March 26, 2003
Senate skirmish over revenue

We all know that the motto of this Texas legislative session has been "We're gonna balance this budget without any new taxes if we have to kill everyone to do it". The reality of bringing expenditures for our growing population in line with our shrinking revenues was a 12.5% across-the-board cut, which would have decimated Medicaid, CHIP, various services for the retarded and mentally ill, corrections, you name it.

That reality has started to make some Senators, as well as Lt. Governor David Dewhurst, blanch a bit. They've started looking around for other nontax revenues, such as the Rainy Day fund and parts of the $17.3 billion tobacco lawsuit settlement, to fill the gaps. This development does not please Governor Goodhair:

The governor's comments to newspaper editors and publishers put him at odds with Lt. Gov. David Dewhurst, who recently outlined nontax proposals that, he said, could cover $5 billion to $6 billion of a $9.9 billion revenue shortfall.

"The Legislature should not try to balance the budget with billions of dollars in budgetary sleights of hand and one-time revenue sources, instead of real spending reductions," Perry told the Texas Daily Newspaper Association.

The governor, Dewhurst and key legislators all have vowed to bridge the budgetary gap without increasing state taxes. But after that point, they have begun to part company.

Dewhurst said he found Perry's comments "confusing," particularly the governor's opposition to using the rainy day fund, a state savings account, to avoid cuts in state programs and services.


The governor criticized lawmakers who were "looking for a quick fix" to the financial crunch.

"Securitizing tobacco funds, emptying the rainy day fund for ongoing expenses, deferring large payments to the next budget cycle may sound attractive now, but they won't be when the bill comes due later," he said.

He said such steps would increase the likelihood that the next legislative session would have to enact a "major tax hike."

But Perry defended his proposal to divert part of the rainy day fund for economic development purposes. Such initiatives help create jobs and expand the future tax base, he said.

"By keeping our spending disciplined, and by growing our economy, we will build a long-term foundation that will be able to support vital health care and education needs," he said.

Dewhurst said the rainy day fund plus other nontax revenue should be used to help "protect our Foundation School Program, higher education, Medicaid, CHIP (children's health insurance) program, mental health and mental retardation."

"Most of the senators are in favor of seriously considering the totality of this in order to balance our budget and maintain our central services," added Dewhurst, who presides over the Senate.

Perry said children's health insurance and other services could be funded, instead, by cutting state funding for cultural, research, historical and other "special items" from the higher education budget.

Today it appears that Perry may lose this fight:

[More] than the two-thirds majority of senators needed for passage have agreed to tap into nearly $6 billion of nontax revenues, an option Gov. Rick Perry sharply criticized this week.

The state is facing a projected $9.9 billion budget shortfall between now and 2005. To balance the budget without raising new revenue would mean cutting services by 12.5 percent, which senators argued is too much.

"It's my belief that in order to pass an appropriations bill that we can get the votes for in the floor of the Senate, we will need to use the nontax revenues that we have been discussing," said Senate Finance Chairman Teel Bivins, R-Amarillo.

"Not everybody agrees with every idea, but I think we have the critical mass to pass the bulk of the nontax revenues," he said.

Perry has essentially been reduced to sputtering over this development, something I'm sure he never expected given the dominance of his party in the state government:

"If you remember the cartoon Popeye, then surely you will understand what I mean when I say using budgetary sleights of hand is something like ol' Wimpy would have done," Perry said. "It's the same as saying, `I will gladly pay you Tuesday for a hamburger today.' "

Perry is referring in part to a suggestion of Dewhurst's to defer some payments to school districts for a month, which carries into the next fiscal year. Oddly enough, I agree with Perry on this point. That is just prestidigitation that covers up but does not solve a big hole in our finances. Not that this is a catastrophe - it's an artifact of being constitutionally bound to make everything balance out by a given calendar date. That bill still needs paying, though, and it's unlikely to be easier in the next go-round.

Still, I think Dewhurst and the Senate have recognized that the drastic cuts that Perry's dictates would force is a bigger negative than groping around for whatever loose change they can find. They still haven't accepted the reality that the state's tax structure is hopelessly broken and needs fixing immediately, but at least they're trying.

Posted by Charles Kuffner on March 26, 2003 to Budget ballyhoo | TrackBack