State budget surplus? Depends on who you ask.

TSCPA friend Harvey Kronberg is noting in his outstanding Quorum Report that Speaker Craddick, Comptroller Combs and other players appear to have different interpretations of the state's budget surplus amount.

COMPTROLLER COMBS DOWNSIZES SPEAKER'S BUDGET SURPLUS ESTIMATE TO $10.7 BILLION

The Speaker had estimated a $15 billion surplus going into next session; Comptroller says today, "I think that there was a misread of a number."

Comptroller Susan Combs was asked today at the close of her presser on her new comprehensive energy report on the validity of a $15 billion budget surplus estimate floated recently by Speaker Tom Craddick.

Her answer: The Speaker overshot the estimate by a little more than $4 billion.

"We've talked with his staff and I think there was a misread of a number," she said. "I believe if you count in the Rainy Day Fund, I believe we're at about $10.7 (billion). And I believe that his office would agree with that number."

Craddick's office explains the numbers way: At the end of last session, the Legislature set aside $3 billion for future property tax cuts. At the time, lawmakers noted it was with the understanding the revised franchise tax might not be enough to cover the anticipated $13 billion cost of the 50-cent tax cut over the next biennium.

Add to that an estimated $4 billion that was left in the state's rainy day fund. That's $7 billion. Good economic numbers and solid sales tax collections have pushed those totals to a collective $10.7 billion. Those numbers were certified by Combs late last year.

Continued strong economic numbers -- especially given the fact the sales tax is exceeding its 3 percent growth rate -- could push the final tally toward $15 billion. Given the fact Texas often lags one to two years behind recession trends in other parts of the country, it might be assumed the current economic growth would be solid going into the next session, said Craddick's office.

Misread or no misread, the total likely will be between those two numbers, given that the initial assumptions were conservative.

But let's look at what the property tax cuts are going to take from that $10.7 billion -- or $15 billion -- figure. Talking to experts from both sides of the equation -- the school finance experts at Moak Casey and the tax analysts at the Texas Taxpayers and Research Association, the property tax cut is expected to take at least a $6 billion bite out of that excess revenue going into next session.

First, you look at the anticipated franchise tax collection numbers out of Combs' office. Initially, collections were pegged at $6.7 billion a year, and then they were scaled back to $6.1 billion. That may still be somewhat conservative. Combs' office said a good estimate of franchise tax revenues -- with appeals and such -- may not be available until August.

Remember that we have to subtract the old franchise tax totals from the new franchise tax totals. The old franchise tax was $2.8 billion a year. So that means that the state actually has an estimated annual $3.2 billion.

Let's add the cigarette tax to that. Current estimates are that the cigarette tax -- pegged early at $1 billion per year -- should be between $700 and $900 million in revenue a year.

So if you look at a price tag of the tax cut at $7.5 billion a year -- and revenue of about $4.1 billion annually -- then you're going to have to pull an additional $3.4 billion out of general revenue.

If the surplus going into the session is $15 billion -- as Craddick has suggested -- it's actually $8.2 billion on the table. If we go conservative and use Combs' $10.7 billion, then we're looking at $3.9 billion.

The caveat here is that the more property values go up, the more that 50-cent tax cut is going to cost. That's probably the only reason to hope for a soft housing market going into the upcoming session.