Texas Republicans Make $9 Billion Rainy Day Fund Off Limits

Tuesday, 18 January 2011 06:42 AM

The two-year budget plan that the Texas House of Representatives will release today may eliminate more than 8,000 jobs and cut spending on schools, universities and social services by 11 percent. It will not tap $9.4 billion set aside for deep economic stress, Republicans say.

The Rainy Day fund will grow 14 percent by Aug. 31, 2013, bolstered by revenue from levies on oil and gas production, State Comptroller Susan Combs estimated this month. The fund has risen sixfold since 2007 as other states drained reserves to balance total deficits likely to top $190 billion over the next two years, according to the National Conference of State Legislatures.

While Texas is spending $87 billion of general-fund revenue in its current two-year budget, it won’t expend more than $77.3 billion in fiscal 2012 and 2013, Governor Rick Perry said in a Jan. 13 speech. Using the reserve would delay efforts to set the state’s fiscal house in order, he said. Texas voters in November supported Republicans who pledged to cut spending and not raise taxes in one of seven U.S. states without a levy on personal income, he said.

“We don’t have shortfalls in Texas,” Perry told reporters last week. “You prioritize what’s important in this state. We will fund those.”

States across America are bracing for a brutal budget season. The Illinois Legislature last week increased personal and corporate taxes to plug a deficit of at least $13 billion, yet the state still faces a backlog of at least $6 billion in unpaid bills. California Governor Jerry Brown’s proposed budget would cut $12.5 billion, mainly from welfare programs and universities. In Washington, Governor Christine Gregoire is confronting a $4.6 billion gap by slashing health care and education.

Bigger Classes

Texas’ public schools and universities, which receive 56 percent of the general fund’s expenditures, are bracing for billions in spending cuts that will mean bigger classes and fewer courses, Representative Scott Hochberg, a Houston Democrat, said at a Jan. 14 conference in Austin.

Many school superintendents and hospital administrators are pressing legislators for help that won’t come, Representative Jim Pitts, the House’s main budget writer, said in an interview last week. “The votes for more spending aren’t there,” said Pitts, a Republican from Waxahachie.

Many Republican legislators oppose using the reserve, he said. Tapping the fund requires two-thirds support in the Legislature, which is composed of 120 Republicans and 61 Democrats.

In the wake of a pledge to avoid new or higher taxes, legislators will have to cut spending as public schools add about 75,000 students annually, Amy Beneski, a lobbyist for the Texas Association of School Administrators, said in a telephone interview.

Hurting Hispanics

About 56 percent of Texas students are considered economically disadvantaged under state formulas, she said.

“Most of the growth in student population in Texas is Hispanic, so they will be the ones most affected,” Representative Roberto Alonzo, a Dallas Democrat, said in a Dec. 13 interview. “If we are not using the Rainy Day fund now, in this economic period, then what are we waiting for?”

Amanda Engler, a spokeswoman for the Texas Hospital Association, which represents 85 percent of the state’s hospitals, said the sick will suffer.

“Health care is a target, yet cutting care to some of the most vulnerable patients is not the best way to growth in our state,” she said.

Untouched for Years

Texas voters approved the Rainy Day Fund in 1988 under rules that it receive oil and gas production taxes exceeding 1987 levels, plus money left at the end of each two-year budget period. Legislators used $3.2 billion from 2003 to 2007 to help pay for children’s health insurance, cover shortfalls in the Medicaid and retired teachers’ health insurance programs and to finance two economic development funds championed by Perry, according to a report last April by the Center for Public Policy Priorities. The Austin-based research group favors more spending on education and social services.

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--Editors: Stephen Merelman, Andy Davidson.

To contact the reporter on this story: David Mildenberg in Austin at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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The two-year budget plan that the Texas House of Representatives will release today may eliminate more than 8,000 jobs and cut spending on schools, universities and social services by 11 percent. It will not tap $9.4 billion set aside for deep economic stress, Republicans...
Tuesday, 18 January 2011 06:42 AM
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