POLITICS JUNE 21, 2011
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Between speeches in Los Angeles, New York and New Orleans, Rick Perry is doing his best to keep people guessing if and when he’ll throw his (ten-gallon) hat into the GOP presidential primary. When the Texas governor appeared last Tuesday on “Your World with Neil Cavuto,” the conservative Fox News host was already gushing over the hundreds of thousands of new jobs created in Texas in the past two years. When Cavuto asked how Perry had lured Carl’s Jr. restaurants to Texas, the governor flashed a trademark smile. “They love the smell of freedom,” he explained.
Cavuto is hardly the only one enamored with the Perry story. Following his media blitz, few articles have cast a skeptic’s eye on the governor’s Texas record. “Texas Governor Calls for Halt of Economic Ruin” read one recent Bloomberg headline. The narrative is appealing: Small-town guy becomes Texas governor and makes (the economy) good—all by sticking to conservative principles. But 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.
In the face of Perry’s promise to veto any use of the rainy day fund, lawmakers turned to accounting tricks like deferred payments to soften the blows to state programs. Fees, too, on everything from getting help collecting child support to registering as a lobbyist, are going up all over the state, and almost nowhere does the budget account for normal growth in social services enrollment. The final budget short-funds Medicaid by almost $5 billion. Legislators had to return for a special session to hammer out the cuts to education, which will likely end up around $4 billion. It will mark the first time Texas has cut funding for public schools since 1949, when the state first took a prominent role in financing them. Even the Texas Association of Business, a conservative, pro-business coalition if ever there was one, has expressed concerns over some of the cuts to schools and early childhood education. “Our state runs the risk of falling short on our commitment to Texas school children and businesses that rely on a well-educated workforce,” the group proclaimed in one March press release.
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.
State legislators on both sides of the aisle have decried Perry’s ill-conceived fiscal planning. The chief Senate budget writer, Republican Steve Ogden, hasn’t been afraid to mince words about just how bad the business tax is. “None of us were elected to raise taxes on anybody,” he said the first day of the session. “But the margins tax is different. If we don’t fix the margins tax, local property taxes will definitely go up.” The regular legislative session came and went, however, without any real effort to fix the broken tax. The result is that the state is still operating with a structural deficit, and will very likely face more cuts the next time around.
Meanwhile, Perry continues to traverse the country, stirring up will-he-won’t-he excitement. As he told Cavuto, he may decide very late to join in the fun, keeping everyone on their toes a little longer. It also means less time for reporters to investigate the governor’s tenure in Texas. But if Neil Cavuto does find his way down to Austin, he might be a little surprised at the fiscal record of this pro-business, pro-growth governor.
Abby Rapoport covers politics and education for The Texas Observer.
21 comments
Perry's been around long enough that he's considered safe by the establishment within the GOP, but he was also shrewd enough to align himself with the Tea Party movement from the get-go. It's really that simple - any talk of "planning" or "budget cycles" is over-thinking in this case.
- whyamihere
June 21, 2011 at 12:56am
Why is everyone fauning over Rick Perry? 'Cause he's HANDSOME. In this world you don't actually have to know how to be an executive, you just have to look like one.
- AaronW
June 21, 2011 at 3:07am
How does Rick Perry create jobs in Texas? By turning the state into a third world country. The governor has used beggar thy neighbor policies, the costs of which mainly fall on the poor and working poor, to create economic development. In the meantime, Texas has oil. So, there is enough money to run the state's elite institutions like the University of Texas and Texas A and M. Finally, the state sucks off the Federal Tit by taking highway money and Medicaid payments and complaining about it every second of the time. Texico (there's a border but Texas actually blends into Mexico) also has the advantage of not having to pay for a national defense and for having economic stabilization policies like a sound currency to which it contributes little and, again, complains every second of the time. As a result, their low tax rate is really low only for rich people but not for the poor and workers and not for the rest of the United States. The state is run by a ruling elite that brooks no dissent and puts people in jail and executes people at an alarming rate. In other words, think rentier state. Think Saudi Arabia with a football team.
- poldpf
June 21, 2011 at 4:36am
Why is Texas cited as exemplary of low taxes and not exemplary of deficit spending to stimulate it's economy? And why aren't the people of Texas cutting spending to stimulate jobs?
- Nusholtz
June 21, 2011 at 10:00am
Coincidentally, there's a story I read today that Texas has 3 of the top 10 high schools in the country. In fact, Texas and Florida have 5 of the top 10. No state income tax, and very modest public unions. Other factoids.. * Since 2001, Texas has created more jobs than all other states combined. That is staggering. * Texas housing foreclosure rate: 1 in 1106. Nevada, 1 in 97. Cali: 1 in 240. US 1 in 593. Half the rate of the US. Not bad. * Texas unemployment is about 1% lower than the rest of the US So, yes, Texas has a shortfall. About the same size as California's shortfall. But which state is in a better position to cover it? What is funny is the liberal left looking at all the amazing ways the Texas economy has outpaced the other big economies in the US and then saying "Ah hah! Look! A problem!"
- seattleeng
June 21, 2011 at 11:31am
I'm a liberal, and don't think much of Perry, but this article isn't very balanced. California, Nevada, New Jersey, and Oregon all have worse budget shortfalls (as % of their GDP), and Texas's shortfall is comparable to that in Louisiana and Minnesota. It's bad, but not horrific. In addition, Texas (like most states) will actually balance the budget, and if anything, that gives Perry a nice talking point, since the federal government's not even close to doing that. Combine that with the record of the Texas economy, and Perry does have a nice record.
- polcereal
June 21, 2011 at 12:05pm
Texas also has the sixth highest poverty rate in the country, ranks last in number of high school diplomas (CA is 49 though, has much to do with large immigrant populations), 44th in education spending, "Texas is #49 in verbal SAT scores in the nation (493) and #46 in average math SAT scores (502)." TX should be happy with those 3 schools, but I don't know about the rest that probably aren't in affluent areas.
- Pnaut
June 21, 2011 at 12:10pm
The Iowa caucuses may be held sometime in January 2012, ensuring every hotel and motel room in Iowa is filled for a week or more. To be successful in the caucus , a candidate must have his or her hordes in Iowa placing lawn signs everywhere. A candidate with no lawn signs is not really a candidate.
- Doug12
June 21, 2011 at 12:10pm
California's appalling education shortfalls, financial and otherwise, are indeed impacted by our immigrant population but are not driven by that. The fundamental problems are legislative gridlock, fiscal irresponsibility on the Right, and educationist ideologues on the Left. Add to that 1978's notorious Proposition 13, which basically transferred public education from local control to Sacramento -- the immutable Law of Unforeseen Consequences at work. The article doesn't mention that Texas is a weak-governor state. Thus Texas's financial situation isn't entirely Perry's responsibility -- but neither are Texas's successes.
- polkovnik1
June 21, 2011 at 1:23pm
seattleeng -- Really? Did you give more than 2 seconds thought to your post? Texas is an oil state -- it's economy has been buoyed by the hike in oil prices. And, seriously, you are comparing the oil, agriculture, defense, finance industry rich, economy of high population Texas with the tourism and construction dependent economy of Nevada? Frankly, I'm surprised to hear, given the increase in oil and gas production in the state in the last two years, that Texas only enjoys an unemployment rate 1% below the national average.
- esmense
June 21, 2011 at 1:45pm
Up here in Minnesota, Pawlenty cleaned out every cookie jar and filched every nickel and dime hiding under the couch cushions--including massive use of accounting shifts and draining the state's budget reserve--and somehow he's viewed by some as a bastion of sound fiscal practices. What we are left with now is a state headed for shutdown. We just got there a year ahead of Texas because by the looks of it, that's where they'll be heading next budget cycle.
- Lundell
June 21, 2011 at 4:49pm
Despite the rah-rah's coming from Texas cheerleaders, not all is bright and rosy there. With regards to the construction industry, there are plenty of contractors fishing across borders to bid on projects here in Louisiana and other border states because things are or have dried up there. But with regards to schools, I don't see how having 3 in the top 10 for HS proves that Perry or his policies have anything to do with it. Texas schools benefit a lot from oil & gas subsidization, which means consistent financing and commiserate pay in a state that is a "right to work" state. And in those states, joining a teachers' union is not obligatory. And as far as I know, not too many school districts are financed by income tax but by real estate taxes. Looking at the US News & World Report ranking of schools...the states with the most highly ranked schools, Texas comes in at 14. The top 5 states? CT, MA, CA, NJ and NY. I guess those high taxes account for something. http://education.usnews.rankingsandreviews.com/education/high-schools/articles/2009/12/09/americas-best-high-schools-state-by-state-statistics
- singlspeed
June 21, 2011 at 5:28pm
Texas is a low tax, high fee, low service, I got mine and to hell with them that don't state. A commenter above is right--Texas has a governor state. The state constitution places, or implies the placement of, most of the political power in the hands of the legislature. The lieutenant governor and house speaker, as co-chairs of the powerful legislative committee that oversees the state government while the legislature is out of session (which is most of the time) actually wield more real influence than that governor. As far as I'm concerned, Perry is nothing more than Bush light. And remember what Molly Ivins said about him--all hat and no cattle. But I sincerely hope Perry announces for president, so he can be asked just why it is he thinks a state can secede from the Union--one hundred and fifty years after the end of the Civil War.
- arnnmann
June 22, 2011 at 1:47am
Correction, I meant to say "Texas is a weak governor state."
- arnnmann
June 22, 2011 at 1:48am
One has to wonder whether our friend seattleeng is a creationist. Mistaking outliers for data is a common problem you see in their literature. I'm sure there are some wonderful schools in Texas. I'm also sure that their performance their performance has little to nothing to do with Perry, the Texas state legislature, the state budget, teachers unions or anything else this article is talking about. Texas is the second largest economy in the US, I'd be surprised to not find some very, very nice schools in it. And while we're on the topic of schools, it's probably worth noting that Texas is a large enough market to demand "Lone Star Editions" of textbooks, i.e. versions that re-write or omit things that make some Texans uncomfortable. Make of that what you will. I can't imagine in means that Texas education in the aggregate is any better than most other states when indulging in revisionist fantasies is acceptable state policy. However liberals should be celebrating that Texas has an unemployment rate of 1% under the national average, as it is fantastic evidence of the usefulness in the government (specifically salary) spending to act as a counter-cyclical force (or automatic stabiliser) during a downturn. While Texas actually receives a little less back than it sends to Washington (although nowhere near actually productive states like union-stricken CA, IL, MA etc), its how that expenditure is disbursed that is important. An obvious one is cotton. Cotton needs the nice warm weather that Texas provides, but it also needs timely watering, which is provided by large scale government market interference (or dams as they're otherwise known). Beside the government infrastructure (if you ever see a typical cotton farm in Texas, one can only conclude that nothing is really mean to to grow in that place, especially not cotton), the whole industry is so heavily subsidized that we can economically grow cotton there, ship it to China to get made into a t-shirt and then ship it back to the US to sell for $10. Those cotton concerns would be in a considerably more precarious state were the feds to not trot up the cash for growers when prices don't meet their needs (rugged individuals that they are). Then we could look at the massive aerospace and defence installations in Texas. Some are private, but suckle heavily from the public teat, and others are straight military installations. While jobs aren't guaranteed in defence for life, the employment they provide tend to be considerably less cyclical than the real private sector. Always helps to have people earning money in your community/city/state who aren't thrown onto the unemployment line when the economy tanks. But that requires that the government keep on spending. This is of course excluding the rather obvious benefit that Texas (and the US as a whole) derives from being an oil state. Funny how oil revenues always come up in conversations about Norway, but never Texas.
- Nari224
June 22, 2011 at 12:05pm
How can a governor who voluntarily(?) raised the possibility of secession be considered as a candidate for any national office? Doesn't compute.
- awm34x
June 22, 2011 at 10:06pm
"* Texas housing foreclosure rate: 1 in 1106. Nevada, 1 in 97. Cali: 1 in 240. US 1 in 593. Half the rate of the US. Not bad." Simple reason for that: it is nearly impossible to foreclose on a house in Texas since homestead laws make it nearly impossible. I lived in Tejas for 7 years, part of my sting there was during the late 80s real estate bust. Virtually no one's home could be repossessed due to the homestead laws even though the mortgage was in default. So what is so special about foreclosure rates being low when state laws forbid forcing you out of your home? I had co-workers with mortgages in default but they could not be kicked out of the house. As for the governor's power, it was weak when I was there. I don't suspect it got stronger over the years (I left in 1993). The governor's main tool was the bully pulpit. The legislature controlled everything and they were owned by insurance/banking/real estate. It was a horrible place for anyone without means; if you were down on your luck, so be it. Thankfully Austin (where I lived) wasn't as miserable as other parts of the state.
- tmmats
June 22, 2011 at 11:14pm
Oops: I meant "stint", not "sting". Gotta proofread more carefully.
- tmmats
June 22, 2011 at 11:15pm
This all reminds me of "Road Runner" cartoons. Who is the coyote and who is the bird? Do Texas and Perry obey the laws of "cartoon physics?" Take a look at the Wikipedia entry on Road Runner to get an overdose of irony poisoning. I would say that Perry right now is up in the air and has not looked down yet...
- skahn
June 23, 2011 at 7:38pm
Liberals hate Texas because Texas produces real jobs. This is bizarre, since liberal social programs depend on revenue produced by taxes coming from productive work in the private sector. Cuba, yes Cuba, has laid off tens of thousands of state workers. American "liberals" - my eyes roll at the very phrase - are the last economic statists outside of North Korea. Belarus, Zimbabwe and Venezuela. Even the Europeans have for the most part voted the socialists out of office. Can you spell Spain, Portugal, Ireland, Italy and Greece? Or, addressing the readers of The Nation, can you spell Cuba and Venezuela? I suspect not. Human stupidity is infinite, especially among so-called intellectuals.
- bulbman1066
June 27, 2011 at 12:38am
Liberals keep saying that the American masses would all lean left if it they weren't brainwashed by the media. The trouble with that theory is that the American media, with the honorable exceptions of Fox and the Wall Street Journal, lean to the left. The fact is that normal Americans have too much self-respect to be willing to be willing to have their lives directed by the peecee police, who are basically ethnic studies majors too dumb to succeed in the private sector.
- bulbman1066
June 27, 2011 at 1:03am