With declines in property values, sales tax revenues, and motor vehicle registrations, Texas counties are experiencing the double-whammy of a down economy. Revenues are dropping while demands for services are increasing.
Adding to the budget woes will be reductions in state-funded services. The Legislative Budget Board has estimated that the state will face a $15 billion to $18 billion shortfall during the next biennium. While some of the shortfall is attributable to the economy, the state has also created an automatic deficit. In 2006, the Texas Legislature reduced local school property taxes, but did not raise enough new state money to cover the loss. This creates a $9 billion hole in the state budget every two years.
While the state “rainy day” fund with its $9.6 billion balance could cover a portion of the deficit, the state leadership has pledged to balance the state budget without increased revenues. This process began on May 27 when the Governor’s Budget Office and the Legislative Budget Board ordered many state agencies to cut their current budget by 5 percent and instructed all agencies to submit a proposed budget with an additional 10 percent reduction. Even these cuts will leave an $8 billion deficit, near the entire balance of the “rainy day” fund.
Cuts in the state budget have a direct impact on county programs. The current 5 percent reduction in state spending for health and human services, criminal justice, and Texas AgriLife Extension Service programs is placing additional demands on counties for indigent physical and mental health services, jail facilities, and youth development programs. These cuts have also resulted in a significant loss of federal matching funds. Another 10 percent cut in state programs over the next two years will slide downward to the county level.
While budget reductions are necessary during a weak economy, the Legislature should also examine its revenue base. The state motor fuel tax has not been adjusted for inflation in 20 years. Many sales tax exemptions have been added to satisfy the demands of special interests. Texas counties have been forced to rely upon the property tax, while other states have provided broader, local-option revenue choices to their counties. As we struggle to do more with less, our legislators need to keep an open mind on the proper balance between budget cuts and revenue statutory revisions to meet the state’s responsibilities.
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