253 Million Will Flow From Cities

To Fund 2014 State Budget

Many states provide funding to their cities to help cover the costs of city services.  In Texas, the situation is reversed:  the state takes hundreds of millions of dollars from Texas cities to fund the state budget.  (Some of the revenue cities send to the state is returned through a few grant programs and a share of the mixed beverage tax.)  Two years ago, League staff created the City/State Cash Flow Index to track the net loss or gain to cities.

This year’s index, looking forward to the state’s 2014 fiscal year that begins September 1, 2013, finds improvement from the previous year.  In the previous year, the Legislature had slashed some of the funding coming back to cities.  An improving economy has boosted state sales tax receipts and state revenue from the on-going oil and gas boom enabled the Legislature to restore some, but not all, of the funding cuts in the previous biennium.  Local parks grants, previously cut from $17 million per year to only $400,000, have been brought back up to $8 million.  The city portion of the mixed beverage tax, which was cut to $123 million, will rise to $153.5 million.

Overall, the new cash flow index shows a $253.6 million loss to cities, an improvement from $308 million following the 2011 legislative session.  On a per capita basis, the net amount flowing from cities to the state declined from -$11.90 per person to $-9.73.

Here’s a breakdown of the components of the index that are currently known to the League:

  • Local Park Grants:                  +$8,000,000 
  • Mixed Beverage Tax:              +$153,500,000 
  • Library Grants:                        +$14,000,000 
  • Auto burglary Grants:             +$14,900,000 
  • Sales Tax Fee profit:               -$62,000,000 
  • TCEQ fees:                             -$43,000,000 
  • State traffic ticket tax:            -$227,000,000 
  • TxDot Cash Participation:      -$112,000,000 

NET TOTAL:                        -$253.6 million

The following chart shows the numbers in graphical form:

 Reverse Intergovernmental Aid (City/State Cash Flow Index)

 

When state officials fuss and fume about local taxes or local debt, they should be reminded of the heavy burden they place on city taxpayers to fund state services.

 

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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