Truth Test: Revenue Shortfalls and Public Opinion on How to Tackle Them

Major statewide officeholders like Gov. Rick Perry made a vigorous effort during election season to keep a lid on discussion of the deep and dangerous state budget deficit awaiting the next legislature. To a large extent, they succeeded. For instance, in one recent pre-election survey of public opinion only 3 percent of respondents listed the state budget shortfall as an issue of concern. Perry and company did a skillful job of steering the election debate toward problems both real and perceived on the national rather than state level.

Yet the truth will out, especially now that Election Day is receding in the rear-view mirror. Yesterday, just a day after the election, a state task force issued a report confirming that the state business tax enacted in 2006 to make up for school property-tax cuts is not delivering the promised revenue. When the tax swap was engineered four years ago, lawmakers estimated that the business tax would yield $6.4 billion in fiscal year 2010, the task force said. In reality, it produced only $3.9 billion-a shortfall of $2.5 billion. By some estimates, the overall amount of the ongoing, structural deficit due to the badly designed 2006 tax plan is headed toward $4.5 billion a year.

In fact, while business-tax receipts have fallen short, we also have learned from recent reports that local school property-tax collections also are declining because real-estate values-especially for commercial properties-have dropped sharply. The result, under our school-finance system, is that the state must contribute more to help school districts reach the funding levels targeted under state law. The bottom line, according to Texas Education Agency officials testifying at a recent House tax hearing: School districts will need “somewhere between $2 billion and $3 billion more” in state aid than TEA previously requested for fiscal 2012-2013.

In the face of such dismal news, a consortium of the state’s major daily newspapers published a poll last weekend asking prospective voters how the state should respond to the looming budget shortfall. The front page of the Austin American-Statesman proclaimed that “likely voters overwhelmingly favored cutting spending as opposed to increasing revenue, a sentiment that falls in line with Perry’s campaign message.”

But that’s not what the newspapers’ poll really showed at all. In fact, respondents were not asked about cutting spending “as opposed to” increasing revenue. The setup for the question specifically asserted that both cutting spending and increasing revenue may be necessary to address the shortfall, and only then were respondents asked which option they most preferred. Even with the question loaded in that fashion, only 50 percent said they would prefer to cut spending. While 19 percent said they would prefer to increase revenue, another 20 percent actually volunteered that both should be done equally. Some 10 percent said they weren’t sure, and 1 percent refused to answer. So five out of ten “likely voters,” after being told that both cuts and increases could well be needed, said they would prefer cuts; four out of ten said they would prefer revenue increases, or both revenue increases and cuts equally; and one out of ten couldn’t or wouldn’t decide. How is that an overwhelming preference for cuts?

We also would remind lawmakers of what another recent poll of Texas public opinion found when the questions focused specifically on spending for public education. Fully 88 percent said that Texas public schools need more money from the state, and 68 percent said they are willing to pay higher taxes in order to deliver more funding for public schools. What’s more 82 percent said they favor higher taxes for increased teacher salaries, versus only 14 percent opposed. And 71 percent favor paying higher taxes to lower class size, while only 24 percent opposed that option. We’d call that pretty overwhelming support for increasing revenue to provide for public education.