UPDATED: Hours after this post the Comptroller released the Revenue Estimate for the 2014-15 biennium as $208 billion with the Rainy Day Fund at $11.8 billion.
Texas is expected to have $8.5 billion more than the Comptroller estimated last year for the 2014-15 biennium, but it doesn't mean that hardline conservatives in the Texas legislature are eager to spend it. During the interim Texas state-level politicians are quick to talk about the explosion of economic growth but get weak-kneed during session when discussing how that growth is increasing the demands of key budget drivers like public education, health and human services, transportation and water infrastructure.
At the beginning of last session (82nd) the Legislative Budget Board estimated the gap between available revenue and current service demands to be $27 billion. The 82nd legislature dealt with this shortfall in several ways. To attain additional revenue they tapped the Economic Stabilization Fund (Rainy Day Fund) for $3.2 billion, increased one time revenues by $1.4 billion and recurring revenues by about $700 million. To find savings they reduced the entitlement funding to local school districts by $4 billion (5%, or about $500 per student), used an accounting trick called deferred payments to delay payments to local school districts into the next fiscal year valued at $2.3 billion, they also underfunded the growth in Medicaid by $4.3 billion as well as reduced spending in other areas. Some of those other areas include student financial aid, the state contribution to retirement and health care programs for state employees and retired teachers, certain direct services provided by state agencies, and formula funding for institutions of Higher Education. And, another fancy accounting trick called cost shifting was used. Some of the cost shifting measures the Legislature took were tuition deregulation, an increase in reliance on bonds and cost shifting to state employees through health insurance changes.
“the fiscal challenges the Texas Legislature faced in 2011
developed during the previous five years.” -LBB
Unfortunately these fiscal challenges will continue to persist because what the 82nd legislature did not do was address the $10 billion per biennium structural deficit. The deficit was cause in 2006 when the legislature voted to cut local property taxes by ? and “replace” the funding to local school districts through increased General Revenue Funds by implementing a business margins tax that has sorely underperformed.
Democrats made modest gains in the House breaking the Republican's 2/3s majority, but 83rd legislature will bring many new Republican members that promised to be more conservative than their predecessors. This could set the stage for an uncomfortable inner-party struggle between the more seasoned moderate Republicans willing to work with Democrats and the surge of Tea Party Republicans that will inevitably attack them for raising any additional revenue. After realizing there's not much that can be cut after last session, Republicans might recognize their Governor wears no clothes. The true believer of smaller government is officially retired, meaning drawing a pension from the state as well as a bloated salary. And, when he says, “Texas is open for business” he means the almost $1 billion in corporate welfare that has been given to companies to create jobs through his pet projects the Emerging Technology Fund and the Texas Enterprise Fund.
“In Texas, we understand that high-tech companies don't just happen overnight but are a product of forethought, sound vision and planning, and strategic investments by both the public and private sectors. Through our Emerging Technology Fund, we are bringing the best scientists and researchers to Texas, attracting high-tech jobs and helping start-up companies get off the ground faster.”
- Gov. Rick Perry
Now reread that quote replacing “high-tech companies” with “educated workforce”, and “Emerging Technology Fund” with “Public and Higher Education systems” and I think we'd be on the right track. It all begs these questions – Does the Texas budget reflect Texas values? Do Texans want the most conservative legislature, or one that addresses the real needs of our growing state?