[beneitpedro]

More on Perry's budgetary quagmire: http://www.tnr.com/node/90370


While Texas remains “open for business”—the slogan of his successful re-election campaign in 2010—the state’s Legislature is in the process of a going-out-of-business sale. The Texas budget for the next two years is a mess of accounting tricks and gutted programs, thanks to an unprecedented budget shortfall. The state’s business tax has not only been unpopular, it also doesn’t generate nearly enough revenue. Operating at a structural deficit, the state has even begun to attack funding in the once-hallowed ground of education. And while Perry has spent a good bit of June on his non-campaign-campaign, state lawmakers from both parties are fighting tooth-and-nail to legislate around his dictums.


Although he campaigned in 2010 on the premise that, as he told the Associated Press, “Texas is better off than practically any state in the country,” Perry, along with the rest of the state, soon discovered that Texas’s budget gap—$27 billion short of what it would need to maintain its already lean services in the next biennium—was among the worst in the nation. Luckily, Texas did have a rainy day fund—over $9 billion saved up for “economic stabilization.” Some lawmakers, including many Republicans in the state Senate, advocated using the fund to prevent or at least soften cuts to education and health care. But Perry, who had turned “preserving the rainy day fund” into an applause line, stood firm in refusing to use it to plug holes in the budget for 2012-13. As a result, the budget cuts were draconian—initial proposals cut almost 20 percent from public schools and proposed 30 percent cuts to Medicaid providers. According to estimates from the nonpartisan state Legislative Budget Board, the initial proposal would have cost the state over 300,000 future jobs.

Of course, many lawmakers didn’t want to use the rainy day fund in the first place, but that’s because they know a dirty little secret: Even after this two year budget period, the state’s fiscal woes are far from over. The Lone Star State has a standing $10 billion shortfall every two-year budget cycle, thanks to a faulty tax system pushed by Perry that fails to balance the budget. Although the governor normally stays away from the state Legislature—sightings in either chamber are rare and exciting—Perry engineered a new business tax in 2006 to replace a prior one riddled with loopholes. Ostensibly a good idea, his new tax nonetheless suffered from the simple fact that it didn’t bring in enough revenue. Furthermore, it turned out to be incredibly complex, leaving many business owners scratching their heads. Those who figured it out, meanwhile, realized that, because the new tax was levied on gross margins as opposed to profits, companies could be losing money and still find themselves on the hook.