Update From the State

Happy Independence Day! With the primaries completed, things are starting to return to normal in Austin. While we are still waiting for the runoffs in several congressional races, state house races, and one state senate race, legislators and legislators-elect have started discussions about policy issues for the next legislative session. Justice Court Rules: Evictions The 2011 legislative session came with an extremely challenging task for lawmakers: how to solve a $15 - $27 billion budget shortfall. The legislature chose to embrace cost-cutting measures instead of revenue enhancers to close the shortfall. As part of that task, the legislature streamlined some courts and combined the justice courts and the small claims courts. Prior to the combination, justice courts were run by one set of rules, and small claims courts were run by a separate set of rules. After the consolidation, the Texas Supreme Court was tasked with developing a single set of rules for the combined courts. This was an issue for Texas BOMA. Eviction cases are heard in justice courts. If the rule changes slowed down the eviction process, or made it more expensive, they could result in a revenue hit for commercial landlords. In mid-June, the Supreme Court Advisory Committee (“SCAC”) met to consider proposed rule changes. Texas BOMA joined with the Texas Apartment Association and the Texas Association of REALTORS and submitted comments to the Committee on the rules. At the hearing, several interested parties testi fied about the proposed rules. The Committee made several modifications to the proposed rules which addressed our issues, and then recommend the adoption of the modifications. The recommended rules from the SCAC now go to the full Texas Supreme Court. The Supreme Court has the authority to follow the SCAC’s recommendations, or do anything it wants on its own. We will continue to monitor this issue. State Issues and Policy Matters A few weeks ago, some important was released: tax collections are coming in well above the state’s projections. Each legislative session, the Texas legislature is required to pass a balanced budget. The budget, which runs for two years, must not spend more money than the state is estimated to take in. That number, the revenue estimate, comes from the comptroller, who is constitutionally required to estimate the amount of revenue the state will generate in the coming biennium—a forecast that requires estimating economic activity up to two and a half years into the future. The Comptroller estimated tax revenue growth statewide for the current biennium. However, the economic recovery, combined with increased oil & gas production and high oil prices, have increased the tax revenue growth substantially. For example, comparing the first 9 months of fiscal 2012 to the first 9 months of fiscal 2011 has oil severance taxes up 49.5% and natural gas severance taxes up 53%--which amounts to nearly a billion dollars more in revenue compared to fiscal 2011. The Comptroller’s official estimate had natural gas production taxes going up 16.6% and oil production taxes going down 10%. Similarly, sales taxes have grown 11.9%, compared with an estimated growth of 5.3%. Overall, for the first 9 months of the biennium, all tax revenue collections are up 13.6% (about $4 billion dollars), compared with the revenue estimate of 3.8% (which would have been about 1.1 billion dollars). What does this mean? The short answer is the state’s economy is rebounding from the recession, and there will likely be more money available when the legislature reconvenes in 2013. This may take some of the pressure off lawmakers to raise additional revenue. While this is decidedly positive news, we must caution that these are early numbers—it is possible for the state’s growth to slow down, though the numbers do appear strong. The Elections While the primary elections are done and gone, there are a few runoffs around the state. The one you will probably hear the most about is the runoff for the Republican nomination to replace retiring U.S. Senator Kay Bailey Hutchison, with Lt. Governor David Dewhurst facing off against former Texas solicitor general Ted Cruz. Governor Dewhurst barely missed obtaining a majority of the vote, and will be headed to a runoff with Mr. Cruz. On the Democratic side, former State Representative Paul Sadler will face Grady Yarbrough in a run-off for the nomination. In the state senate, Senator Jeff Wentworth (R-San Antonio) will face emergency room physician Dr. Donna Campbell. There are also several other runoffs for the state house, and a few for the U.S. Congress. The runoff election will be held on Tuesday, July 31. The general election is Tuesday, November 6. We will continue to monitor these issues as they develop, and will keep you informed. #tb