BUDGET

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.