Texas Legislative Watch: The Shortfall

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The Great Recession has affected everyone's budget. From the federal government to the millions of Americans unemployed, budgets across the nation have been affected by the worst economic downturn since the Great Depression. State budgets have been also hit hard by the recession. A recently released survey by the National Governors Association and the National Association of State Budget Officers found that states currently face a combined $41 billion in budget shortfalls for fiscal year 2012. According a report by the Center for Budget and Policy Priorities, state tax revenues were 8.4% lower in the 2009 fiscal year than in 2008, and an additional 3.1% lower in 2010, while the need for state-funded services did not decline.

Already during the last fiscal year those states dramatically cut their budgets, raised taxes, and relieved heavily on the $43 billion in federal Recovery Act funds to close those budget gaps.  Over the past three fiscal years, states have closed $230 billion in budget gaps, and they done it by making significant budget cuts in education, social services and public safety, the state workforces and reduced aid to local governments. These cuts are having a disproportionate affect on the working and middle class, as services that they depend on are being either cut altogether or dramatically scaled back.

Despite the rhetoric of Texas Governor Rick Perry describing Texas as being relatively unaffected by the Great Recession, the state is facing a significant fiscal crisis. There is a debate about the actual size of the budget shortfall, and the numbers vary from anywhere between $15 billion and $30 billion depending on who is making the estimate. Governor Perry is touting the estimates of State Senator Steve Ogden (R-Bryan) which predict a budget gap of $15 billion or less.

The Legislative Budget Board has adopted a plan to cap the growth in the discretionary spending in the state budget at 8.92% in the budget that will be written in the next legislative session. Cuts of 5% from state agencies produced about $1.2 billion in savings in the 2010-11 budgets, although certain agencies were exempt. It appears that agencies will be expected to cut their budgets by another 2-3%. Reportedly approved cuts from earlier this year, together with the agencies' proposals to reduce spending by 10 percent in the next budget, would produce an estimated $4.2 billion in savings in the 2012-13 budgets.

While Texans are opposed to raising revenues through new taxes and want lawmakers to cut the budget to address the shortfall, a Texas Tribune poll also finds that Texans do not want lawmakers to cut the budgets of popular programs. Texans want to protect public and higher education, health care services for children and elderly, and the prison system from budget cuts. However, in all likelihood at least two out of three of those programs are going to face massive budget cuts. This seems to be consistent with the current American political character: we want to keep popular government programs but we don't want to have to pay for them.

More Below the Fold…

The 82nd Texas Legislature will face quite a challenge when it comes into session next month, and the incoming Republican majority will likely face a more difficult challenge from reality than it will from Democrats. With a near supermajority in the State House, members will need to bridge ideological divides in their own caucus as Democrats will be unlikely to make much of an impact in the legislative process. In the State Senate, Republicans do not have as large of a majority, but lawmakers have begun discussing eliminating the Texas version of the filibuster to remove the last obstacle to complete Republican rule. Republicans will then have to face the reality of closing a budget shortfall after painting themselves into an ideological corner. No new taxes. No use of the rainy day fund. Nothing but cuts.

It is important to note that it the Texas state budget is not exactly bloated. While education is likely to be one of the hardest hit areas of the budget, according to the Editorial Projects in Education Research Center, Texas spends $7,561 per student which ranks 48th in the nation. In fact when you look at what Texas spends on the entire budget, according to Tax Foundation Texas spends $3,831 per capita, which is the least amount spent per capita in the entire nation. Republicans are going to have to cut one of the most comparably leans budgets in the country, while not raising taxes. Taxes which by the way are the seventh lowest in the nation.

As the budget shortfalls looms, State Senator Kirk Watson has called to revamp the budget process in a three-part program designed to make the budget process more responsible and accountable. Watson recently gave a speech to business and civic groups at the Bullock Texas State History Museum, during which he said that “For years, those in control have balanced the budget with a combination of debt, diversions and deception.” During the speech Watson laid out a plan to make the budget process more transparent to the public, and to end unfunded mandates. While these reforms are unlikely to be supported by Republicans, Watson has begun to do exactly what Democrats need to: embody the party of alternative ideas that supports working and middle class Texans.

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