We're not alone, of course. Tax revenues are down in 44 states. But Texas was cushioned from the blow this year thanks to high oil prices and federal stimulus money, neither of which can be counted on going forward.
The last five months are the worst string of sales tax months since the tax was enacted in 1961 and are much worse than during the 2002-03 recession when collections fell by “only” 1.1 percent in 2002 and 1.7 percent in 2003.
State revenue forecasters have noticed national conditions, and the state’s current budget assumptions were built on projections of weak sales tax growth in 2009 and 2010. Weak growth, but still growth. Unfortunately, the tax declined by 2.7 percent in fiscal 2009 (the state fiscal year ends in August), and it is down by better than 12 percent so far this year. Results like those are guaranteed to produce heartburn aplenty for revenue forecasters.
The rest of the tax system isn’t providing much reason for comfort. Motor vehicle sales tax collections were down 22.5 percent in October. Oil and natural gas taxes have been down all year, although state forecasters saw that one coming after the price spike in 2008. Hotel taxes are sagging. Motor fuel taxes are down. The newly reformed state business franchise tax has underperformed projections from the start. Only alcohol and cigarette taxes are up right now. Given the economy, it figures.
The revenue situation could pose real problems for budget writers in 2011 if there isn’t some improvement soon. The state will already be without the federal stimulus dollars that filled a lot of holes in the current budget. Deteriorating revenue conditions could add to what already promises to be a tough budget year.
One of many big concerns this raises in the criminal justice arena is that budget cuts might spur lawmakers to scale back recent expansions of community corrections infrastructure, cutting treatment funding and non-prison programming in response to shrinking budgets. However, those programs have been such a great success (and will only fully roll out next spring) that it would be a mistake to shut them down just as taxpayers begin to get a return on their investment. (Funding these efforts, somewhat ironically, is part of Sen. Ogden's legacy as Finance Committee Chairman.)
Instead, given current trends, perhaps it's time to ask if the state could save money by closing one or more of the 112 prison units it currently operates? Just this summer, the Texas Department of Criminal Justice (TDCJ) was able to eliminate contracts for 1,900 beds in four county jails because population loads had declined and they were no longer needed. It doesn't seem unreasonable to suggest that the state might achieve a similar reduction in the coming biennium, assuming all the new diversion tools available are fully utilized at the local level.
Though staffing shortages have improved, TDCJ is still more than 1,000 guards short systemwide, so such cuts could likely be achieved without eliminating existing jobs, and with the added benefit of improving staffing and safety in other units.
In past meetings of the Senate Criminal Justice Committee, Chairman John Whitmire has made reference to a list in his possession detailing cost-per-prisoner at each TDCJ unit, a number which apparently varies quite widely, especially on the high end. Given the looming 2011 budget gap - and the likelihood that some will propose cutting diversion programming when money gets tight - I hope during the interim that legislators and the agency seriously consider how many fewer inmates they'd need to close the top one or two most expensive units on the list.
In lean budget times, state leaders must set priorities, and it's important to know when it's time to walk away from a bad deal. From the taxpayer's perspsective, it's a bigger priority to build on recent diversion successes than to prop up TDCJ's most antiquated, expensive units.
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