A Tale of Two Deficits Testimony Before the House Select Committee on Fiscal Stability August 23, 2010 Dick Lavine The Recession Reduced Sales Tax Revenue Fiscal 2008 Fiscal 2009 Fiscal 2010 Sales Tax Revenue Is Climbing Out of a Hole Change from same month, prior year Were Still In the Hole Created in 2006 In billion $ /06 Fiscal Note 11/09 Cash Report 5/06 Fiscal Note 11/09 Certification Franchise tax Tobacco tax Used car, interest TOTAL REVENUE Cost of property tax cut SHORTFALL -$5.9-$9.3-$5.8-$9.5 One-Time Money Balanced the Budget Current Budget Budget General Revenue$75.0 billion ARRA Used for GR$6.4 billion$0 Cash on hand$2.6 billion$0 Property Tax Relief Fund carryover $3.0 billion$0 Permanent School Fund$0$1.2 billion TOTAL GR BUDGET$87.0 billion$76.2 billion GAP$10.8 billion Funding a Balanced Approach: Easy Money Potential Revenue for Economic growth with no change in revenue system $800 million for each 1% growth Accounting adjustments Payment delays, etc $2.0 billion Funding a Balanced Approach: Spend the Rainy Day Fund Potential Revenue for Beginning balance$8.2 billion Growth during $1.0 billion Total Rainy Day Fund Available $9.2 billion When Can the Rainy Day Fund Be Spent? If GR forecast for the rest of a biennium is less than the GR appropriated, RDF can be used to cover the shortfall vote of 3/5 of members present (up to 90 in House; 19 in Senate) RDF can be used at any time and for any purpose 2/3 of members present (up to 100 in House; 21 in Senate) Funding a Balanced Approach Long-Term Solutions Eliminate exemptions Raise existing taxes New taxes Structural changes Other Taxes Had to Replace Falling Oil & Gas Revenue Federal Funds Increased As a Source of State Revenue Use of This Presentation The Center for Public Policy Priorities encourages you to reproduce and distribute these slides, which were developed for use in making public presentations. If you reproduce these slides, please give appropriate credit to CPPP. The data presented here may become outdated. For the most recent information or to sign up for our freeUpdates, visit CPPP Center for Public Policy Priorities 900 Lydia Street Austin, TX P 512/ F 512/