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Lots of Kids

The Big Picture Houston Conference on Children June 15, 2005 F. Scott McCown, Executive Director Dick Lavine, Senior Fiscal Analyst Eva DeLuna Castro, Senior Budget Analyst. Lots of Kids . Second largest child population, totaling over 6.1 million under the age of 18

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Lots of Kids

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  1. The Big PictureHouston Conference on ChildrenJune 15, 2005F. Scott McCown, Executive DirectorDick Lavine, Senior Fiscal AnalystEva DeLuna Castro, Senior Budget Analyst

  2. Lots of Kids • Second largest child population, totaling over 6.1 million under the age of 18 • Largest growth in child population between 2000-2003 • 350,000 additional children • 183,000 more than California • By 2040, school enrollment projected to double

  3. Our Changing Demographics

  4. Great Need for Public Services Source: U.S. Bureau of the Census, March CPS and American Community Survey

  5. What State Government Pays For Source: U.S. Bureau of the Census, StateGovernment Finances series. Data for 2002 for Texas, total expenditures (including trust) of $70.3 billion.

  6. What Local Government Pays For Source: U.S. Bureau of the Census, Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $77.1 billion.

  7. The “Balancing” of the 2004-05 State Budget Cuts to 2003 Budget: $1.4 billion Cost shifting: $1.0 billion “Smoke and mirrors”: $1.2 billion Rainy Day Fund: $1.3 billion Federal Fiscal Relief: $1.4 billion Revenue Measures: $1.8 billion Cuts to 2004-05 Budget: $7.5 billion Estimated General Revenue shortfall of $15.6 billion for 2004-05

  8. Comparing 2004-05 to 2006-07 • Final 2006-07 budget: $139 billion in All Funds • This is 10% more than in 2004-05, less than expected growth in population and inflation • Nationally, state spending per resident has been about 50% higher than Texas state spending, and this budget will leave Texas near the bottom in spending per resident • As a percentage of the economy, since 1991, state spending has been roughly 7%, and this budget will be about the same

  9. Public Education Spending • 2003-04 Texas spent $7,335 per student • Texas ranked 34th among the states • Average state spending was $8,208 about 12% higher than Texas • Costs of living adjustments are faulty • Austin: 106.1% of U.S. Average • Dallas: 98.5% of U.S. Average • Houston: 96.1% of U.S. Average

  10. School Funding in Next State Budget

  11. Price Tags • Biennial cost of public school enrollment growth = At least $1.5 billion • Biennial cost of 3% inflation for public schools = At least $2.4 billion • “Ending” Robin Hood = At least $2.3 billion • “Buying down” local school property taxes by 10 cents per $100 taxable value = At least $2.2 billion • Biennial cost of one candy bar per year per child is $4.3 million

  12. From a Taxpayer’s Point of View Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash Report.

  13. From the State’s Point of View: All Revenue

  14. From the State’s Point of View: Taxes Only

  15. Our Tax Base is Inadequate

  16. Indicators of Ability to Pay Source: CPPP, using data from Bureau of Economic Analysis and the Census Bureau.

  17. Households with the Lowest Income Pay the Highest Percentage in State and Local Taxes

  18. Not Taxing Where the Money Is

  19. Revenue Options • Cigarette tax: $1/pack increase raises $1.7 billion biennially • Video Lottery Terminals: $1.1 billion biennially. “Crack cocaine” of gambling • Revised Franchise Tax (Business Activity Tax): Pre-tax net income, add back compensation minus first $30,000 per job times 1.95% • Sales tax rate increase — but this is extremely regressive, and TX already has one of the highest rates • Sales tax base expansion (to services not covered now)

  20. If We Replaced Current School Property Taxes with Sales Taxes 22

  21. House Proposed Tax Change(H.B. 3) Source: CPPP Policy Page 232, Tax Equity Note Confirms that Most Texas Families Would Pay More Under HB 3, the “Tax Relief Bill”, March 2005.

  22. Special Session? School Finance • Fund me, not you, by ending equity • You pay, not me, through regressive taxes Cap local spending growth • Through appraisal caps • Through revenue growth caps

  23. The Texas Constitution Article 8 - TAXATION AND REVENUE Section 24 - PERSONAL INCOME TAX; DEDICATION OF PROCEEDS (a) A general law enacted by the legislature that imposes a tax on the net incomes of natural persons . . . must provide that the portion of the law imposing the tax not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of imposing the tax. (b) A general law enacted by the legislature that increases the rate of the tax, or changes the tax, in a manner that results in an increase in the combined income tax liability of all persons subject to the tax may not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of increasing the income tax. (f) In the first year in which a tax described by Subsection (a) is imposed and during the first year of any increase in the tax that is subject to Subsection (b) of this section, not less than two-thirds of all net revenues remaining after payment of all refunds allowed by law and expenses of collection from the tax shall be used to reduce the rate of ad valorem maintenance and operation taxes levied for the support of primary and secondary public education. In subsequent years, not less than two-thirds of all net revenues from the tax shall be used to continue such ad valorem tax relief.

  24. TEXAS CONSTITUTION (Cont’d.) (g) The net revenues remaining after the dedication of money from the tax under Subsection (f) of this section shall be used for support of education, subject to legislative appropriation, allocation, and direction. (h) The maximum rate at which a school district may impose ad valorem maintenance and operation taxes is reduced by an amount equal to one cent per $100 valuation for each one cent per $100 valuation that the school district's ad valorem maintenance and operation tax is reduced by the minimum amount of money dedicated under Subsection (f) of this section, provided that a school district may subsequently increase the maximum ad valorem maintenance and operation tax rate if the increased maximum rate is approved by a majority of the voters of the school district voting at an election called and held for that purpose. The legislature by general law shall provide for the tax relief that is required by Subsection (f) and this subsection. (Added Nov. 2, 1993.)

  25. How Would An Income Tax Work?

  26. A State Income Tax, With Property Tax Reductions, Would Benefit Most Texans

  27. Texas: One and Indivisible

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