Beginning with this issue of the Legislative Update, League staff will calculate on a recurring basis the net yearly cash flow between Texas cities and the state. This cash flow index will be presented as a positive number if cities receive net income from the state. The index will be presented as a negative number if cities are net donors of money to the state.

Currently, the cash flow index stands at a negative $270,700,000 or -$10.78 per capita. In other words, cities are net donors of funds to the state to the tune of over a quarter of a billion dollars per year.  That is unusual:  most states are net donors of money to their cities, not the other way around. Here’s a breakdown of the components of the index that are currently known to the League:

Local parks grants:
Mixed beverage tax:
Library grants:
Auto burglary grants:
Homeless grants:
Sales tax fee profit:
TCEQ fees:
State traffic ticket tax:
TxDot Cash “Participation”:

Why begin to calculate this figure now?  There are at least two reasons. First, the proposed state budget, H.B. 1, would make sizeable cuts to what little funding Texas cities receive from the state, but would do nothing to decrease the flow of money from cities to the state. In fact, various court fee proposals would increase the flow of money from cities to the state. Combine this proposed increase with the proposed budget cuts, and the effect of the 2011 legislative session could be doubly bad for cities. 

Second, the League believes it will be useful to begin thinking of city/state relations in terms of one underlying dollar figure that captures the “big picture” of how we approach intergovernmental relations in Texas, and would make it easier to understand the effects of various legislation and proposals on that relationship.  

The bottom line is this:  money to and from Texas cities is essentially fungible.  If we “gain” $10 million in new homeless grants in a given session, but “lose” $50 million more in state traffic taxes during that same session, we were net losers overall.  

(Disclaimer:  these figures are TML’s best estimate of cash flows that are readily measurable.  The index will exclude cash flows that are impossible to accurately calculate. For example, cities donate an increasingly large amount of city-owned rights-of-way to TxDot as part of the cities’ “local participation.”  Because a dollar figure cannot easily be put on those donations, the index will not include those amounts.  The index will be adjusted as new cash flows are discovered.)

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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