Thursday, May 13, 2010

Diversions continue cheating and misinforming taxpayers

By Faith Chatham - DFWRC - May 13, 2010
DFWRCC consistently opposes diversions from dedicated funds and refusal of the Legislature to appropriate of full amount dedicated to specific sectors of the state budget when there are appropriate needs for such services. Slush funds do not benefit the citizens or the Governor to veto scuh appropriations.

Some examples of costs to the citizens from such diversions include:
- Toll Roads costing citizens more to travel per mile than on non-tolled roads while part of the premises for "justification" of financing by tolls is based on lack of funds. Transportation dollars have been spent on advertising, lobbying, travel for promotion of other departments, and transfers into the General Fund in years when the General Fund showed a surplus (violating the balanced budget laws of the state).

- Lack of funding for services by departments and non-profit organizations participating in the vanity license plate program. Organizations ranging from animal spay and neutering to state parks and children's groups such as the Boy Scouts were hindered in their mission by the refusal of the state to appropriate and release funds to them collected by the state through the vanity license plate program where individuals elected to pay additional dollars to the state in behalf of those departments or non-profit organizations. During the Rick Perry Administration this practice, in our opinion, has misled the public and defrauded citizens of dollars they were led to believe they were contributing to specific purposes. If private citizens conducted business in the same manner, they would be subject to arrest for fraud. The Legislature has acted to end some of these diversions but corrective action does not erase the dishonest actions of the Governor and many in the Legislature.

- The State Park budget has been a political field of misrepresentation, misappropriation and under-appropriation while maintenance and services suffered.

- During a period when the number of oil and gas production sites, storage sites and pipeline construction sites and miles of pipeline to be inspected and enforced by the Railroad Commission and TCEQ increased by 300% the number of inspectors and budget for staffing has consistently been reduced for the past decade. Currently fines and fees paid by the industry to these agencies goes into the General Fund instead of being paid to adequately fund field inspections and air quality and water quality testing/monitoring by these agencies. It is dishonest to show a "surplus" in the General Fund when funds paid for specific purposes are not spent to adequately protect the citizens of Texas.

- Employment Insurance Fund:

Below is a post from Bill White about how Rick Perry diverted payroll taxes into his Texas Enterprise Fund and failed to plan ahead for the Unemployment Insurance Trust Fund. His actions resulted in a massive tax increase on small businesses, the engine of job growth in our state.

Download this white paper, How do payroll taxes and the Texas Enterprise Fund work?, to learn more about payroll taxes, Rick Perry's slush fund, and what can be done about the problem

Job growth in the private sector, especially in small businesses, is the key to economic recovery. Yet this year Texas nearly doubled the payroll taxes on our businesses. This massive tax increase on Texas jobs was caused in part by the diversion of $161.5 million which Gov. Perry used to subsidize companies he selected and publicized at numerous press conferences.

A sharp increase in payroll taxes hurts job growth.

Employers know better how to manage job growth than a politician does. You can see that from the track record of the Enterprise Fund. Failed subprime lenders Countrywide and Washington Mutual received $35 million. Another $35 million was paid to struggling biotech firm Lexicon Genetics, so it could give mouse stem cells to a non-profit affiliated with Texas A&M. Rick Perry announced this project would create 5,000 new jobs. Instead of adding jobs, Lexicon laid off much of its workforce, and lost more than $500 million.

Before the Perry Administration, all payroll taxes were used to fund the Unemployment Insurance Trust Fund and workforce development activities. The Trust Fund is now empty. More than $52 million was diverted from payroll taxes last year alone, when demands on the Trust Fund were rising. Almost every month, these tax dollars are given to various favored companies, including some associated with Perry's campaign contributors. Meanwhile, Perry will have borrowed more than $2 billion from the federal government to plug its holes, without a plan for paying it back.

Three simple reforms can help avoid further hikes in state payroll taxes, establish public accountability and avoid this type of tax increase during a recession in the future.

Restore diverted funds. The Enterprise Fund should pay into the Unemployment Insurance Trust Fund the full $161.5 million diverted from Texas' payroll taxes. The governor previously vetoed a bipartisan bill to limit these diversions, but there is no excuse for keeping this money in the TEF now that the Unemployment Fund is broke. When these funds are returned to the Trust Fund, all employers will benefit from the reduced tax burden and the employers--not a politician--can decide how best to allocate payroll dollars to strengthen business and expand employment.

Audit the Enterprise Fund. There should be an independent audit of tax dollars used for subsidies. The auditors should report on: (1) whether the Governor conducted sufficient and independent analysis of each application before awarding a subsidy; (2) whether each subsidy recipient fulfilled every promise made; (3) whether these dollars were necessary to accomplish the intended purposes; (4) whether there was any political influence used or lobbyist paid to influence these decisions; and (5) whether the subsidized firms competed with other Texas businesses not receiving a subsidy.

Disclose the plan for repaying borrowed federal stimulus funds. Gov. Perry declined federal grants to strengthen the Unemployment Insurance Trust Fund, but has accepted federal loans under the stimulus legislation. No family or business or governmental entity should borrow money without a plan to repay, but in April the chair of the Texas Workforce Commission did not have a plan in place on how and when to repay these amounts. A repayment plan should be made public immediately.

In prior years Gov. Perry took credit for the beneficial effects of modest decreases in employer payroll taxes. Because of lack of planning during economic growth and the diversion of payroll taxes, payroll taxes have almost doubled for many Texas businesses. Obviously this hurts employment, at a time when the number of Texans unemployed is near a record level. Texas must put all payroll taxes into the Trust Fund to reduce further tax increases, the Legislature must have an independent audit of the use of TEF funds, and taxpayers should not have to wait until after an election to find out how the massive borrowings will be repaid.

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