley, On Visiting the Sick: One great reason why the rich, in general, have so little sympathy for the poor, is because, they so seldom visit them. Hence it is, that, according to the common observation, one part of the world does not know what the other suffers. Many of them do not know, because they do not care to know: they keep out of the way of knowing it; and then plead their voluntary ignorance as an excuse for their hardness of heart. “Indeed, Sir,” said a person of large substance, I do not know anybody in the world that is in want.” How did this come to pass? Why, he took good care to keep out of their way; and if he fell upon any of them unawares “he passed over on the other side.”

20. Use of This Presentation The Center for Public Policy Priorities encourages you to reproduce and distribute these slides, which were developed for use in making public presentations. If you reproduce these slides, please give appropriate credit to CPPP. The data presented here may become outdated. For the most recent information or to sign up for our free E-Mail Updates, visit www.cppp.org.www.cppp.org © CPPP Center for Public Policy Priorities 900 Lydia Street Austin, TX 78702 P 512/320-0222 F 512/320-0227