BUDGET

In response to the Great Recession, the Legislature chose to make extensive cuts to school funding instead of using the Rainy Day Fund to protect Texas school children, putting the state’s economy and long-term prosperity in jeopardy.

State and local funding for preK-12 education is 11.2 percent below 2008 levels in Texas after adjusting for student growth and inflation, according to a report released by the Center on Budget and Policy Priorities, a non-partisan policy research organization based in Washington, D.C.

On August 22, the first Legislative Budget Board-Governor’s Office public hearing on funding requests for the 2014-15 biennium was held at the Capitol. These hearings will continue through September and are the one opportunity for the public to comment on budget proposals for education, health care, and other critical state services before the regular legislative session starts in January 2013. This paper contains the scheduled hearings for the agencies overseeing key state services for low- and moderate-income Texans, and all of us.

Texas one of six states studied in detail

(AUSTIN, Texas)�"The State Budget Crisis Task Force, a national blue-ribbon group convened by Richard Ravitch and Paul Volcker to study state tax and budget issues, released its recommendations today at a press conference in Washington, D.C.  Texas was one of six states studied in detail. We have closely followed the work of the task force.  Several of its recommendations are important for our state.

On June 4, the Governor’s Budget Office and the Legislative Budget Board issued budget instructions to state government agencies, state courts, and public higher education institutions. For most state services, these instructions define the General Revenue (GR) baseline for the coming 2014-15 biennium at the reduced funding levels established by the 2011 session’s budget cuts. Because these instructions do not allow the baseline to grow enough to cover population growth or cost inflation �" what “current services” proposals would require �" they keep Texas on the wrong path by concealing the true consequences of an ever-growing population. Agencies and universities must also describe how they would cut GR spending by another 10 percent. The Legislature will use the baseline proposals to write the draft budget bill it will consider in 2013.

Executive Director F. Scott McCown on Texans for a Conservative Budget Coalition’s “Real Texas Budget Solutions: 2013 and Beyond.”

During the legislative session, we recommended that the state spend the Rainy Day Fund to prevent damaging cuts to vital state services, particularly public education. The Rainy Day Fund is a constitutional fund designed to save money in good times to pay ongoing expenses during bad times when revenue is short. After the economy improves, and revenue rebounds, general revenue once again pays for ongoing expenses. During the 2011 legislative session, with billions available for appropriation from the Rainy Day Fund, the state had no need to cut spending on public education�"the proven path to good-paying jobs. Unfortunately, the state cut public education spending by $5.3 billion.

The center on the President’s budget released yesterday:

“The center applauds the President’s budget for the significant progress that it would make toward reducing deficits without undermining our economic recovery or balancing the budget on the backs of the poor and middle class."

2011 was a big year, with a fierce battle at the Capitol for Texas children and famillies, numerous honors and awards, the release of our Better Texas Film, and our 25th Anniversary Legacy Luncheon, where we announced we will be expanding to a new space on North Lamar.

This report analyzes our state’s new budget, focusing on areas that are especially important to low- and moderate-income Texans. The report looks at both “General Revenue” spending (revenue that is primarily from state taxes) and “All Funds” spending (which also includes federal revenue, general revenue that is statutorily dedicated to a specific program, and “Other” legally earmarked revenue such as State Highway or Property Tax Relief funds).

Senior Fiscal Analyst Dick Lavine on the Texas Comptroller of Public Accounts revised revenue estimate released yesterday.

“To meet the needs of all Texans for education�"the proven path to better jobs�"and health and human services�"vital protection for Texas families�"our state must reform its out-of-date revenue system."

Executive Director F. Scott McCown on a balanced budget amendment to the U.S. Constitution.

Executive Director F. Scott McCown regarding what should be done by the Joint Select Committee on Deficit Reduction (the “supercommittee”). The Budget Control Act requires the committee to propose by October 14 a way to reduce the federal deficit by $1.2 to $1.5 trillion over the next 10 years.

“For the good of the country, the committee needs to succeed. But success requires a balanced package that combines selected revenue increases with careful spending cuts. A cuts-only approach would devastate low- and moderate-income Americans because it would mean severe cuts in critical areas like Medicare, Medicaid, and Social Security.

“Our state would be among those hit hardest by a cuts-only approach because we have so many low-income families. Doing nothing would also be hard on Texas because it would trigger automatic cuts, including to defense. Texas benefits from significant federal spending, including from military bases and defense contracting. Most important, though, is that doing nothing would leave the country with an unsustainable imbalance between revenue and spending."

In a brutal budget session, child protective services (CPS) fared better than most state services for 2012-13. The proposed rate cuts for foster care and adoption payments were not implemented and some caseload growth for these programs was funded. At this funding level, CPS hopes to move forward with its proposal to redesign foster care to help children move to permanency faster. With the budget, CPS can actually start hiring new staff to work with children and families at the start of state fiscal year 2012. Finally, funding for families services was maintained at 2010-11 levels.

But the overall budget for CPS is 10 percent less than what CPS estimated it needed for the biennium to help families affected by child abuse and neglect. Caseload growth for family services was not funded and statewide intake staff, adoption services, and child abuse and neglect prevention programs were cut. The specifics are discussed below.

At the end of the regular session, the Legislature was poised to pass SB 1811, a fiscal matters bill that included rewriting the state’s school finance laws, when the clock ran out. Because the Legislature underfunded schools in the state budget by $4 billion from what current law says schools need to meet the state’s educational goals, the Legislature now must devise a new school finance plan to determine how much each school district is to receive.

On Thursday, when it takes up SB 1, the House will again confront the question of how to distribute $4 billion in cuts to schools. SB 1 is essentially SB 1811 all over again. Based upon discussions in the House Appropriations Committee, we anticipate several floor amendments to SB 1 that would significantly improve this legislation and set the stage for progress in the next session. In this short paper, we explain the problems in SB 1 and how they can be mitigated by floor amendments.

Executive Director F. Scott McCown released the following statement today in response to the budget committee conferees agreeing on the state budget for 2012-13.

“If the Legislature adopts this budget, the Legislature will have failed to meet the needs of Texas.

“The far right’s demand that our state’s revenue crisis be addressed by cuts alone instead of through a balanced approach that uses the Rainy Day Fund and adds new revenue has forced damaging cuts to essential state services. For the present biennium, 2010-11, the state’s general revenue budget totals $90 billion (roughly $82 billion in state general revenue and $8 billion in federal recovery dollars). To provide the same public services in 2012-13, because of more people and higher costs, the Legislature would have to spend at least $99 billion in general revenue. The conferees’ budget deal (with HB 4) would appropriate just under $80.7 billion, leaving the state short more than $18 billion�"about $5 billion of which would have gone to public education.

“A balanced approach was the better choice."

As the session draws to a close, the Legislature must make adjustments in the state’s school finance plan because the Legislature is underfunding current law by close to $4 billion. In essence, the Legislature must determine how to distribute $4 billion in cuts to school districts.

At this point, the vehicle for making changes is Senate Bill (SB) 1581, which Representative Aycock is carrying in the House. Earlier the Senate amended SB 1581 to include SB 22 by Senator Shapiro, commonly called the Hybrid Plan. Now the House must decide whether to keep Shapiro’s Hybrid Plan or amend SB 1581 by replacing the Hybrid Plan with either the Hochberg plan (which eliminates Target Revenue but keeps all program weights the same as current law) or the Eissler pro-ration amendment (an across-the-board cut to Target Revenue).

CPPP urges House members to adopt the Hochberg plan as the principled way to distribute $4 billion in cuts and as the best way to ensure adequate support for public education in years ahead.

“Today the House takes up fiscal matter bills that will determine whether the Legislature can write a budget in the 12 days remaining in the session.The House should encourage its budget conferees to accept the Senate budget, and the House should make the money available to do so through the fiscal matters bills.

“While the Comptroller’s new revenue estimate makes $1.2 billion more available, the conference committee needs that money plus everything in the fiscal matters bills to fund the Senate budget, allowing the Legislature to minimize damaging cuts to public education, higher education, and health and human services.

“At the end of the day, if the House remains short of revenue to fund the Senate budget, we again call on the House to use more of the Economic Stabilization Fund. The Comptroller’s new revenue estimate forecasts another $300 million available for appropriation, and knowledgeable experts suggests that the fund may grow even more. We urge the House to be open to using the Rainy Day Fund to close a budget deal.”

Executive Director F. Scott McCown sums up the case for using the Rainy Day Fund for 2012-13:

“Texans aren’t supposed to protect the Rainy Day Fund. The Rainy Day Fund is supposed to protect Texans. Voters created the Rainy Day Fund by constitutional amendment in 1988 to offset unforeseen falls in state revenue just like the state faces now. The Legislature should use the Rainy Day Fund to bridge the revenue hole created by the Great Recession."

The Texas House and Senate have adopted two different budget bills, and a conference committee has begun to work out a compromise budget.

Both chambers provide less money for Texas health and human services than was budgeted in 2010-2011. But the Senate’s version of the budget provides substantially more money for health care and social services than the House version.

The House and Senate have each appointed members to the conference committee that will write the final state budget. We urge you to contact the conferees and ask them to write the best possible budget for Texas. CPPP is urging the conferees to at least write a budget as good as the Senate budget.

Two years ago, several groups sent a letter to the Texas Legislature urging the Legislature to save the Rainy Day Fund “to address future potential shortfalls as a consequence of the current economic downturn.” Now the same groups have sent a letter to the Texas Senate opposing the use of the Rainy Day Fund to address the current $27 billion shortfall caused in large part by the economic downturn.

These groups have lost touch with reality.The agenda of these extremists is not to save the Rainy Day Fund but to permanently reduce state spending in service to their agenda of ever lower taxes. Instead of pretending otherwise, these groups should just say what they really mean�"they don’t care.

Executive Director F. Scott McCown's statement in response to the Senate adopting its version of the state budget for 2012-13.

A list of potential new revenue to balance a state budget.

Two years ago, several groups sent a letter to the Texas Legislature urging the Legislature to save the Rainy Day Fund "to address future potential shortfalls as a consequence of the current economic downturn." Now the same groups have sent a letter to the Texas Senate opposing the use of the Rainy Day Fund to address the current $27 billion shortfall caused in large part by the economic downturn.

These groups have lost touch with reality.The agenda of these extremists is not to save the Rainy Day Fund but to permanently reduce state spending in service to their agenda of ever lower taxes. Instead of pretending otherwise, these groups should just say what they really mean�"they don't care.

The Senate Finance Committee (SFC) proposed budget for 2012-13 would reduce All Funds and General Revenue support for state services by 5% compared to 2010-11 (after including a $2 billion delayed Foundation School Program payment and $3 billion from the Rainy Day Fund). In a state that is already near the bottom in state spending per resident, the implications of these reductions are even worse when Texas's growing population and rising health care costs are taken into account. In "current services" terms, the SFC budget proposes General Revenue cuts of 13% overall, and would leave billions of federal dollars for health care and other social services unmatched.

(AUSTIN, Texas)─Center for Public Policy Priorities Executive Director F. Scott McCown released the following statement today in response to comments made yesterday by Lt. Governor Dewhurst on the use of the Rainy Day Fund by the Senate Finance Committee in its version of the state budget for 2012-13.

“One week ago today we applauded Lt. Governor Dewhurst and the Senate Finance Committee for their valiant attempt to write the best state budget possible given the Great Recession and the political climate. Yesterday in comments to the press, however, the Lt. Governor disavowed the committee budget saying he “disagreed” with the committee’s use of the Rainy Day Fund.

“Unfortunately there is no path to an acceptable budget that does not use billions more from the Rainy Day Fund. In light of Lt. Governor Dewhurst’s position, we turn from applause to jeers. We urge every Senator to vote no to bring the budget up for debate. If the budget comes up for debate, we urge every Senator to vote no. There is no reason to support a budget that the Lt. Governor won’t help defend in conference.

“Unless the Lt. Governor and the Speaker make a decision to stand up to the Governor and to the far right, we see no good outcome to our state’s budget struggle.

“We urge Texans to call upon Lt. Governor David Dewhurst and Speaker Joe Straus to disavow the know-nothings trying to wreck Texas and to provide the leadership Texas needs to cope with the aftermath of the Great Recession.”

The Center for Public Policy Priorities supports Senate Bill (SB) 68, which would establish sensible contracting standards to ensure that state agencies make informed decisions when outsourcing state services or assets. We want to thank Senator Zaffirini for her hard work in developing this comprehensive approach to strengthening state contracting practices. SB 68 establishes the same standards for business analysis and planning that you would use in your own company to get the most out of outsourcing. We urge you to pass this legislation today.

Executive Director F. Scott McCown released a statement in advance of the Senate Finance Committee voting this week on its version of the state budget for 2012-13.

Below is CPPP's county-by-county analysis of the 2012-13 state budget for major essential services, such as health and human services, public education, and higher education.

House Bill 13 by House Public Health Committee Chairman Lois Kolkhorst would direct The Texas Health and Human Services Commissioner to seek a “waiver” of federal law to dramatically restructure the Texas Medicaid program. In laying out the Committee Substitute for her bill, Chairman Kolkhorst identified a recent Rhode Island “1115 waiver” as a model for what Texas might seek. CPPP testified in opposition to the bill. Our testimony details our objection to overly broad terms of the bill that do not give any guarantee of protections for current beneficiaries, covered populations and services. We detail a list of specific provisions which would prevent the concept from being workable in Texas without substantial additional changes to Texas law and protections for Medicaid’s vulnerable population of children, seniors, Texans with disabilities, and expectant mothers.

Executive Director F. Scott McCown made the following statement in response to the House passing House Bill 1, its proposed state budget for 2012-13.

On March 29, 2011, Dale Craymer of the Texas Taxpayers and Research Association wrote Chairman Pitts criticizing the Legislative Budget Board’s dynamic impact statement for Committee Substitute House Bill (CSHB) 1, suggesting that it is not a useful tool for evaluating the proposed budget. In fact, the dynamic impact statement is a very useful tool and suggests that an alternative that takes a balanced approach using rainy day dollars and adding new revenue is preferable to CSHB 1. As we explain briefly in this letter, spending rainy day dollars from the Economic Stabilization Fund to avoid cuts in state spending is a way to increase revenue without a tax increase, and there are other ways to increase revenue that are better for the economy than cutting state spending.

On Friday, April 1, 2011, the House is scheduled to debate and vote on the Appropriation Committee’s proposed state budget for 2012-13, officially the Committee Substitute to House Bill (CSHB) 1. We have prepared a short summary of the top five reasons to reject CSHB 1.

The House Appropriation Committee’s proposed budget for 2012-13 would reduce total funding for state services by 12 percent compared to 2010-11, and by 14 percent for the General Revenue part of the budget. In a state that is already near the bottom in state spending per resident, the implications of cuts are even worse when Texas’s growing population and rising health care costs are taken into account.

Executive Director F. Scott McCown made a statement in response to the House Appropriations Committee recommendation of House Bill (HB) 1, the proposed state budget for 2012-13; HB 4, which would revise the state budget for 2011; and HB 275, which would appropriate $3.2 billion from the Rainy Day Fund to fund 2011 appropriations.

F. Scott McCown made the following statement in response to the Governor’s claim that he will not sign a 2012-13 budget that uses any of the $6.2 billion remaining in the Rainy Day Fund after using $3.2 billion to cover the 2011 deficit.

CPPP addresses the Tea Party Advisory Committee about why spending all the Rainy Day Fund is the right thing to do.

Texas faces a devastating revenue shortfall. We are about $18 billion short of being able to maintain spending at its current level and at least $27 billion short of being able to maintain services at their current level. Whichever way you look at it, we face a larger revenue shortfall than during the last recession in 2003 and even larger than during the global energy price collapse in the 1980s.

A cuts-only approach to dealing with a shortfall this large would undermine our economic recovery and threaten our future prosperity. Instead, we need a balanced approach, one that includes using our Rainy Day Fund to minimize damaging cuts to critical public services such as education. As part of a balanced approach,the Rainy Day Fund can cover about a third of the shortfall. This paper explains how the fund works and why it should be used.

The proposed budgets do not begin to meet the needs of Texas, as this new analysis from CPPP shows. CPPP provides (1) an overview of House Bill (HB) 1, (2) an overview of Senate Bill (SB) 1, and (3) a comparison of the current budget, HB 1, SB 1, and the cost of current services.

Medicaid funding proposed in HB l is estimated by the Legislative Budget Board (LBB) as falling $18 billion (All Funds) below the amount need to maintain current benefits, provider fees, and eligibility standards. This underfunding would be more than 7 times the depth of the disastrous 2003 Medicaid and CHIP cuts. While delivery reforms and best practices can and should be aggressively implemented, the best program improvements combined cannot achieve savings anywhere near the $7.6 billion GR shortfall. The Legislature should begin immediately looking for ways to mitigate the damage to our state’s most vulnerable through a balanced approach to balancing the budget that looks to savings and new revenues, not a cuts-only approach.

Center for Public Policy Priorities Executive Director F. Scott McCown gave the following statement in response to the Governor’s State of the State address today to a joint session of the House and Senate.

“When the Governor signed the current budget into law, after using his line-item veto to cut everything he considered unnecessary, the Governor assured Texans we had a lean budget that targeted our priorities, saying: ‘We worked collectively throughout the session to ensure our state’s priorities were met while remembering that every dollar spent is that of a hard-working Texan.’

“Now we are $27 billion short of being able to fund these very same priorities at the same lean level over the next two years. With a revenue shortfall this large, the Governor needs to be realistic and the Legislature needs to take a balanced approach that includes using all the Rainy Day Fund and adding new revenue."

A brief analysis focusing on House Bill 1’s proposed 13 percent overall cut (from 2010-11 levels) to services that primarily benefit children. Much of the decrease is due to the failure to restore General Revenue to services that were temporarily supported in 2010-11 by federal American Recovery and Reinvestment Act funds.

In a letter sent Tuesday, February 1, 2011, to the chairs of the board of directors and the president/CEOs of approximately 500 chambers of commerce in Texas, former Lt. Governor William P. Hobby and CPPP Executive Director F. Scott McCown urge business leaders to help address a challenge facing Texas that imperils our economic recovery and future prosperity�"how to cope with a devastating state revenue shortfall.

Center for Public Policy Priorities Executive Director F. Scott McCown issued the following call to action to the superintendents of Texas.

"We have no reason for pessimism but pessimism itself.

"Texas can meet the challenge of our state’s revenue crisis, which has left us at least $27 billion, or 27 percent, short of being able to provide services at their current level, but doing so requires a balanced approach that includes using all of our Rainy Day Fund and adding new revenue. In a democracy�"where the most important election is always the next election�"if citizens demand a balanced approach, the Legislature will take a balanced approach. All that stands between us and a pragmatic response to this crisis is the sort of pessimism that leads to doing nothing."

Center for Public Policy Priorities Executive Director F. Scott McCown made the following statement in response to the proposed House budget bill released late today.

“Late today the proposed House budget bill was released. The proposed budget is merely a starting point for hearings and debate leading to the official state budget, but we already know that the cuts-only approach taken in the proposed bill would hurt Texas families, cost us jobs, and undermine our economic recovery."

Center for Public Policy Priorities Executive Director F. Scott McCown made the following statement in response to today’s release of the biennial revenue estimate by the Comptroller.

“Today the Texas Comptroller of Public Accounts delivered her constitutionally required biennial revenue estimate. While she projects continuing economic recovery, her forecast shows a $4.3 billion deficit in the current budget and only $5 billion more in General Revenue for the upcoming two fiscal years than in the current biennium adjusted for the deficit. When increased population and higher costs are taken into account, Texas is at least $26.8 billion short of the General Revenue needed to provide for current services into the next biennium. In other words, we are short by at least 25 percent.

Texas is suffering from a devastating collapse in revenues. State leaders order cuts to spending, even while Texans’ needs grow. Throughout 2010, the Governor, Lieutenant Governor, and House Speaker have asked state agencies to propose a series of reductions to General Revenue (GR) spending─5 percent in 2010-11, 10 percent in 2012-13, and most recently, on December 7, 2010, an additional 2.5 percent cuts for 2011. Because state sales taxes and other tax collections have only recently started to grow compared to the previous year, state leaders expect the current budget to end with a $3 to $4 billion revenue shortfall. Combine this with growing needs, falling local property values, and uncertainty about the 2012-13 biennial revenue estimate, and the revenue shortfall through 2013 could approach $25 to $30 billion.

The Texas Legislature will convene on Tuesday, January 11, 2011, for the 82nd Regular Session. For essential state services to continue in 2012 and 2013, the Legislature must pass a state budget before adjourning. This Policy Page explains the process of writing the 2012-13 budget and how you can participate to ensure a budget aligned with your values�"a budget that invests in the critical public services and structures necessary to create opportunity and prosperity.

CPPP Executive Director Scott McCown, Senior Fiscal Analyst Dick Lavine, and Senior Budget Analyst Eva DeLuna Castro show how a balanced approach to balancing the state's budget will meet of the needs of Texas today and tomorrow.

In the Education Jobs Fund, Congress set aside approximately $10 billion for states for public education for 2010-11.  You can read the legislation and administrative guidance on the U.S. Department of Education’s website under Education Jobs Fund.  This money is extremely important for Texas public schools.  We urge school boards and superintendents to call upon the Governor to request Texas’ share of this money before the September 9 deadline.

On August 10, Congress set aside approximately $10 billion for states to spend to save public school teachers’ jobs. Saving jobs helps today’s economy and protecting education helps tomorrow’s economy. Texas’ share of the total is about $830 million. The U.S. Department of Education estimates that this will pay for about 14,500 Texas teachers and other personnel. As this paper explains, both technical and legal questions must be answered before Texas can draw down its share. But Texas should be able to access these funds to help our schools and economy.

On May 27, the Governor’s Budget Office and the Legislative Budget Board issued budget instructions to state government agencies, state courts, and public higher education institutions, setting the baseline for the coming 2012-13 biennium at levels that reflect any General Revenue (GR) cuts already approved to 2010-11 spending. Agencies must also submit information on how they would cut GR spending by another 10 percent.

Yesterday the Governor and the Legislative Budget Board (LBB) began the budget-writing process for 2012-13 by instructing state agencies, courts, institutions of higher education, and health-related institutions to submit proposals that include more deep cuts.

CPPP urges that the state leadership instead take a balanced approach to balancing the state budget by spending all the state’s Rainy Day Fund and raising new revenue, rather than relying solely on reducing services to make ends meet.

CPPP Senior Fiscal Analyst Dick Lavine appeared on this week's edition of Texas Matters, where he discussed the best ways for lawmakers to deal with Texas' projected $10-15 billion budget deficit�"and how we got here in the first place.

Many are looking to how legislators dealt with the 2003 budget shortfall for guidance in approaching a similar problem in 2011. For history to be helpful, though, we must accurately remember what happened. The budget shortfall in 2003 was almost $16 billion, not $10 billion, and it was closed with a balanced approach of both cutting spending and increasing revenue. The Legislature should also take a balanced approach in 2011. A balanced approach that includes new revenue is the better choice for Texas. Relying solely on budget cuts leaves critical public structures and systems, such as education and health care underfunded.

Texas should use the Economic Stabilization Fund, commonly called the Rainy Day Fund, to maintain essential services during tough economic times and to stimulate our economy. The constitutional purpose of the fund is to maintain vital state services during economic downturns. The Legislative Budget Board forecasts that the fund will have $9.6 billion available for appropriation through 2012-13. The Legislature has in the past often spent all of the Rainy Day Fund to maintain the state’s investments in critical public structures and systems such as education. It should do so again in 2011.

Concerned that there won’t be enough revenue to fund state services in 2012-13 and cover a $9-billion-plus school finance budget “hole” created in 2006, top state officials have instructed Texas agencies to propose ways to reduce General Revenue (GR) spending by 5 percent in their 2010-2011 budgets. If these cuts can actually be implemented, the need to use the state’s $9.6 billion “Rainy Day Fund” would be reduced, as would the need to find other sources of ongoing revenue.

This Policy Page analyzes some of the proposed cuts in health and human services, workforce and economic development, and higher education. The Center for Public Policy Priorities (CPPP) recommends a balanced approach that uses the Rainy Day Fund and new sources of state revenue�"not just budget cuts alone�"to balance the state budget without needless human suffering.

CPPP appreciates the evident efforts of agency officials to mitigate harm to clients in proposing these options. We will advocate with our elected officials for Medicaid and CHIP reimbursement cuts to be avoided. CPPP will support use of the Rainy Day Fund and pursuit of new revenue sources to avoid such cuts, and to support ongoing updates to provider rates.

The Center for Public Policy Priorities is a member of the State Fiscal Analysis Initiative, and we monitor the state budget closely. While the recession may not be as long or deep in Texas, things are bad. Because of falling tax revenues our state government needs additional fiscal help from Congress to avoid reductions in public services such as education or increases in taxes such as the school property tax. We urge Congress to provide additional state fiscal relief to ensure our state can meet vital needs and our economy fully recovers.

Today the Governor proposed two constitutional amendments, a California-style budget and tax restriction based on minority rule and a Colorado-style spending restriction based on an arbitrary formula unrelated to what Texas needs or can afford. Texans are best protected by a representative democracy based on majority rule without arbitrary restrictions. Texas faces many challenges but spending too much is not the problem. Texas ranks near the bottom in state spending. The Texas problem is that low- and moderate-income families pay too much in taxes while the top pays too little. Minority rule and arbitrary spending limits are designed to protect the top, not to protect Texas.

The American Recovery and Reinvestment Act (ARRA) is making a vital difference in Texas. Potentially injecting as much as $38 billion into the state economy, ARRA temporarily increases grants to federal, state, or local government agencies while providing tax cuts or tax credits to families and businesses. This Policy Page discusses the importance of the ARRA funds in the Texas state budget for 2010-11--the budget cycle that begins on September 1--and related developments.

Texas needs to make significant public investments in infrastructure and services to ensure our prosperity. Unfortunately, Texas is a low-tax state with a structural deficit. In 2006, the state made its structural deficit worse by pledging to pay for a local school property tax cut. The “hole” or uncovered cost of that tax cut is now almost $10 billion per biennium. To add to the state’s woes, just before the legislative session began in 2009, the country went into a severe economic recession that substantially reduced state tax revenues. Fortunately, the federal government stepped in with Recovery Act funding. Even so, many important projects and programs were left unfunded or inadequately funded. This analysis, Building Texas: The 2010-2011 State Budget, focuses on areas of the budget that are especially important to low- and moderate-income Texans.

Writing the budget for Texas is a challenging and important responsibility. As a policy institute concerned about low-income Texans, we closely study the state’s budget and recommend key improvements. The House and the Senate have already funded many of our priorities in each chamber’s proposed budget. Consequently, we focus our recommendations on unfunded priorities and ways to reconcile differing approaches between the chambers. In part 1, we make three general recommendations regarding state spending. In part 2, we urge additional and important General-Revenue related spending primarily in health and human services. In part 3, we make recommendations regarding budget riders that have no General-Revenue impact. In part 4, we suggest ways to maximize federal TANF spending.

Policy institute urges Legislature to keep key provisions intact in final budget

Austin, Texas�"The Center for Public Policy Priorities today highlighted several pieces of the Texas House of Representatives’ proposed state budget for their potential benefits to low- and moderate-income families. CPPP encouraged the Texas Senate to adopt similar provisions in the final budget.

Public structures such as Medicaid, Food Stamps, and Unemployment Insurance were created to help families in tough economic times and to help the economy recover from a down cycle. These are indeed tough times�"we face the worst economic crisis since the Great Depression. Tragically, many Texans are becoming aware for the first time of the crumbling nature of many of our public structures, weakened by years of neglect when times were good. Now that times are tough, we find our systems unprepared. Fortunately, though, the new federal economic recovery law makes resources available to help repair and improve these systems, which will in turn energize economic activity and get Texas on the road to recovery.

But, Texas will only get the federal funds�"and the needed improvements to our public structures�"if state policymakers make the right choices, soon.

With more than $16 billion in federal recovery spending coming to Texas through state agencies, the Center for Public Policy Priorities urged state policymakers to invest in programs that will give struggling low-income families and unemployed workers new opportunities to succeed economically. CPPP also called on the state to ensure that recovery money helps stabilize the economy and benefits those hurt most by the recession. Spending should be done openly, efficiently and with accountability.

On March 5, the House Select Committee on Federal Economic Stabilization Funding began hearing public testimony on the use of American Recovery and Reinvestment Act (ARRA, also called “the stimulus package”) funds in the Texas state budget. ARRA provides billions of dollars to support critical public structures, protect vulnerable Texans during this economic downturn, and set our economy on the road to recovery. This paper summarizes our recommendations for taking full advantage of the benefits in the recovery package.

Today, Congress released the details of the American Recovery and Reinvestment Act (ARRA), which provides $789 billion to stimulate the economy. Many of these measures will also help protect vulnerable Texans during this economic downturn. To take full advantage of the benefits in the recovery package and set our economy on the road to recovery, Texas must plan immediately. We applaud Speaker Joe Straus for appointing the Select Committee on Federal Economic Stabilization Funding, charged with monitoring federal action and suggesting to standing committees needed steps to qualify for federal economic recovery funds. This paper summarizes the portions of the bill that affect the state budget.

Texas should use the Economic Stabilization Fund, commonly called the Rainy Day Fund, to maintain essential services during tough economic times and to stimulate our economy. The state created the fund in reaction to the experience of 1986, when plummeting oil prices required the governor to call a special legislative session to cut the state budget and raise taxes. The constitutional purpose of the fund is to maintain vital state services during economic downturns. The comptroller forecasts that the fund will have $9.1 billion available for appropriation through 2011.

Today the Governor gave his State of the State Address to the Legislature. Cutting the state budget in the middle of an economic recession would be counterproductive, and more must be done for those who have lost their jobs and for those who have no health insurance. Texas needs a bolder vision.

Today the Comptroller of Public Accounts announced her Biennial Revenue Estimate. The Comptroller forecast $9.1 billion less general revenue to write the budget for 2010-11 than was available for 2008-09. But the Comptroller also forecast $9.1 billion available in the Rainy Day Fund. The 81st Legislature must now write a budget for 2010-11.

Spending cuts would hurt the Texas economy and hurt vulnerable Texans. That means:

• Texas needs federal fiscal relief;
• Texas should spend a significant portion of the Rainy Day Fund to protect the state from the full effects of the recession; and
• Texas should consider new revenue sources.

NOTE: Booklet version is formatted for two-sided printing. If you can only print one-sided, use "side by side" version.

Policy Page 263 described the spending needs that are still not a part of the state budget for 2006-07. The latest version of the supplemental appropriations bill, SB 16 by Ogden, identifies $2.95 billion in immediate needs. The state’s ability to respond to these needs, while reducing school property taxes and improving public education, has called into play a little-known restriction on state budgeting �" the constitutional limit on spending �" which limits the amount available for spending in the current biennium. An additional limit �" the dedication of all revenue from tax changes made in the special session to further reducing property taxes �" proposed by HB 2 by Pitts would further hamstring the next Legislature in writing the 2008-08 budget. This Policy Page explains the constitutional cap and the proposed dedication and the restrictions they would impose on the current special session and on future state budgets.

HB 2292 was signed into law by the Governor on June 10, setting in motion extensive reorganization of state health and human service agencies and functions, as well as a lengthy list of health and human service policy changes which are too wide-ranging to be easily summarized. This Policy Page provides a general description of the bill that is now law.