Greetings, and welcome back to ZacCast, your official podcast for local government nerdery. I'm Chad, and that's Pat, and after a much, uh, I guess, an unfortunate delay, Patrick, we've been so busy, we haven't been able to actually jump on this podcast in a few weeks. So, uh, since spring break is coming up, we wanted to jump out there real quick and at least give you something that you can chew on for the next couple of weeks. And this actually is a really timely episode because we're in the middle of a legislative session, and so we thought, what better topic than to, uh, to go through some stuff that you probably need to know about? So, uh, Pat, how are you doing?

I'm good, man. I'm good. Uh, busy is an understatement, brother. We, uh-

It is.

We, we have been more than busy. Uh, it's been a really wild time at Zach, and, uh, we have been super, super busy. Uh, put a post out on LinkedIn the other day, just asking folks who may be interested in side hustling, things like that. I had forty-six responses in my message, so if I have not gotten back to you yet, uh, please realize that I'm still rolling through those responses and getting back to people. So think I've gotten messages out to most folks who've reached out to me, uh, but, uh, you know, obviously, could use all the help we can get, uh, right now as, uh, as cities are, are dealing with not only a slowing economy... Um, hey, you remember when I used that word stagflation the other day?

I, I do. Uh- ... I do. Sent that article last night, I was like, "Oh-

I s-

- he got me."

I sent the article last night where we have officially-

Although-

... or we're getting very close to entering-

In my defense-

... a stagflation economy. Yep.

In my defense, the environment that we're in right now is much, much different than it was, you know, four or five months ago when you first brought that term up.

It, it is. Uh, it is, but I, I think, uh, I, I distinctly remember sitting in my economics class at A&M, and the professor explaining the different ways in which a, uh, stagflated economy, uh, could, could move or, or how they would occur, and this seems to be one of them. Um, a trade war, uh-

Multiple trade wars.

Multiple trade wars at the same time. A globalized economy that somehow is trying to readjust itself to the globalization. It's like the reverse of the last stagflation, right? So it's basically, it's not a, uh, it, it, it's not American manufacturing that has slowed down so much and can't really sell to the rest of the world. It's that we want the rest of the world not to sell into the United States, and it's creating, uh, like, an unnatural inflation that, uh, that is happening. So in, in, in city revenues, we're not really seeing the same increases in sales tax that we are seeing in the increases in the cost of goods, uh, which is, you know, the direct indicator that you try to keep, you know, at least keeping up with inflation. Uh, you want sales tax to keep up with that inflation number. Um, and, and we're, we're not, we're not in, like, negative territory yet in a lot of the communities that I was, uh, poking around at. Uh, we've, we've got a measurement inside the, um, the Zach software that shows you what your actual growth is versus the inflation rate, and, and those are still positive in, in many communities. They have turned negative in a few. Uh, but, um, I, I think we're gonna see that because consumers... Just watched a, uh, CNBC interview with the CEO at Target, I think it was yesterday, uh, talking about the shift that they've already seen, uh, with consumers and how consumers are becoming, uh, significantly more car- cost-conscious and also trying to spread that dollar. Uh, so as prices go up, I mean, a banana cost is gonna go up twenty-five percent with a twenty-five percent tariff, right? So as bananas costs go up, you're, you're gonna see that. Bananas are a bad example 'cause they're not taxable.

'Cause they're all... I was gonna say that, but yeah.

But I, I think it's easy, easy to use that, right? Uh, I mean, you could use that equivalent in car parts or anything else that comes through the delivery process. But, um, I saw the other day-

I think-

There were some vehicles-

Real quick, one thing to keep in mind with-

Yeah, go ahead

... if you've been looking at, like, February's data-

Mm-hmm

... there was a massive audit adjustment in February.

There was, yeah.

Which means it's not indicative necessarily of what we're gonna see going forward. So, like, if you are way up relative to inflation because you had a huge audit adjustment, right? That, that is a one-time adjustment, where it remains to be seen, and data comes out in just a few minutes, hopefully. It remains to be seen whether that one particular adjustment, which if you had it, you know it, what I'm talking about, um-

Right

... represented something that should actually increase your move- your revenues moving forward, or whether it was just a one-time thing. That, what happens today is gonna help us understand that a lot better. Um, unfortunately, the comptroller is a little bit tight-lipped on some of those things, and so we have to infer what happened, but-

Right.

But yeah, I mean, if, if you're looking at... Like, last month, the total percent change was eight point seven three percent, but for many cities, that one audit adjustment was, like, twenty percent of their revenue.

Right. Right.

So if you back that out, then where are you sitting?

Yeah, and talking about that, the reference that we're making right there, right. I, I think, uh, the one thing we can infer is that we know that those audit adjustments went back to January of 2020, which is the same month in which the rule change occurred for destination. So you can automatically assume, based on the, the taxpayers, which we can't disclose, 'cause that's confidential data, but based on the taxpayers that we saw in the data and the fact that it went back to January 2020, it looks like there were a number of taxpayers, not just, not just one or two, but there were a couple of, of taxpayers, um, that did not properly handle destination, uh, sales tax. And I think that some of that is, revolves around the confusion of where an item is bought, um, like, if somebody walks into a store and buys a washer and dryer, versus where that washer and dryer was actually shipped from, right? Um, so without giving too many details, you can kind of assume-

Interesting example that you gave there

... based on the example I gave there.

I thought you were gonna use the bananas again.

So, um-... And, and we did see, we did see higher volumes in, like, um, in, in residential communities, like suburbs that had high levels of home building during those periods of time. We saw-

Yeah

... significant increases in those areas, right? So, um, you know, so house goods, home goods, those type of things, you know, that- that's where a lot of that was, was, uh, was seen.

Yeah.

So we talked industry, we just can't tell you the exact taxpayer.

Particularly in areas or in cities where that particular taxpayer did not have a physical presence.

Right. Uh, and if you-

Where you wouldn't expect to see such a large audit adjustment.

Right.

But for-

And in the state of Texas right now, if you want to, you know, obviously, don't want to be salesy here, but if you want to see that data, uh, give us a call, and we'll get you onboarded in, like, the next two and a half months. So I'm just kidding. I'm just kidding. I'm just kidding. We're still on a ten, ten-day, uh, onboard window when it comes to sales tax, so, um-

Ten business days.

Ten business days.

As long as the controller can get us the data.

Yeah, which kudos to them on most of what we've requested recently, especially with the ebbs and flows. They have been, you know, fairly quick, uh, and they've had a lot of turnover in that office, too. So, uh, we appreciate the work that they have done for us. Uh, but-- So we want to jump into, uh, legislative issues, though, and talk about that. Obviously, there's a lot of governmental decisions that are being made, both in Austin and in DC, that are impacting local government revenues. Um, Austin, in its standard two we- two-year window of direct stupidity, um, is put forward a couple of bills that I think we ought to take a look at. Uh, and obviously, we want to say, look, these are proposed bills, they're not, um, you know, we-- It's really early in the session right now to understand, like... You know, this is, like, the scary time. Like, these are all the terrible things that could happen, yet we don't really know what's going to happen yet. And we don't have any sense from anybody on the legislator side, because they haven't had... These things haven't gone to committee hearing. Um, we haven't, you know, some of, some of them have been referred to committee, but we really haven't seen any committee hearings yet of, um, you know, importance to really be able to tell you what is going to happen or what's not. Um, and, and frankly, you got to remember, most of what gets filed in Texas legislature never, legislature never gets passed, because they don't have time, uh, to get through all these bills. So I want to roll through that. Um, we-- I actually, this, this is going to be a little easy for me because yesterday I had a city manager who gave me a list of the bills as, as they went through them. So I really appreciate, uh, Jared Greenwood, uh, for sending me that list because it made me deep dive into some of those bills. One of these bills we were already tracking because it would have a significant, uh, impact on our business model. Uh, and so we were, we were tracking that one, and I'll talk about that. Positive impact for us, negative impact for cities. Uh, we'll talk about that as the last bill, uh, when we get to it, because I think we'll spend a little time on that. Um, so, uh, really rolling through this. So, uh, let's, let's start. They're all House bills right now. Uh, the Senate has been busy dealing with, uh, all of the property tax reform issues, uh, that they're trying to jump on with homestead exemptions and a school tax. By the way, uh, the existing homestead exemption that the state has put in place is estimated by the LBB to take up twenty-two percent of the state's budget in the next biennium. I'm just going to say that out loud.

Say that again.

Yeah. Twenty-two percent of the state's budget will be taken up by handling the cost and the incase- increased cost associated with the constitutional amendment we've already passed for the hundred thousand dollar homestead exemption for schools, for ISDs in Texas. That's the number. There's a Texas Tribune article somewhere on that, if you want to read that. That's, that's correct, yes. Um, the, the cost of, of property tax buydowns, uh, in homestead exemptions, um, will, you know, probably... I don't, I don't-- What, what percentage does Medicaid funding make up of the state budget? I think that's the most expensive part of the state budget, and I think we may exceed that as well.

Just from that one, or from the cumulative effect of all those homesteads for local school districts?

Um, so the cumulative-- So the way the homestead exemption in Texas works is, so you have that hundred thousand dollar homestead exemption, and then the state supplements that fund, right? So whatever the school district is losing from that homestead exemption, the state is sending that money. That's going to be the cost, that's going to be the twenty-two percent of the budget cost that's going to occur, because there's no cap on that, right? Uh, and this is-- I actually had this conversation with, um, an influential politician who's not in the state level, but at the county level, and they asked me the question: "I don't understand how this cost is rising." And I said: "Because the state is growing, so every time we build a new house in a district, that's a new hundred thousand dollars that has to be taken care of." And there was, like, a big aha moment. "Why would they have done that?" And I'm like: "Good question. Still trying to figure that out myself." Um, so because they don't want to mess with appraisals, uh, you know, the, the real issue, they don't want to go after the real issue, um, and so it's just easier for them to kind of increase the homestead exemption, even though it has such a detrimental impact. And if you read the Comptroller's revenue estimate, right, that was... Uh, I guess the revenue estimate would have been presented right in the beginning of January, like mid-January. Um, there's a, there's a sentence, and I, and I don't have it in front of me, so I'm, I'm gonna kind of, you know, work off of memory here. Um, but there's a sentence at the very end that's basically just like a warning sentence that says, "Although we have a surplus, blah, blah, blah, blah, blah, we should be very aware of the continuing cost of the moves we've made," right? Uh, the Comptroller is kind of sending that warning without doing it, like, harshly. Um, but it's a pretty substantial warning that, you know, two to four years from now, the state's going to be in a really rough budget spot, where a bulk of the state budget is taken up by something that doesn't actually provide a service, uh, at the state level. It's basically just buying down tax rates.

Subsidy.

Subsidy, yeah. So-... and, and that's outside of the voucher conversation or, or anything else, right? I think that's, uh, you know, that's, that's a, a big, big push that's going on right now in Austin to try to, to try to do that. Let alone-

Sure.

-vouchers are gonna spend another four billion, uh, in the biennium as well. So if that happens-

So does that provide any incentives for school districts to be more amenable towards multifamily developments, which typically they have not been quite so fond of, right?

Y- yeah, correct. I mean-

So multifamily does not have a homestead on it.

So we don't do financial analysis yet for school districts. That's something we've always talked about doing, and, and that would be a really interesting -- that, that would be a really interesting thing to look at, right? The cost per pupil versus the development style that they have. I-- Most of the superintendents that I talked to over the years have always told me that, uh, they don't make enough money on that. And I, and I'll be honest, I-I've always been very skeptical of that, right? Because if a city looks at this-

How many school-age kids are living in a one-bedroom apartment?

Correct. Uh, and-

And probably in a two-bedroom.

I, I do know that the local district that I work in actually got fairly aggressive in some of the conversations with localities to keep those apartments at one or two-bedroom facilities, right? Um, because when you get to three-bedroom, you do kind of, you know, you, you put yourself in a position where you're gonna put more kids in there. But I, I just have to ask the question, like, the value per door and the mix, I just think there's, like, a, an equation there, and at some point... I, I just don't think you can put a blanket-

I'm sure it's net positive.

Yeah. I, I-- You know, because of all the stuff that we do to calculate the cost of a road or the cost of city services, and we know what multifamily looks like there, or, uh, a forty-by-one-twenty lot versus a sixty-by-one-twenty lot, right? Like, we, we know that there's not necessarily a value difference in the home all the time on a forty versus sixty. Um, you know, you-- But o- one of my favorite developments in the whole state is actually in Aledo, Texas. It's Parks of Aledo. Um, and it's, you know, there's a lot of forty-by-one-twenty lots, uh, forty-by-one-twenty-five lots in that community, and, and, you know, they're selling six, seven, eight hundred thousand dollar homes in there. So from a value per linear foot of road frontage, the city's doing quite well, right, uh, on that development. So, uh, you know, it, it, it's not always about the lot size, I think is an extremely important way to look at it. Um, so-

Value per acre.

Value per acre is, is, is a much better measure on that. So, um, wow, we got sidetracked on that for a minute. So I'm gonna jump into the actual bills here and talk about them real quick. I've, I've got, uh, you know, basically four or five bills to talk about. Uh, I'm gonna start with House Bill two fifty. Um, it doesn't seem too coherent, uh, but House Bill two fifty doesn't really impact cities, but there's kind of an unfair, uh, taxation policy that's out there right now, where cities have to abide by the three and a half percent voter approval rate. Uh, so obviously, anything over th-- under three and a half percent, cities can adopt. Uh, that's above the no new tax rate, obviously. Uh, but anything above three and a half has to go to the voters. Well, uh, higher, higher education institutions, uh, like, uh... and, uh, like-

Community college districts and stuff like that.

Community college districts and hospital districts, and some other players, were given the option to stay at that eight percent number, uh, in that last bill, and this bill would basically remove that. Um, I say that it's not a coherent bill, because if you read the bill, it's very poorly written. Um, I was-- lege council did a terrible job on it. Um, and so it's gonna have a committee substitute. So we don't really know what's gonna-- what it's gonna look like. It looks like they put it in there as a placeholder, but obviously, uh, as Bill two hundred and fifty, they filed this thing pre-session, way beforehand. They had plenty of time to get this right, and they're still gonna have a huge committee substitute that's gonna be adopted at the last minute. Just, I don't know, it was very ugly work, in my opinion. They, they can do better. So, um, so from that bill, uh, move on to House Bill four sixteen. This one is really interesting for cities, and I like it. I'm, I'm not, I'm not gonna lie, I like this bill. Um, so House Bill four sixteen extends the appraisal district's window for providing certified data, but it also changes the process for cities to go through the truth in taxation and tax rate-setting process. So specifically, um, right now, certified rolls are to be provided to cities on July twenty-fifth, and this bill would move that to August twenty-fifth. Okay, so it's just shortening the window.

Sounds bad.

It sounds bad, but let me explain why it's not bad. Right now, if you get your certified data on July twenty-fifth, and there are still a substantial number of properties in ARB review, so people who are fighting their appraisals, and then you end up getting that money anyways, it changes your, um, collection rate, your three-year average collection rate. Which in turn, could take that collection rate above one hundred percent on average over those three years. And it is-

That affects your-

... very-

-your no new revenue rate.

It affects your no new revenue rate, and it is very detrimental for revenue, uh, out of the property tax side of your equation. So, um, we've actually encouraged our clients and anybody who's listening, we encourage our cities to almost negotiate with their appraisal district, uh, based on the certified values that get sent to them. As in, if they're sending it a little early, like they send it July twentieth instead of July twenty-fifth, like, can you ask your chief appraiser like, "Hey, what would that have been on July twenty-fifth? And can you recertify those values for us?" Because, you know, maybe the appraisal area drops by a couple hundred million dollars, right? Um, those assumptions and, and what-... is going to win and not going to win has such a huge impact in your collection rate, that that matters. Um-

So let's walk through the mechanics of this real quick. Okay?

Yeah, go ahead.

So say that there is five hundred million dollars worth of property that's still in ARB.

Right.

The appraiser has to estimate what the final certified value of those properties is going to be as part of their certified values.

Right.

Right? So let's say that they predict that the, after arbitration, it's going to be three hundred million, right?

Right.

So there's a two hundred million dollar gap between the, the current appraised value and what they expect it will be once all of that stuff is worked through the process. If it turns out that the actual number after ARB is four hundred million, then you're going to have a certified value that shows three hundred million, but in reality, it's going to be four hundred million, which means that when you collect on that delta, your collection rate, theoretically, and in many cases actually does, go over a hundred percent. Because the certified value is what that is based on-

Right

... not the actual amount that was taxed.

Right.

Okay.

Yep, that is correct. Um, and I, actually, I think it's the opposite, though. Uh, it's, it's when-- because the way it works in the truth and taxation, it's when they overestimate how much value and loss you're going to have because of the ARB review.

Then, well, then you'd have less.

No.

Your collection rate would be lower.

No, because it gets removed from your certified value at that point in your T and T worksheet. So when that number comes back into your certified value, it doesn't change what the certified value for the future year was, it just changes the amount of collections that you have.

Yes, but then you would collect lower than what you're anticipating.

No. No, no, no. So let's say-

Oh, because the r- it is not based on what you actually collected, it's based on what you were expected to have collected.

That's correct.

Okay.

It's based on the-

Got you

... expected collection in the T and T worksheet. It doesn't ebb and flow based on real time, right? So it's the snapshot in time that you use, and then in a future year, it goes back and looks at, "Okay, you said you were going to collect a hundred million dollars in property tax, and you collected a hundred and two million dollars in property tax. You now had a hundred and two percent collection rate," right?

Yes, but that would seem to support my scenario.

No, your scenario, uh, is, is that the actually, the ARB actually had more, um... The, the property owners won more often in your scenario. You went from three hundred million to four hundred million.

Right.

Right?

Which means that they actually won less than was expected.

So, okay, so let-

Instead of dropping that five hundred million down to three hundred million, it only dropped it to four hundred million.

Yeah. So let me, uh, let me-

But you based your budget on three hundred million.

Yeah, so let me, let me-

Which means that you actually collected more than what you budgeted.

I, I, I get it, but let me walk you through mentally, the T and T worksheet, uh, in today's format, right? Uh, because this is a new format from, you know, last month's session.

I love doing math on a podcast.

It's so fun to do math on a podcast. So I'm going to try to do this, like, visually, as, as best I can. So we start with the certified value, right? We subtract exemptions, okay? We then subtract anything the appraisal district believes is going to win in appraisal review, okay? That's the number we're talking about. Okay, so let's say you had a hundred billion dollars in value, and you had five billion dollars of value that was under appraisal review that they thought was going to win, right? Some appraisal districts look at that as the amount of winnings. Some appraisal districts put in all properties that are still in the ARB process. So not the delta between what the value is-

Total value

... and what the winning is, but the total value of it, which is why I tell everybody, "You need to negotiate that," because that makes a huge difference in your collection rate calculations. But let's say that that's five billion, right? Well, at the end of the day, only four billion of that actually wins. Okay? But you originally took a certified value in the T and T of ninety-four, or ninety... sorry, ninety-five billion, right? And you collected actually on ninety-six billion, because only four billion won, um, instead of the five billion. Because you collected on that, your normal ninety-eight and a half percent collection rate now just became a hundred and, you know, a hundred point two, or whatever that number would be, right, at that number, because of that difference in collections. Um, in most cities, collections rates are above ninety-eight and a half, right? They're, you know, ninety-nine and some change. Uh, there are some communities that are lower.

I mean, it eventually gets to a hundred percent, but yeah.

It, it eventually does get to a hundred percent.

Okay.

It's kind of a goofy way to do it. Um-

So I think that we are saying the same thing then.

Right. Right. I just, for the finance directors that listen to the podcast, I just, I, I wanted to put that, like, i- as if they were reading the T and T worksheet. Now, I say this out loud, and I, I do not say this to sell anybody on this, but I'm just telling you, when you, if, if you're doing your own T and T worksheet, seek assistance of multiple parties, whether that's consultants, us, people in your staff, if you have that staff and team to do that. Um, the, the algebra needs to be looked at because you need to understand how you infill the information, right? How you take into account your, uh, exemptions, homestead exemptions, how you take into account your over sixty-five freezes, all those type of things. Like, um, and in, and in today's world, you actually, when data starts to come in in May, um, you know, you, you can start to make some assumptions of what that's going to look like. If you, if you ha- or if you're in a county that provides taxable data, um, obviously, Tarrant County, for some reason, doesn't do that, which just irks the life out of me. But, um, it, it's just important to look at that. But this bill specifically, is looking at all of the deadlines and extending them by a month. So all of the deadlines you're used to now, it's giving an extra month on that.... but then it is also shortening the period of time that cities have to go through the, the public process, right? Um, so you're losing thirty days, but they're also kind of removing thirty days from the process of posting.

Okay.

Um, so you still get stuff done.

So, you are going to be, you're going to be proposing a budget with an estimate of your final tax values, as opposed to using the certified values and plugging that in at the very last minute.

That is, that is correct. Yeah.

Then a month later, when you're coming up to the really tight end of your budget negotiations, then you're gonna have an actual final number, but it'll be a lot closer to reality.

Right.

And hopefully, this problem will be less pronounced. Uh, this is what your argument is?

That, that is my argument. I, I don't actually think that's why this bill's being written. I, I wanna be, I wanna be clear.

They don't care about-

They don't, they don't care about...

They don't care about the effect on cities, but yeah.

Yeah. Uh, I think this bill is getting written because appraisal districts cannot keep up with the volume that they need in the ARB processes, and so I think that's why the, the bill is, is allowing that to occur, right? Um-

They should only allow you to protest your property values, like, once every three years, especially if you succeed at a, uh-

Well, I mean, under law now-

A protest

... it's, if you, if you successfully protest your property, like, me, personally, I successfully protested my property last year, right? Um, and so they can't make a change to my property, uh, I think, for two years.

Okay, that's good.

Right? Yeah. So-

Maybe it should be five. Just, just thin out... Oh, I mean, come on, y- you have a ten percent cap on, on a homestead anyway.

Correct.

Now, that doesn't affect, obviously, like, commercial, but, um, I don't know, some way to kind of-

Yeah

... thin out the number of cases they're having to, to review.

So they move everything back a month, right? Uh, and they also, um, take that, the, the timeframe of governing bodies to adopt tax rates after the appraisal roll moves from the sixtieth day to the thirtieth day. So usually, when you get your appraisal roll, you can't adopt for sixty days.

Mm-hmm.

Right? Now, you would be able to adopt after thirty days because they're taking thirty days away for process. Uh, and the big one is, is that filing of protests by property owners, the period owners have to file protests, would go from the thirtieth day to the sixtieth day after renew- receiving notice, right? So when they get their notice on May first, they usually have to have that filed by June first. That's typically the way that world works. And then, um, you know, you would then, in turn, uh, have until July first, right? And so the whole process is being held in thirty days.

So that's not gonna mess up anything, then.

It's, it's gonna, it's gonna help the, the inundation of... It's gonna spread it over a longer period of time so that they can get through it more efficiently, is the thought process. I'm not saying that's actually going to occur. I'm just telling you, I think that's what they're... From what I've read, it looks like that's what they're after.

Well, let's just-

So-

... assume that they have, instead of having, you know, five hundred protests, which is obviously a small number, but five hundred protests all filed within the first thirty days-

Right

... so by the end of June, or I guess, by, by the beginning of June, right? Beginning of June?

Beginning of June. Yep.

Okay. So instead of having them all filed immediately, we're now gonna file half of them before and half of them after. I mean, I guess in that scenario, you're still having... You're still pushing off. Like, how many can they actually go through? If they can only go through two hundred and fifty a month anyway, then there's not actually any, any benefit. But if it encourages more people to protest because they have more time to think about it and do it, then it's just gonna add to the number of protests they have to re- resolve anyway.

Right.

So they're gonna be-

So, so-

Are they gonna have a higher percentage resolved by August twenty-fifth than July twenty-fifth if they're giving an extra month to file? I don't know.

Yeah.

Maybe, maybe they will.

Yeah, I, I... I mean, look, I like it personally because it allows cities more time to see the tax rolls as they come in, for cities that are looking at that data, right? Um, so you're gonna get multiple uploads of property tax file that are gonna come through the process, and, and so you're gonna get more time. Um, you know, there are counties out there that, when they release their prelim file, will release a prelim file but forget to put residential properties in the prelim file, right? They send a notice, but for some reason, the data is not available, and so you start making... So this, this does give, like, an extra thirty days to get that cleaned up so that cities can, can look at that because they're not held by, like, this really hard, fast deadline of posting what they need to do versus... You know, uh, cities have to make a r- uh, if they're gonna go up over the new revenue rate and if, or if they're gonna do the de minimis, which is like the ability to go get five hundred thousand dollars for, like, smaller communities, smaller taxing districts, there's a v- there's kind of a very long process that they have to follow to do that, and, and this slims all of that down, uh, quite a bit, so that they can take a little longer to look at their decision-making. I feel like last year was the first year that a lot of cities struggled with that decision-making window. Um, and this is gonna give them more time to see the data so that they know what they actually have to do, uh, 'cause I think a lot of cities, it's hard to say, "Okay, should we be going under the de minimis format, or should we, you know, should we be, uh, looking at this from just a sub three and a half percent?" You know, uh, somewhere between no new revenue and the three and a half percent number. I d- I don't know any community that's gone above the three and a half percent rate to go to the voters at this point. So, um, that's just reality. Uh, so on onward, right, House Bill two seventeen, speaking of going to the voters, um, House Bill seventeen would raise the threshold to sixty percent-... uh, if you wanted to go above the voter approval rate of three and a half percent. So you would need sixty percent of your voters to say yes in order to go up above the three and a half percent number. I think that's a very interesting conversation. Uh, could we require all legislators who get elected to get sixty percent of votes to be elected? That would be a wonderful thing. I think we could solve a lot of issues in the Texas Legislature if we required them to get, uh-

Um-

-sixty percent of the votes. What do you think? How, how would that, how would that functionally work?

I think it would result in even worse gerrymandering.

Oh, it probably would. You're right. But, yeah, I mean, interesting.

So this might be a bill that doesn't have much of an actual impact if very few people are-

Yeah, very few are doing it

... doing it.

Yeah.

So.

I, I've not seen-- there's, there's probably a bill out there, I know there's gonna be one proposed that they've-- they want to go to, you know, a sixty or seventy-five percent threshold for, uh, bond tax increases, right? That's been proposed. I haven't seen anything filed on that yet, but, uh, we expect it's gonna come at some point. Um, House Bill seven sixty-three removes the disaster provisions for that three and a half percent, um, threshold. So right now, if your county is de-declared a disaster area, then you are allowed to go above the three and a half percent, somewhere between three and a half percent and eight percent. Um, and so they're rem-- they want to remove that with this House Bill seven sixty-three. Um, obviously, obviously, I'm gonna disagree with that, because you're gonna need all the flexibility in the world under a disaster. Um, I think the issue here is, is that counties in Texas are really big, and so you open a window for somebody who may have not actually had a disaster to do this, right? So the, the better way to do this would try to be to do it surgically, uh, but they're trying to do it, you know, with a swa-- you know, wide swath.

So I can-- I mean, I can see the argument behind this, which is... like, like, I guess I can see it on both sides, obviously, but if you have a one-time disaster, but you're allowing a local government to get, like, a, an outsized bump in their tax rate-

Mm-hmm

... essentially forever.

Mm-hmm.

I mean, I can, I can see the argument. Now, on the other hand, you're probably gonna have reduced property values, so this may even still result in less revenue over time than you would have otherwise had without the incident. Um, and then on the flip side, if you've just been through a natural disaster, like, is it the best thing to raise your taxes indefinitely afterwards? I don't know.

Right.

It seems like the, I mean, a better option is better state funding for emergency relief, because this is a, this is largely a one-time rebuilding expense.

Right.

Right? So, I mean, maybe it's not the best idea to take advantage of that and use the opportunity to increase your tax rate because you can. I'm just trying to think about it from, from the legislators pers-- legislat- legislature's perspective.

Yeah, I think, I think your devil's advocate stance is actually pretty good, to be honest. Um, I, I'm not super against this. Um, you know, I'm not sure there's a lot of cities out there that go raise their tax rate after a disaster anyways, right? Because, frankly, one of the crazy things in Texas is, is the way our appraisal system works, is that thing was there on January 1st, so-

On January 2nd, that-

Yeah

... got taken out.

That tornado hits on January 2nd, you're still paying taxes on what the tornado hit, right? Uh, and I mean, there, there are some things in state statute to kind of give you some ability to get out of some of that. Uh, but this is also why cities keep fund balance, uh, and this is why we keep back reserves and, and make responsible financial decisions so that we don't put ourselves in a, in a wild position. Um, I just think it needs to be more surgical. I think there needs to be, you know, some type of authority. You know, if I could trust the governor, I'd, I'd be all about, you know, having some type of, like, you know, governor authority to be like: "Yes, because of the situation you're in, you could have this flexibility," right? Um, because I think every, every situation in a disaster declaration is different. Um-

I think it might be better-- if you're gonna keep it, what you're arguing for, it would be better-

Right

... to make that a, an opt-out for the governor, where he has to explicitly say, or she has to explicitly say-

Right

... "You're not eligible for this-

Right. Yeah

... dear local government."

Right. You, you see what I'm saying, though? But I, I, I just, um... but I mean, we, you know, in, in counties that we've worked in, we've seen disasters declared where we didn't have much damage, but we got access to FEMA funding to do, like, road construction work, right?

Yes.

Um, and-

Been there.

I mean, we, we kinda all know, like, if, if we were gonna have a DOGE conversation here, this is one of those areas that, like, you could have some serious DOGE conversation. Uh, just, just being honest, right? I think every city manager who's listening to this will, will agree with that. Like, there are, there are some fundamental flaws in that system that there's a whole industry built around and a whole consulting industry that's built around, that almost encourages you. I mean, I distinctly remember when we went through some of the flooding that we had in Parker County, I distinctly remember getting phone calls from large-- by the way, working for Governor Abbott on his behalf, large accounting firms calling us to say, "Hey, what, what do you got? You know, give me a list of what you got. I mean, yeah, we, we can get you funding for this and funding for that, and blah, blah, blah, blah, blah, and give me the list, da, da, da," it's just a waste of money, people. Like, I, I didn't need a road patch. Like, that was my responsibility anyways. Um-

Yeah, you needed it, but you didn't need the people from Seattle or Spokane-

Correct

... or Sheboygan to pay for it.

Right. So, um, but I mean, that, that's kind of been, you know, uh, it's, it's hard, right? But we have, like, no local responsibility in disaster dec-... relief anymore. And so we don't, we don't necessarily play a level of fiscal conservatism to be ready for that disaster relief, uh, because we, you know, we know the federal government's gonna be there whether we actually had a disaster or not, if we're in that county that gets declared a disaster. So, so that's why I think this probably needs a scalpel, uh, to, to kind of look at it. This is not a scalpel. This is, uh, the way that they're doing this is just removing it altogether. Uh, it's, you know, standard populism. Let's just, you know, it doesn't sound good, so let's get rid of it, but let's not think through what that's actually gonna do, and, you know, that's a problem. So the bill that will change the world-

You saving the, the worst for last?

The worst for last. Well, I mean, it-- for our city clients, it's, you know, it's an interesting conversation.

All right.

House Bill 1433. It is totally new law. Um, this is the DOGE law, right? So the bill would propose or proposes mandatory efficiency audits for certain political subdivisions in Texas that exceed the no-new-revenue tax rate for five consecutive years. It actually goes back historically, too, so, like, if you've done this in the past two years, and then you do three years forward or something like that.

Okay, not the 3.5% cap.

No.

The no-

Just the no-new revenue.

Okay.

Yep.

So a, a city that is not able to function on a flat property tax budget-

Right

... needs to have an efficiency audit?

Right.

Okay.

So a city who is increasing taxes to keep up with inflation, 'cause if you remember, the legislature set it at 3.5% because they believed that was the standard inflation in the state of Texas. You can go look at all the writings that they wrote up. If you want to go talk to Jefferson and Madison of the last session, that's what you would read in their papers. But the reality of it is, is that now-

That's very generous of you

... now, if a city just wants to keep up with inflationary pressures, according to the Texas Legislature, and they do that for a period of five years, they are gonna have to go through an operational efficiency audit every five years. They will have, um, sixty days to complete that audit and thirty days to have a presentation and disclose that audit online, and that audit would have to be done by a certified accountant. So-

So an accountant, you know how much that's gonna cost to get an accountant to do a full efficiency audit of your entire organization in sixty days?

Doesn't it look really good that we hired a CPA?

Although, I guess maybe, theoretically, if you knew, you-- "I've done this for four years now, and we're gonna have to do it again," you probably have some ramp-up time before that. But so, so what happens after this is, is released and, and presented? Does the legislature come read it and then decide that you're not efficient enough, or is this just, like, some paper that's gonna sit on a shelf?

Oh, 100%-

What would that paper gonna be?

I, I mean, look, we, we do this now, right? Let's, let's... O- our Zach Finance team works in cities as CFOs and works as cities on, on working through efficiencies of budgets, and we, we do a lot of this today, right? City managers are doing this all the time. Assuming that a city manager is not trying to be efficient is just frustrating to me. I mean, really, in, in my opinion, it's just, it really is frustrating. I, I, I don't think city managers just sit back and say: "I want to go spend, spend, spend!" I mean, I think we're trying to do things that are measurable, and we're trying to do things that show a direct reference. I mean, in, in order to get the GFOA Budget Award, you actually have to put a lot of these things in your budget, right? I know, you rolled your eyes at that. But I-- the, the reality of it is, is that some of this stuff is already getting done, right? Is it a good idea for a city to do some type of efficiency look-back and look-forward every five years? Probably. I mean-

A lot of your bigger cities already have internal audit-

They do

... departments-

Right

... which function much like an inspector general at the federal level.

Right.

Now, you can argue, what, you know, where, i- is that independent enough?

Well-

Okay, then maybe that's fair.

The, the bill... Yeah, so the, the bill actually specifically says it's not independent enough.

It has to be.

It has to be independent.

Yeah.

Uh, and it has to be, um-

But this is all performative-

Un- unaffiliated-

This-

-with the city

... this bill is just a performative e- efficiency analysis. Nothing's gonna change from that.

Right.

If your city actually had-- I've worked in a city that had an internal audit department, and they were constantly working on projects and looking at programs to see what, you know, what could be made better or more efficient or, or cost less. That was a lot more actionable than anything that will come out of this bill. This is make work-

It's-

... that people will have to go through, and then they'll have this presentation, and no one will care, and then they'll just keep on doing what they're doing. But there's no-- like, there's no teeth in this to say, "Well, any finding has to be implemented." And maybe I shouldn't even be saying this, lest someone hear it and modify the bill, but-

Right

... you know, it's just, it's just show.

I, I mean, I, I don't know if it's just show, right? If, if you post, if you post an efficiency audit, right, and it gets involved in the election cycle process, I mean, I, I don't know if a city could just, like, bury that, personally. I think it gives somebody something to talk about.... and to run on. And if you're being inefficient with taxpayer dollars, like, people are gonna talk about that. Now-

I agree, but I feel like this is just-

My thing is, who's, who's actually certified to do this, is the question? Because I don't-- I mean, most of the outside auditors we work with, love them to death, right? But they, they don't understand how cities actually operate.

Th- this is literally the DOGE bill, DOGE bill.

It, it's literally-

Because those people go in-

Yeah

... and they don't have any idea what they're looking at.

Yeah, and-

And so-

I, as I said to a couple of city managers who've asked me questions about this bill, I, I think it's crazy, and it's dumb 'cause we'd do it anyways. But for, for us, as in, like, Team Zach, this is a huge boon for us.

Gladly take the work.

Yeah. We, we run a finance... We don't really do audit or outside audit because we run internal finances for a lot of cities and, and help there. Um, but we would be the perfect-

Well, we can sure as hell do an efficiency audit.

We could do an efficiency audit, and we would be the perfect group to do it. And if you're a city manager, do you wanna go hire Deloitte, who doesn't have anybody who's ever run a city in their entire life, and it's probably some twenty-four-year-old kid running out of college? Or do you want a bunch of ex-city managers and department directors who know what they're doing to come in and have conversations with your people? Um, I, I, I think, uh, I, I think it's a no-brainer, right? But I still think it's totally unnecessary. Um, I think city managers are more than capable, and their staffs are more than capable of looking at themselves internally, and if they're not, there's a process for that, and it's called voters and city council members, and somebody getting fired. Like, I don't think anybody disagrees with that. I'm not hurting anybody's feelings who's a city manager for saying that. We are all driven to run great organizations. Um, and we're gonna learn this the hard way on the federal government side. There were a lot of really good employees that just got laid off, and there's gonna be some really, excuse my French, shitty federal services coming forward in the future, right? Have you tried to get a driver's license in Texas lately? Do you know how long it takes to get an appointment at the DMV to get your driver's license in Texas? You better book that four to six months out, right? Because that's how bad that department has gotten. We've stopped paying people in Texas to be good at their job, and because we've stopped paying good, solid professionals, we are seeing it in the LBB, we're seeing it in Leg Council, we're seeing it in the Comptroller's office, we're seeing it in all different departments across the state. TxDOT, we are losing great people, and they're contracting out more, and more, and more, and more to do work that could be done by internally well-trained government servants. And, you know, it is what it is. Like, it's a difference of opinion. I'm a fiscal conservative. I've said it a million times. It's not fiscally conservative to just cut government willy-nilly, right? Or to come in there. And so if you start looking at this bill, specifically, 1433, no city manager in their right mind is gonna allow some teenage kid who, you know, has a computer and can code a little bit, to come look at all their information and tell them how they should run their city. There's gonna be a whole industry that revolves around this bill if it passes, right? And, uh, we, we know that already. Uh, so we'll see. I think it's probably gonna pass because I think this is one of those things that's like, we gotta get on board, um, with it. I just wish the state would pass their own statewide DOGE bill. Like, explain to me why we have the Texas Education Agency. If we're gonna DOGE the federal agency, why aren't we DOGE-ing the state agency? Like-

So-

... it's just ridiculous between the two.

The-- I think the fundamental problem comes down to a difference of opinion when you-- a- about the definition of the word efficiency.

Right.

I feel like efficiency doesn't necessarily mean doing something as cheaply as possible. It means it's much bigger than that. Like Ron Swanson says: "Don't half-ass two things, whole-ass one thing." And this is my big problem with DOGE, is that they're just-

Yes, they just want to eat all the bacon and eggs.

Yeah, they're tinkering at the margins with these, you know, this contract or these, these Microsoft Teams licenses, and you're-

Right

... gonna save what? Half a percent of the federal budget.

Right.

The-- there are much bigger questions about the, the, like, the f-- not how are we doing every single program that we're doing, but which programs should we be doing and not be doing, right? Now, the biggest question at that level is the entitlements, which we don't need to get into, but just from a fiscal standpoint, that's the biggest question with our, our long-term structural deficits. At the local level or at the state level, you don't get more efficient by just paying people less, um, a- a- and providing worse service, but doing the same, um, the same things.

Right.

You get better by really, like Steve Jobs would say, "Saying no to things, um, instead of saying yes to everything." Let's figure out what our core competencies are, what our core mission is, and let's do those things as best as we can, and not do these other things that are distractions, um, or that take away from our core mission. Like, we s- we struggle with this all the time, but you just mentioned we don't do st- uh, school district analysis. We've talked about that for years-

Right

... but it's not our core competency. It doesn't-- it's, it's outside of our normal lane right now, and maybe one day we'll get there, but right now, it's not our lane. And so we could do it, but how would it affect everything else that we do and our, our efficiency with our core competencies and our, our main line of business? The cities have the same question. This kind of efficiency audit is gonna be, uh, well, y- you're, you're wasting money on... Like, I, I have literally been in budget meetings-... where during the 2008, 2009 recession fallout, and the street department budget has been cut by thirty, forty percent, we can't maintain our roads, and we're talking about creating a centralized office pool for office supplies because we're using too many staplers and paperclips and pens. Instead, we'll have, like, the city secretary or someone maintain this big pool of office supplies, and if you need one, you can come check out some pens. And that way, we can keep these costs in line. This is like a quarter of a percent of a quarter of a percent of our budget-

Mm-hmm

- is the Bic pens that we're buying. But the amount of time that we spent on that discussion versus these other much bigger fundamental questions, versus what, what was the-

The ten-year cost. What was the ten-year cost to the city of cutting thirty percent out of your road budget?

Yes.

Right. Like, uh, and, and, and for those folks who are not city employees who listen to our podcast, I know there are a few out there, if you don't maintain roads, the cost increase in what it takes to maintain that road gets, gets exponentially more expensive, right? So-

And not only that, but the-

- if you maintain a road in its first five-year window versus ten-year window versus fifteen and twenty-year window, if you have-- if you don't maintain a road and you get to reconstruction, that reconstruction costs you significantly-

Orders of magnitude more

... five to ten times more. Yeah, I mean, huge amounts more than if you would've just chip sealed or, um, you know-

Like a surface or-

Crack sealed, or surfaced or, you know, fog sealed or whatever, that road within its maintenance period, and that's usually what gets cut, right? I mean, the first thing to go is travel training, right, and the road maintenance side. Those are the first two things that get cut out of general fund almost every time. And, you know, it's, you know, we, we, we don't realize that those are also some of the most costly areas that, uh, that impact our budget. Uh, maybe, maybe not travel as much, but training for sure is one of those areas that I used to always argue about. Um, if I can take a lower-level employee and train them to do a high-level task, that saves the city significant amount, amounts of money, right? Rather than having to go hire a consultant to do it or hire outside. Now, in today's world, we're in this whole market where there just aren't people there for high-level task. Um, and it's, it's just gotten more and more difficult, uh, to get people in there, mainly 'cause of the private sector competition. Uh, but yeah, I a hundred percent agree with you on that, Chad. It's... point very well taken, and I distinctly remember having phone calls with you after those meetings, uh, where you were screaming in the phone. There were a few choice words over the office supply pool that you were asked to work with in a budget. So...

Yeah. We didn't do it because it was stupid, but-

It was, it was stupid

... we had to talk about it-

Yeah

- extensively.

Uh-

So that's, that's what I worry about, is you just get... When you, when you-

It was brought up by a, it was brought up by a nice man.

A nice man, seasoned city employee. But when you, when you just don't have the full understanding of how things fit together-

Right

... then you focus on things that are easy to understand, and that's what this is. That's what DOGE is, that's what this is. Um-

Right

... that's how you end up laying off a bunch of probationary people because you think they're all new hires and not people who have recently been promoted.

Right.

So Chesterton's Fence is all I'm saying. Let's understand what we're doing before we do it.

So last bill-

You have any more bills? Okay.

I have one more. Yeah.

Okay.

House Bill nine twenty-four. I do not think this is gonna pass. This has been proposed in the last two legislative sessions. No surprise here. This is a change on the sales tax rules. Um, specifically, the bill stipulates that if certain subsections do not apply, a sale of a taxable item is considered consummated at the location in Texas where the item is stored immediately prior to shipment, delivery, and transfer of possession. This bill has been presented in the last two legislative sessions. It would fundamentally change the way that sales tax is delivered, and most of our communities that receive large amounts of, of, uh, remote sales tax would not receive that remote sales tax. So if you are a suburban, exurban, or even far rural community, this would be a terrible, terrible bill for you. Uh, if you are-

I'm just looking through this, it looks like it almost completely gets rid of destination.

It pretty much gets rid of destination, yeah. Which this was presented last year. I don't even think it made it to committee last year. Um, we-

Who's opposing this? Schofield?

Yeah, Schofield. Who's the, uh... Isn't he the Chair of Ways and Means or Tax? I can't remember which one it is, but he, he's the same guy who presented it last year, and it went through committee hearing and, you know, was... Yeah, I don't even know, I don't even know if it was talked about in committee, to be honest. Um, so I, I don't expect this one to pass. It would have a substantial impact, um, on, on cities. And if you wanna know what that impact would be of this bill, you can go into ZactTax, you can pull up just remote sales tax. Uh, we actually have, um, in cohorts, there's a designated cohort that you can run in live mode, uh, that is just for online taxpayers, and it will pull out how much money you made on those online taxpayers, and you can see that, uh, twelve-month average and also the, the fiscal year to date from last year and this year, and pull that number directly. So what's up?

Do you know his district?

No. What's his district?

Um, West Houston, parts of Katy, up to Waller.

Oh. Yeah, 'cause it's, uh, that's where all the distribution centers are. I mean, it's, it's a, it's a great bill if you're like a, you know, a distribution center. But it, th- this, I, I mean, honestly, gonna s- if this bill went to the floor, it would never pass.... um, there's, there's just, there's way too much revenue loss for way too many communities for this bill to pass. Um, I'm not even really sure why it's being proposed anymore, other than the fact of you've, you know, probably got some very specific politicians who have a connection to Schofield that are trying to get that done. So, um, if Representative Schofield would like to talk to me about this, um, his chief of staff can give me a call. My number's on the wall of many chief of staffs in Austin, and I would be happy to talk to them and tell them how stupid this bill is and the fact that it won't pass. Uh, so look me up, give me a phone call, and I will use, uh, one of my forty hours a year that I'm allowed to use talking to legislators or their staff, so. But I've only used thirty minutes so far this legislative session.

That's pretty good.

Uh, and my thirty minutes was used on this bill, um, to ask the question: "What are the chances?" And, uh, I was told, "Dead on arrival." So good luck, Representative Schofield, with getting that done. So that's it, man-

Can we have a, can we have a, uh, department of legislative efficiency, where we evaluate people who file bills that will never get passed?

Man, I would love to see it.

Boom!

I-

Okay.

Boom. I mean, or file bills just because they feel like they're gonna get something done. And I, I'm gonna get back on my soapbox just for a minute about-

Mm

... um, the amount of money we spend in this state at the state level to tell the local level what to do, especially in schools, is crazy. Um, we've added over four hundred employees to the TEA in the last six years. Um, I mean, that-- we have basically blown that department up.

It's almost two for every county.

Yes, and if you follow the money at the TEA, and you look at why it's being blown up, and all of the private vendors that are testing and doing things that are getting paid in contracts-

The amount of money that gets paid to consultants in public education is wild.

It's wild. I mean, it really is. Um, so I'm just saying, look, as, as we have this voucher debate that's going on, I'm, I'm gonna, I'm gonna take a little bit of a stand here. I, I have always been for somebody's choice of where their kids could go to school. Um, I, I believe we should allow that. I have lots of homeschool friends that homeschool their kids. Um-

But we have school choice.

We have school choice now.

You have the ability-

Right

... to choose not to go to a public school.

Right. Giving me $10,000 with no direct economic benefit of a reason to give me $10,000 makes no sense. I don't need your $10,000. I'm a business owner, a half business owner. Hi, Chad, my other half business owner. We're doing fine, folks. I don't need your money to send my kid to private school if I choose to send him to private school, okay? Now, if we're gonna do something like that, though, don't you think we should have a direct economic benefit to what's happening to that student?

Means tested.

Yeah, or means tested. I mean, you know, you can get into that conversation, too. But we actually passed a really good bill for junior colleges and community college in the last session, that basically ties their funding to the performance of the graduate, or whether somebody graduates or whether somebody gets a job. It's the TSTC model, which is Texas State Technical College is a, a great school, where it's basically you go there, and their funding is directly tied to you getting a job. So it's like, you work here, you get... You graduate, you get a job. I mean, it's a very good program. If we really care about the Texas economy, we should fund all schools: public schools, private schools. Whatever that kid is going to, we should fund a school a base level of funding, with a funding level that is increased based on the economic benefit that that student provides. Um, and we should start to track that. We don't do a really good job of tracking that dollar today. Um, and also, if students just start moving around willy-nilly, why can't they move around within the public districts as well, right? If we're truly gonna compete, let's compete. But hampering one by lifting up another, that really doesn't have to accept all these other students. And then, by the way, not tracking that dollar moving forward is just absolutely nuts to me. It's crazy. If that dollar is public, we should know the direct benefit that is spent on that dollar.

I... You know, I, I just don't think that's very difficult to do in today's world. Um, you know, if they're college-bound, great, give them a bonus.

If they're going to tech school, great, give them a bonus. Like, I feel like every level of the education platform should be, should be funded based on outcomes. We should specifically care about outcomes.

So I think that's fine as a general principle. I, I worry how you would implement it at the public school level, where, like, the baseline funding would have to be sufficient to actually provide the service. But I would worry that you might end up with a growing bifurcation between good schools and bad schools, right? It's gonna compound, because then schools that are already doing well at that are gonna get even more money and have more resources, and schools that are struggling at that are gonna be, uh, working with even less and less relative to the other schools. And so I think you just have to be careful of how it would-- something like that would be implemented-

Right

... to avoid that kind of scenario.

So it's already technically in the public schools. We already technically have that. Graduation rates matter in their funding, so, like, if, if a kid doesn't graduate, they get docked on their funding.... right? On this scenario, on the voucher side, it wouldn't matter. So to put that into perspective, under the bill that's being proposed, and it, it looks like it's probably moving to pass at some point. My wife is a public educator. I've said that before on a podcast, but just make sure I say it now. If my wife decides that she wants to be a private educator, she can start a private home group school, charge ten thousand dollars a kid, take that voucher money, have fifteen kids, work two days a week, and make a hundred and fifty thousand dollars a year. This bill would allow that to happen, right? She has no requirement to make sure that those kids pass any test, right? Now, their SAT scores would be tracked by the state, their ACT scores would be tracked by the state, but there's no, like, penalty on my wife if they don't score high, right? If that kid drops out, she loses that funding for that next school year, for sure, but it's not-- it doesn't penalize her. So you're gonna have lots of people who just start picking these programs up to make this money.

Little pop-up shops.

Little pop-up shops. I mean, you think ARPA was bad? Get ready for this one. This one's gonna be a lot of fun watching.

It's the, the food truck version of schooling.

It is. The food truck version of schooling. So... And I, I think this is, it's gonna be really interesting to watch what happens, but it's just not a thought-through policy. Um, and, you know, frankly, the numbers are crazy, man. I mean, I think, uh, I think Arizona's numbers, um, and Oklahoma's even higher. Um, but I think in Arizona, uh, their numbers are, like, eighty-eight percent of the students who take a voucher were in private school previously. Can you check that real quick? I want to Google that one. It's, it's pretty high, though. But basically, in all of the states that have adopted this program, eighty percent of the students at this point have been in private school previously. Let's go ask ChatGPT this question.

I love that you're getting super, uh, super reliant on ChatGPT.

Yeah.

It's just kind of funny.

Sorry, I'll take that back. Seventy-five percent was the number. "In Arizona's Empowerment Scholarship Account program-

Arizona, okay

... approximately seventy-five percent of the universal voucher recipients were already attending private schools and had no prior public school enrollment."

So you're just giving money to people that were already paying for it?

You, you're just giving money to people-

You're making private school a little bit less cheap for them, a little less expensive for them.

Yeah. Uh, going rate for All Saints Episcopal on the west side of Fort Worth, like, thirty-eight thousand a year. Country Day Academy is up in that high thirties, uh, low forties as well. Trinity Valley, up in those numbers as well. I'm sorry, but a kid from Stop Six or Como who takes ten thousand dollars is not gonna be able to afford the difference between ten thousand dollars and forty.

Saying you-- it should be means tested-

That's correct

... if you're gonna do it. The whole argument, the, the crux of the argument is, we have all of these big inner-city schools that are failing people, and so we need to give those students a way out. So let's give them fifteen, twenty percent of what they need to go to a private school-

Right

... when the rest of that tuition, maybe sixty, seventy, eighty percent of that household, you know, income. Like, this is not doing anything. Ten thousand dollars does nothing to those people in terms of getting them into a private school.

Look, at the end of the day, I, it, it's not even the voucher part that, that kills me. It's not, it's not even the fact that that person's gonna get that. It's, as a taxpayer, I should want to know what the economic benefit of my dollar is.

Are the private schools gonna go through efficiency audits?

That's a question. There we go. You got government money-

Just DOGE for everybody.

The DOGE, everybody. So all right, we're gonna wrap there, guys. Uh-

Also, real quick, can I just say-

Yep

... like, whatever you think of DOGE, the fact that they named it after a meme coin-

Yeah

... I, I think is, is interesting.

Well, and it-

I'll just leave it at that.

Well, and I, I think it's, I think it's also i- important to say, look, you can't be running two trillion dollar deficits.

Of course not.

Right? We have to do something. We, we-- you and I have talked plenty on here about, man, if the federal government was only held to the same accountability standard that state and locals are when it comes to budget balancing, right? We, we'd be, uh, we'd actually be a much wealthier country, uh, than we are right now. Um-

Yeah, 'cause we wouldn't build so many roads and highways.

Correct.

For one.

And, and there, there is a, there is a serious need for Social Security reform, right? There is a serious need for Medicare and Medicaid reform. But wow, the way we are doing things right now, I'm not sure I'd want anybody in that administration to touch those things, right? Um, but let's not forget, 2005, George Bush put forward Social Security reform. He was killed not only by Democrats, but by his own party, right?

Yeah.

And if we would've, if we would've implemented the Bush reform-

Has anyone done a study on what that would've looked like right now?

I saw, I saw it the other day. It's thirty-five thousand dollars a month. So Social Security's max is, like, forty-five hundred, I think. So right now, if you pay into Social Security and then you get to seventy-two, you'll get, you know, the forty-five hundred dollars a month, right? If, if you would have implemented that in 2005 under the s- under the requirements that were there, 'cause it was anybody that was under the age of fifty, I think, that would have been able to do that. But if, like, you were age thirty, you would... And, and all you did was buy a fund that tracked the S&P.

With your... It would've been what? Your six and a quarter, plus your employee's six and a quarter?

That's, that's correct.

So you would've been putting-

Privatized money

... thirteen and a half, or twelve and a half percent of your... Well, okay, six and a quarter percent of your take-home pay, plus an extra six and a quarter percent.

Right.

So that is an actual cost to the employer for you, but it's not technically part of your take-home pay. So either way-... about twelve percent-

Right, it was, it-

-of what you earned into-

Correct

... uh, a relatively simple index fund. Not like-

Yes, so technically, the bu-

Not putting it in something super risky

... technically, the Bush proposal was only to put half of that money in there, in a private account.

Okay.

Half of the money would-

And the rest would stay in Social Security.

That, that, the rest would stay in Social Security, and there would be a hundred billion dollar cost to the federal government at that point, uh, in order to make sure that the fund had enough money in it to, uh, to survive, right? Uh, was, was basically the numbers that were thrown out around that time. Um, but if you had done that, if you'd put half that money in the S&P over that period of time, and it would've just followed the S&P, you, you would've made like... It, it came out to, like, thirty-four thousand dollars a month-

And that's even-

-that you would've had

... accounting for-

In '72

... 2009, 2020-

Yes

... like, all of the stock market disruptions-

That's correct

... that we've had since then.

That's correct. And not only that, but think of the overall economic benefit we would have had.

So this was my concern, is that putting that much extra money into the market would have just goosed it and given us an initial, like, bump. Um-

But it wouldn't have been all at once. It wouldn't have been all at once, right?

It would've been a little bit.

It would've been, it, it-

It wouldn't have been... True.

Yeah.

But it w- if we had that many people start immediately investing that much more money every single month, it could have had a goosing effect on the, on the market, which could have made it seem like it was a much better idea.

Right.

It's, it-

Right, right. It would have overvalued stocks.

Yeah, like ceteris paribus-

Right

... yes, we'd be here now, and you would have been able to get X amount, number of dollars monthly. But would that have changed any of the market dynamics along the way? I don't know.

It, it, it would have. I mean, and, and the answer to your question is yes, it would have inflated the market. There's no doubt. The analysis that was done was done on if it just followed the S&P the way it had performed.

Right. If it had no impact on the-

I think the S&P would've... Yeah, the, the S&P, if it had no effect, and, and the reality is it would have had an effect. It would have inflated the cost of stocks, and, and that, that would have actually driven up, uh, some things associated with that. It would have had an impact, for sure, but, you know, it's, it's real hard to know exactly what it is, 'cause that's such, just such a free-flowing market. Um, but I think it speaks to the fact of people do not understand that Social Security is not invested.

No, it's spent on-

It's spent.

Well, right now, every dollar, actually, we spend out more dollars than we take in.

That's correct.

Right.

In 2035, it will be fully bankrupt.

Yeah, but up until recently, what we didn't spend went elsewhere-

Right

... to the federal government.

Right.

So-

So-

Which is why Al Gore wanted a lockbox.

Mm-hmm.

Have you ever gone back to listen to some of those old debates? Uh, for some reason, I went back, uh, over the summer, uh, obviously, 'cause it was an election year. But I went back to go watch some old d- debates, and I, I happened to watch the lockbox one, and it was just-- it was really funny to hear him say that word, like, 40 times.

I've been watching, um... I've actually gone back and watched a lot of Reagan's speeches. His library, like, has all his speeches on there, and so I've just kinda gone through them, like, one by one, little by little, when I've got some time, and listened to him. I actually posted on my Facebook the other day about his Evil Empire speech 'cause I thought it was very telling on what we're going through in the Russian-Ukraine conflict. Um, and in his reference in that, if you just get some time, I'm not gonna have any opinion on here, but his reference to C.S. Lewis's Screwtape Letters, uh, which I'm not a big book reader. Uh, shout out to Brittany Huff, by the way, for she actually handed me a copy of Screwtape Letters for me to read. Um, and, and wow, Reagan's reference to, to Russia, and Marxism, and communism, and the imperialist thoughts of those thought processes, um, and how they relate to C.S. Lewis's writings is just, it's a phenomenal speech. Uh, it's not even that long, it's just a phenomenal speech. Um, his speechwriter was just, I mean, a star, uh, in the things that they were able to put together. Uh, but let's not forget that Reagan... Reagan was against his party on a lot of issues. He lost elections coming up because he was against the grain. Um, and, and I think in today's world, that's probably what you're gonna have. You're gonna have something like that. Um, you know, it's a very interesting political environment out there. Right now, you have the, the, the most precipitous drop in presidential approval ratings within the first 90 days in the history of the American presidency, just to put that in perspective. So it's, it's, it's very interesting. It- this is a "I'm gonna tear the Band-Aid off" approach because I- if I don't do it within the first 18 to 24 months before I get to the midterm election cycle, I'm not gonna be able to get it done. So I'm gonna try to get everything I can get done now. So we're gonna have two years of this, and then we are gonna have two years of elections.

Impeachments.

And impeachments, and we know that's coming. And if I'm Elon Musk, I'm not sure I really want that, right? Like, it's... E- Elon is, Elon is gonna be living at Congress two years from now. Um, and, you know, people are like: "Oh, well, you know, it's, there's not gonna be a big switch." Show me the last presidency that we didn't have a switch at the midterms, folks. Let's have a conversation. Like, American history is American history, so it's been a while.

Yeah, I think it was 2002.

Yeah, after 9/11. Yeah, and before that-

Yeah, 'cause-

I think it was-

... Obama's first term, we had the Tea Party.

Yep.

And then I'm pretty sure both Trump and Biden lost.

Which, to be fair, I- DOGE is very similar... I had this conversation the other day with, uh, with a government official. DOGE feels very similar to the Tea Party to me. Um-

Except it's in the executive branch instead of Congress.

Right, right. But there's like a s- a, there's like a kernel of truth-

It definitely feels like all of the Tea Party council members that got elected-

... and the mindset that they had coming in to council.

Right.

Right.

Yeah, go ahead.

Yeah, so I, I just, you know, but in Tea Party, there was always, like, this kernel of truth that they had, right? They're like: "The government wasn't transparent enough, and we didn't know enough, and da, da, da, da, da." And DOGE is doing a really good job of tapping into that, too, right? Like: "I can't believe we spent this money here." Uh, or, or my favorite, uh: "I can't believe we're paying all these dead people Social Security," um, "and, and why, why are all these people in there?" Well, one, they're actually not receiving checks. And, and two, I mean, you code, when you insert a null value, they had a very specific number format that they used for that null value, right? And so y- I, I can't remember what the date was, but it was, like, 1875.

Yeah.

There was some sym- symbolic reason they used 1875. I can't remember what it was.

Uh, I'm, I'm sure it has to do with COBOL, but it also could have just been because it was so out of range that you would know it wasn't real.

Yes. So but the 22-year-old coder that was working behind the scenes, who came up with that and sent that information out, forgot to basically tell them that that was the null value. So but, hey, you know, I guess you actually have to work in government to understand how those numbers are gonna work. So that's why we say all the time, like, y- you know, we can't just go hire somebody who doesn't understand the industry that we're in. I mean, we tell our own kids, like: "If you want to get in this business, you have to go work in cities for 10 years. No ands, ifs, or buts, you gotta go do it." So you have to understand where we... what we do and why we do it. Um, I'm sorry, but you can't, you can't take the coder from SpaceX and be like: "Hey, why don't you come in here and tell me how government should run?" Um, good luck. Long-term, it's just not a long-term solution. And oh, by the way, my favorite is anybody who knows anything about governmental budgeting, just because I cut the workforce, does not mean that the workforce goes away. Those FTEs, full-time equivalent employees, are budgeted employees, so just because I laid off 30% of them, when a Democrat gets elected, they get to go hire that 30% back.

Still authorized.

They're still authorized, so we still-

And-

-have to work with Congress.

Now, you have salary savings.

True.

Salary savings are where you get to do all the fun stuff.

First off, you know, every city manager just heard you said that and started laughing, right? So now I have salary savings where I can shift that money to something else in the department-

Mm

... that's not actually cut, right? So, um, anyways, all right, let's wrap it up, man.

Yeah.

That, that was-

That was supposed to be a 30-minute one, and we've been pushing well over an hour.

We've been pushing for a little while. So, uh, I hope you guys enjoyed this episode. If you got any questions for us, as always, you can reach out to us. I'm Patrick. This is Chad. We're available by email at patrick@zactax or chad@zactax.com. Uh, and you can get us on our socials as well. Uh, but, uh, hopefully, this one comes out. Uh, we- we're using a new studio platform for the podcast, so hopefully, this one comes out well.

Yeah.

Chad?

Let us know in the, in the... well, there's no comments, but you can just email us and let us know if it was any better or worse.

Right.

Not the content, like the audio quality and all that kind of stuff, the, the technical side.

And please listen to us, please listen to us on Spotify, 'cause Chad is a big fan of Spotify.

You know, we might actually post the videos here, and then you could watch it on Spotify.

Oh, that's pretty cool. I like that.

Yeah.

Oh, your video-

My kind of-

... ebbs and flows, so.

A little, yeah, well, but I'm recording it on my end, and yours is on your end.

Ah!

Yeah.

So smart.

Yeah.

Look at that. Look at that.

Yeah.

So-

All right, well, it's spring break next week. You're gonna be gone.

Yeah.

I'm gonna be gone the week after, which is a normal podcast week, so I may try to do something next week. Like, I may bring someone on, um, or something, just so we have an episode, but if not, we'll see you guys after, after the s- the spring break time.

Yeah. Do you need any bananas and avocados when I go to Mexico?

I don't think you can bring that back.

Oh, I was trying to avoid the 25% tariff on avocados.

Yeah. Where was I? Um, I'm trying to remember. Oh, oh, it was in Palm Springs. Um, someone had... was, like, stopped by Customs, and they had police and everything over because they had tried to bring food back into the country.

Oh, man.

Like, their bag was all over the floor, and they, they were, like, pulling food out.

Yeah.

Wow.

Coolest airport I've ever flown out of, by the way.

It was interesting.

Outdoor, outdoor airport, was very awesome. So terrible in the summer, by the way, but-

I would imagine so, yes.

Yeah.

But not so bad-

It was awesome

... in February.

All right. Cool. Kudos. See you later.

Adios.

Bye.