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If you haven’t been following politics and government news at the state level in America, you may not know that there are budget troubles from sea to shining sea. California’s budget deficit, all $26 billion or so, gets a lot of coverage, as do problems in Wisconsin and Illinois. But the economic downturn has hurt the budgets of most states, and Texas — which managed to keep a pretense, at least, of health for a while — is suddenly the focus of much attention.

While Texas was still creating jobs in recent years, other factors — a drop in consumer spending and some spending decisions (including cuts to taxes) now has the state’s budget out of whack.

And that means the $25 million in state money to support the construction of the Circuit of the Americas might get whacked, too. From my reading of the news (keep in mind, this is bordering on my day job), it really looks grim. Here’s why:

According to KXAN TV in Austin, the USGP money cut is being pushed in Texas’ Senate, where last week a key committee approved the slash in funds. A House version maintains the money. But in general, it is the Texas House (essentially the lower body politic, akin to the House of Commons in the UK versus Lords) that is proposing the larger cuts.

In other words, during negotiations — where, typically, both sides will come to a middle-ground final number — the Senate will be having to offer more cuts while the House will have to be OKing fewer. It could become a bargaining chip: These funds would get caught in the discussion in which the Senate would move closer to the House version in order to get back some other spending cuts. But, in the end, the funding for COTA is taken out of the budget.

If the House had made the cut, I’d be feeling more optimistic. Then, theoretically, it could be a bargaining chip that would end up back in the budget.

Of course, I’m not an expert on the people involved, and KXAN says that “observers” expect the funds — at least part — to be restored. The state’s comptroller, Susan Combs — the one who went to the British Grand Prix last year, I believe it was — is a supporter. Perhaps she has some muscle here. But she’ll be fighting this sentiment from the Senate Republican who pulled the money out:

“At a time when people are stressed about their schools, stressed about their jobs, stressed about health care and nursing homes, for us to check off $25 million for race cars, I think we make people say where are their priorities,” state Sen. Dan Patrick said.

“That $25 million would pay for 500 teacher salaries. How can we explain to people we’re spending that money on race cars?”

I guess looking at it all, maybe an educated guess would be that the final figure will be more like $15 million. We’ll see.

I wonder, though, whether any cut would get F1’s attention and cause any trouble with the agreement with track owners.

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  • I have to think this is a blow to what they were considering operating capital on a yearly basis but if they hinged the entirety of their program on $25 million of tax payer money each year, they’ve missed the notion that guaranteed income or revenue is not a thing of certainty. The economics of this track have to work and signing MotoGP is a good move. I assume they are lobbying right now for the bill to pass in full and you have to appreciate one notion, how does a race in Austin benefit all Texans? It’s a tough political fight but as I said, if they’ve hinged their operating costs and revenue stream on taxpayer money, then you are running on thin ice as that can change with every new budget plan the state develops.

    • peterriva

      You may be right, but I think they knew this was coming, hence the overwhelming talk about broad education and conference uses in Austin. In fact, Austin needs this sort of space (conference center, education outreach, etc.). I suspect they are going to get hammered a bit over the $25mil all the while more serious funds are kept in play from non-F1 interested parties (medical, etc.). Oh, and let’s not forget the Texas Republicans are totally happy to take DC’s stimulus money why decrying same.

      • peterriva

        Sorry about my dig at Texan Republicans… after the House yesterday I really depressed with these people.

        • Todd loves bashing Texan Rs, don’t worry!

  • mg5904

    Precisely. Fickle are the winds of tax payer whims and funds. That being said, Red McCombs is a powerful figure to have in your corner and may be able to leverage some serious lobbying pressure.

    Re. F1’s attention, I expect them to be watching with both eyes wide, particularly after Korea. I’m not sure what they can actually do to expedite the process, though.

  • One thing to keep in mind is that this is now affecting MotoGP as well as F1 so as not to get myopic about this issue, MotoGP fans would do well to keep their eye on th story. This could be a bump in the road for a guy like Mr. Red but I think $25 million is a sting no matter how rich you are as it would go a long way toward track operating costs on a yearly basis.

  • Although the statement is very much understandable… But why fund the whole project in the first place? It’s almost as if the state couldn’t grasp what the infrastructural/economical needs were about roughly two years ago. I mean, it’s not like the economic crisis started out a little than a year ago…

    Just adding my opinion.

    • The state is not funding the construction of the project. The Major Event Trust Fund is reimbursing the City of Austin for expenses related to hosting the event.

      As for the statement by Patrick, he’s operating from a fallacy. The METF doesn’t pay these entities out of funds that would otherwise be used for Public Works, Emergency Services, Education or the like. It pays from accounts funded by sales taxes from the events themselves. The only people being taxed for the events are those who attend.

      • Tim’s points probably are part of the reason why “experts” think the money will get put back in. Nonetheless, it puts the track into the political debate — not a place anyone wants to be.

  • Someone sign this guy as our (second) Texas correspondent! Thanks for the added info, Tim!

    Did Cowboys stadium get much, I wonder? (Although if it was enough pre-recession, there’s a certain sense of comparing rich apples to poor oranges.)

    • Thanks SJ! I’m passionate about the Circuit of the Americas project, but unlike some of its detractors, I won’t stoop to misinformation, and it gets my blood pressure up a bit when they do.

      The City of Arlington was reimbursed $31,154,062 for expenses related to hosting NFL Super Bowl XLV at Cowboys Stadium. This is the largest amount ever awarded.

  • It’s interesting and noteworthy that Senator Patrick’s home area of Houston is receiving more than $13,000,000 from the very same fund for having hosted the NCAA’s Final Four College Basketball Tournament just last month.

    http://www.texasahead.org/tax_programs/event_fund/approvals/

    In FACT, when we dig a little deeper and do a little math, we can see that since the introduction of this program:

    -Houston & Harris County have taken full advantage, collecting over $86,000,000.
    -They hit up the METF early and often, gaining 6 of the first 11 approvals ever granted.
    -They’ve benefited for such events as the NFL Super Bowl, the Major League Baseball All-Star Game, the Major League Soccer All- Star Game, the NBA All-Star Game, the Latin Grammy Awards, and wait…what’s this? RACE CARS!?
    -Yes, it’s true. Houston took money from the Major Events Trust Fund for the 2006 & 2007 Champ Car World Series Grands Prix of Houston.

    Patrick and his constituency are benefiting greatly from the program, and actually that’s fine. That’s what the program is there for. Yet now he wants to examine it? Interesting timing, to say the least.

    The Major Events Trust Fund is a program that enriches the state’s tax coffers and pays for itself via tax moneys generated by the very events in question. It is designed to encourage the influx of money into the state from the outside to be spent and spent again, thus generating MORE money for state programs. Cutting off funding for projects like these is short-sighted, ill-conceived, and is nothing more than political grandstanding to the detriment of the taxpayer in the long term. The argument that we’re taking from Nursing Homes, Emergency Services, or Teachers to pay for race cars doesn’t fly, at least if you want to take a factual (not emotional) look at the matter. Mind you, I’m a Firefighter married to an Elementary Educator, so in this house we do look at these issues with a critical eye.

    • The $13,594,890 awarded to the City of Houston for expenses related to hosting the NCAA Final Four Basketball Tournament was the 3rd largest amount ever awarded and only the 3rd figure of 8 digits.

      The City of Austin, until now, has never sought an amount greater than 6 digits.

  • The Imperative Voice

    Dan Patrick is a conservative radio talk show host (and FoxNews regular) turned politician (which makes him a more sincere blowhard than many, since he actually puts his money where his mouth is). Just about everyone right of center is grandstanding on the budget right now. Just to put this in political context. We’ll see how it comes out in the wash.

    The fears of government funding cuts and job losses are very real. My brother works for a municipal library worried about this potential. A local school district was talking about cutting teachers to balance its budget. Now, since libraries are paid for from the general budget, school districts primarily with property taxes, and the F1 funds from redirected sales taxes, the claimed tradeoffs are misleading. It’s not the same kitty. But the public generally only understands we have budget problems and that teachers and others are losing jobs. So the gloss has superficial appeal, F1 is not a popular program, and the gloss may travel around the world, and the budget bill be long passed, before most people put the honest 2 + 2 together, if they ever do.

    One thing also being omitted is that the state has billions in “rainy day funds” saved up for downturns like this that it’s not touching. The rumor is a $15 billion-ish shortfall but $9 billion is left in the rainy day fund to result in that “shortfall.” If you understand the national flavor of budget issues and politics in the US right now you might see there’s an element of gamesmanship in the drive towards Texas budget cuts, economy or not.

    Is part of this $25 million F1’s race fee?

    • Believe me, out in California we’re hearing various doomsday scenarios about cuts, too.

      I’m horribly oversimplifying Patrick (ummm… maybe?), but I’d think he’d be supportive of government support for a business project like this (the ever-popular public-private partnership). But perhaps it is too much government for his liking.

      That’s trending us waaaayy off topic, though, although this post sort of asks us to dive into one of the areas where it often is hard to maintain Todd’s civility and decorum: politics.

      Should we also talk about Patrick’s religion? :)

      If Patrick is looking to make a political stand, one that doesn’t necessarily have to do with real issues, F1 could be a winner: A sport that still hasn’t pulled out entirely from Bahrain. One that is “taking $25 million from the state.” Fat cats and other elites — probably socialists from Europe, to boot!

      I’ll try to keep my eye on things… but y’all who are closer feel free to give us heads up, too!