We have the beginnings of a budget

And with it, some idea of how deep the hole is.

Maintaining basic state services over the next two years will cost Texas almost $84 billion, $3.7 billion more in general revenue than the state expects to raise during that period, according to the Senate budget introduced Tuesday.

To close that gap, lawmakers will have to choose between cutting costs, raising more money or dipping into a rainy day fund that is projected to have $9.1 billion available.

The key words in those paragraphs are “maintaining basic state services”. In other words, if we just do what we did two years ago, we’re $3.7 billion in the red. Keep that in mind when you hear people talking about cutting spending.

That gap could also grow considerably because the base budget, prepared by the Legislative Budget Board staff, will serve as the starting point for the Senate and House to begin hammering out the nitty-gritty of the 2010-11 budget.

Nor does the proposal cover increased demand for services in all areas, said Eva DeLuna Castro, a budget analyst with the Center for Public Policy Priorities, which advocates for low- and moderate-income families.

Lt. Gov. David Dewhurst said in a statement that the budget meets his priorities of “holding the line on state spending, continuing the record local school property tax cuts and funding essential services for the most vulnerable in our society.”

But Talmadge Heflin, a former House appropriations chairman, said more spending restraint was needed.

“The Texas Legislature needs to get to work on pruning the next state budget back within the available revenue,” said Heflin, director of the Center for Fiscal Policy at the Texas Public Policy Foundation, an advocate for limited government.

Heflin had more to say than that – Burka has his statement, along with a suitable reply. Heflin is delusional, but he’s got a lot of company. I hope that people will associate him and his positions with the budget disaster that came out of the 2003 session and will at least consider other possibilities.

The Morning News has more details:

The Senate’s version spends $171.5 billion over two years – 1 percent more than in the current two-year budget cycle; the House, $170.8 billion.

The key differences between the two chambers’ plans were that the Senate’s would spend $200 million to fix state schools for people with mental retardation; $148 million to expand teacher merit pay programs; and $200 million to maintain current financial incentives for better performance by state universities and colleges.

Both versions would leave intact most of the $9.1 billion that Comptroller Susan Combs last week predicted would pile up in the rainy day fund by September 2011.

The Senate plan proposes $3.7 billion of spending that’s not covered by Combs’ revenue estimate – of which $1.4 billion would occur only if textbook money can’t be distributed from the Permanent School Fund, battered by recent stock market dips.

The House’s base budget would draw down the rainy day fund by $3.3 billion, or maybe only $1.9 billion if the textbook money is freed from the school fund.

Both bills include a provision spelling out how cuts would be made to balance the budget, if lawmakers balk at tapping the rainy day fund. Spending the money, derived mostly from oil and natural gas production taxes, requires a supermajority in each chamber.

So if all goes well and there’s enough votes to tap into the rainy day fund, we’ll spend about $2 billion of the $9 billion that it contains. That doesn’t seem like too big a withdrawal to me. If not, if there’s enough Heflin acolytes to insist that we leave all that money under the mattress, then we get to cut basic services again. Which will be just a dandy thing to do in an economic turndown. The fun begins next week when both chambers reconvene. You can see both proposals on the Legislative Budget Board‘s website, and you can see Sen. Ogden’s SB1 here. Thanks to Eye on Williamson for the links.

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  1. Pingback: Krugman on the Texas budget deficit – Off the Kuff

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