Glenn Hegar may have ridden to the rescue — if Texas’ top leaders — and especially Lt. Gov. Dan Patrick — are wise enough to listen to him.
As Texas Comptroller of Public Accounts, he keeps track of how much money the state will have coming in, so he can certify there’ll be enough to cover the Legislature’s proposed budget. Their spending is limited to how much revenue he estimates will come in.
On May 4, Hegar sent a letter to Patrick, presiding officer of the Texas Senate, warning that some spending duties need attention to preserve the state’s credit standing, before a tax-cut binge.
“…I want to emphasize that in addition to tax cuts, it is also important to consider the long-term challenges affecting the state’s balance sheet and credit ratings,” Hegar wrote.
The letter was also addressed to Gov. Greg Abbott and House Speaker Joe Straus, with copies to Senate Finance Committee Chair Jane Nelson and House Appropriations Committee Chair John C. Otto.
The Senate has already proposed a tax-cut bill that, at Patrick’s insistence, would include $2 billion in property tax cuts, and more than $2 billion in business tax cuts.
The House has passed its own bill, that would cut the state sales tax of 6.25 cents per dollar by three-tenths of a cent.
Gov. Abbott, has said he wants a significant cut in business taxes. He has paid lip service to a property tax cut, but hasn’t signaled a choice between cutting property taxes or the sales tax.
He has, however, said he expects tax cuts of at least $4 billion.
Hegar’s letter could be seen as raining on the tax-cut parade — saying “slow down” to Patrick’s pet property tax cut, and also to House Ways and Means Chair Dennis Bonnen’s sales tax cut.
Or, it may be a welcome life preserver. Hegar may have done Patrick and Bonnen — and the state — a real favor, by warning that some critical spending decisions are necessary before cutting taxes.
“(I)n addition to tax cuts, it is also important to . . . . bear in mind that the state currently enjoys the highest credit ratings from the major rating agencies, which translates into lower borrowing rates for state issued obligations and less costs to taxpayers,” Hegar wrote. Making sure those issues are addressed “is vital to the maintenance of that rating,” he said.
Hegar said consideration must be paid to assuring state pensions are made solvent, reducing ballooning long-term debt, fully funding the Teacher Retirement System and Texas Tomorrow Fund tuition guarantees, and deferred maintenance of government-owned facilities.
These long-term issues “must be addressed to ensure the state’s continued good financial health and condition,” Hegar wrote.
His cautionary letter gives Patrick, and also Straus and Abbott, a good excuse to soft-pedal their call for tax cuts until it’s sure the state’s top-notch credit ratings will continue.
Paying off some of the rapidly mounting debt, for example, will essentially be a tax cut in future tax bills, because the interest cost on burgeoning state debt will be lowered, rather than linger for decades.
This has been proposed repeatedly by Sen. Kevin Eltife, R-Tyler. He should know. As mayor of Tyler, he got citizens to temporarily raise taxes to pay off some debt, and after that was accomplished, then cut the taxes. It meant that taxpayers paid less in the long run.
Hegar didn’t mention the big decisions facing legislators and the governor about Medicaid expansion. But the federal government is on the verge of refusing to continue waivers to reimburse Texas and other states for indigent care outside Medicaid.
Abbott, like former Gov. Rick Perry, stubbornly resists Medicaid expansion — even though Republican governors of several other states have accepted it, saying it’s too good a deal to pass up.
Meanwhile, the state’s hospitals and others who have begged for the state to accept the federal help are greatly concerned about what could happen if Abbott doesn’t come around.
As for Hegar’s counsel to consider state spending needs before rushing to tax cuts, Straus said the House has already taken them into account.
Patrick insisted tax cuts are essential.
“We have the money to lower taxes and address the needs of a growing state,” he said. “We must do both.”
Lawmakers might consider this:
Since the only bill the Legislature really has to pass is the appropriations bill, and since the regular legislative session ends June 1, and since there’s apparently enough money that a tax bill isn’t necessary to make ends meet, how about lawmakers go ahead and make the spending decisions — including taking care of the potential shortfalls that Hegar points out?
And then hammer out the tax cuts separately, in a special session if necessary — if indeed there’s any money left.