Wednesday, May 12, 2010

That's Billion with a B....

Mayor Parker unveils her new budget, one that's notably less ambitious than those submitted by the two previous administrations.

It's probably safe to call this the "hold your breath" budget since it forestalls a lot of 'nice to have' projects in the hopes that the economic turn-around is going to happen sooner rather than later. There's a lot of faith put in that fact, a fact that may not come to fruition given recent events.

The first cause for concern is the oil spill currently growing in the Gulf. Depending on the scope of the disaster and how the current federal administration reacts to it, job loss in the energy sector could severely weaken Houston's tax structure. Add to that a Senate climate change bill that's been written without a nod to reality and you have two potential major down thrusts on Houston's economy.

Then there's the regulation of the health insurance industry, the long-term effects of which we don't know. While it's true that "30 million" Americans are going to now be required to purchase insurance, it's not yet clear that the payment system for medical treatment providers is going to be in the sustainable range. For a City whose economy is linked to the health of the health-care industry.....

Then there's the pension short-fall, whose negative effects are being stressed by Bill King. At some point the City is going to have to address the issue that has been, to this point, pushed back to other administrations, by previous Mayors.

All of that still doesn't take the following into account: A lot of the 'plugs' for revenue short-falls in this budget have yet to materialize. There are rumors of departmental cuts, but nothing on paper. There are also potential land and real property sales that have not materialized, or could close at lower amounts than City appraisals.

Given all of the above what Houston is seeing is a realistic budget written in times of economic stress. It's also the first symptoms of Houston's coming hangover from the drinking binge of recent years.

Three rules to keep in mind:

1. You reap what you sow.
2. You reap after you sow.
3. You reap more than you sow.

For the last 20/odd years Houston has been sowing fiscal irresponsibility. If the economy doesn't turn around soon the price for that will have to be paid through sizable tax increases on a potentially shrinking taxable base. Granted, that's a worst-case scenario, but not an unrealistic one.

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