Texas Tsunami: Falling Revenues, Rising Needs Mean Proposed Budget Cuts Just the First Wave

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Eva DeLuna Castro /(512) 320-0222 x 103

January 3, 2011

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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.

If the legislature attempts to close that gap without using the Rainy Day Fund and without any other new sources of state revenue, the 2012-13 budget would mean unprecedented cuts, the likes of which we’ve never seen. This Policy Page analyzes a sampling of the cuts proposed to this point. As damaging and harmful as they would be, these proposed cuts could be only the first wave of a powerful storm that threatens our prosperity once an actual budget is filed in the 2011 Legislature.