Texas' financial black hole widens
By Richard Whittaker,
3:59PM, Sat. May 29, 2010
As Gov. Rick Perry and Lt. Gov. David Dewhurst attempt to distract Texans from their failure to protect the Texas environment, more stunningly awful news about the budget: They and Speaker Joe Straus want agencies to cut 10% from their general revenue spending next session.
It had already been a bad week on the state finances front, with Rep. John Otto, R-Dayton, telling the Special Committee on Fiscal Stability that the state is almost out of bonding capacity. Now the GOP leadership has asked agencies, which have just started their budget request calculations for the 2012-13 budget cycle, to construct a supplemental schedule with a 10% reduction in general revenue and dedicated general revenue spending.
A supplementary letter for the Legislative Budget Board clarifies the situation, and it's even worse than it first seems. The board says that the starting point for any calculations isn't the current 2010-11 budget the the legislature passed last session, but the recently and retroactively revised version with 5% slashed out of it.
In a press release, Perry said, "This request for 10 percent reduction proposals for the next biennium builds on our ongoing call on state agencies to tighten their belts so Texas can continue our commitment to keep taxes low, attract businesses and create jobs as we continue to lead the way out of the national economic downturn."
However, the Center for Public Policy Priorities has warned Republican leadership that this "cut and cut again" approach is a catastrophe waiting to happen. Their solution is to tap the Rainy Day Fund as a short term stop gap, then actually revise the state's malfunctioning tax base.
The request does include exemptions: On the pure finance side, the LBB protects bond service payments and cash to fulfill employer contribution requirements for state pension and employee group benefits (worrying coda there: The letter warns that "group benefit modifications may be considered.") Medicaid, health and human services eligibility staffing are also off the table.
Most of the exemptions involve children, with protections for CHIP, foster care, and the Foundation School Program. However, that still means massive and swiping cuts may be on the table for the rest of the educational system. Texas AFT President Linda Bridges called this proposal "a glib request to 'tighten our belts.'"
She put the blame on the "faulty 2006 tax swap that cut school property taxes without fully replacing the lost revenue from alternative tax sources as promised." The end result, she noted, is a $9 billion deficit. The recent 5% cut meant $120 million went out of Texas Education Agency funding. What was targeted, she warned, were services like dropout prevention, community service and intensive summer programs – those generally designed to keep at-risk students in school. "We're past the last notch on our public education belt," she warned.
That 2006 swap Bridges highlighted was the the misguided attempt to pay for school property tax relief with an extended business margins franchise tax, and even fiscal conservatives like Rep. John Zerwas, R-Richmond, have sought to replace it with a tax that actually works.
As for the Rainy Day fun, that could become the subject of a game of political brinkmanship next session. Perry and the conservatives may remain committed to sinking it into property tax relief next session, but more moderate Republicans have joined the broad chorus that it must go into shoring up the budget next session. However, to tap the fund they'll require a 2/3rds majority in the legislature: Sen. Kirk Watson, D-Austin, has already warned that he will not vote to tap the Rainy Day Fund unless there are serious efforts to fix the structural deficit constructed under Perry's administration. At a recent Texas Tribune breakfast, Watson said, "We come back session after session and try to put Band-Aids [on] and the Band-Aids are all washing off."
All of which loops back around to Perry's claim that everything he does is all to encourage business. With a crumbling infrastructure and three our of every five students in Texas schools coming from economically disadvantaged families, how is that encouraging anything?