Texas state budget (2009-2010)

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The Texas State Legislature passed and Gov. Rick Perry signed on June 19, 2009 a $182 billion 2-year budget (Sept.1, 2009 to Aug. 31, 2011) with a projected $9 billion Rainy Day Fund. The FY 2010-2011 biennium budget of $182.3 billion spends $1.6 billion less in general revenue than the previous biennium. Comptroller Susan Combs acknowledged that Texas would show a $1.3 billion deficit at the end of the budget year[1], which was up dramatically from the July 2010 estimate of a shortfall of up to $18 billion dollars.[2] Other estimate the shortfall at $28 billion.[3]

Over the next two years, the state faced a budget shortfall of between $15 billion and $27 billion over the next two years, depending on who was doing the calculation.[4]

In per capita spending by state, Texas ranked 50th in the nation, meaning there was likely less fat to trim when making budget cuts in Texas than in other states.[5]

Texas had a total state debt of $81,128,512,515 when calculated by adding the total of outstanding debt, pension and OPEB UAAL’s, unemployment trust funds and the 2010 budget gap as of July 2010.[6]

2011 State spending & deficit in billions[7]
Total spending Healthcare Education Protection Nat resources Econ dev Regulatory General government Stimulus
$182 $59.7 $75.5 $10.8 $3.5 $20.7 $.84 $5.4 $12
2011 Local spending & deficit in billions[8]
Total spending Pension Healthcare Education Welfare Protection Transport Deficit
$153.3 $1.5 $13.3 $45.3 $3.1 $12 $10 $255

Budget for the 2012-13 Biennium

See also: Archived Texas state budgets

The state faces a budget gap for the 2012-13 biennium and it had been estimated to be as high as $27 billion.[9] Lt. Gov. David Dewhurst, the presiding officer of the Senate, said legislators would pursue targeted cuts instead of across-the-board reductions and may even increase spending in some instances. "We're going to cover all our essential services," he said.[9]

Legislative Proposed Budgets

The House version of the state budget cuts spending by $23 billion. In contrast, the Senate Finance Committee’s budget uses $3 billion from the state’s Rainy Day Fund and cuts $17 billion.[10]

On April 3, 2011, the House passed the $164.5 billion state budget by a vote of 98-49, primarily split down party lines.[11] It cuts approximately $23 billion in state spending with cuts to K-12 education, elderly care and higher education.[12]

Lawmakers positioned themselves for the fiscal debate, with Republicans saying that the state spends too much, and Democrats arguing that the state fails to generate sufficient revenue.[13] Republicans said that no new taxes would be used to balance the state budget.[9][14]

After a delay, on May 4, 2011, the [[Texas State Senate|Senate] maneuvered around a 2/3 vote requirement and approved its $176.5 billion state budget bill with a vote of 19-12.[15] The Senate version of the budget spends $7 billion more than the House version and differs in substantial ways. The Senate budget would spend billions more on public education, nursing homes and Medicaid.[12] It cuts $11 billion when compared to the FY2011 budget.[15]

The Senate also passed SB1811, which injects $4 billion in non-tax revenue into the budget and utilizes accounting strategies including moving the state’s final $2 billion payment of the fiscal year to the Permanent School Fund from August into September, the first month of FY2012, and collecting the state’s franchise tax a month early in 2013 to bring in about $800 million.[10][16]

The Senate also passed SB 23, which would save about a half billion dollars in health care costs over the biennium by moving Medicaid prescriptions into managed care and increasing managed care for Medicaid patients in South Texas.[10][17]

Union Protests

Between six and seven thousand people gathered at the Capitol on April 6, 2011, to take part in a union-organized protest of budget cuts to education and health care as well as those that would impact public employment levels.[18]

A counter-protest calling on the Senate to make even deeper budget cuts was held simultaneously.[19]

Structural Deficit

The state faced a structural deficit in its budget, meaning that a $10 billion budget shortfall would reappear in each future fiscal year until lawmakers align revenues and expenditures, according to John Heleman, chief revenue estimator for Comptroller Susan Combs.[20]

The structural deficit stemmed from issues with education funding. Heleman said a "structural deficit" developed in the state budget after the 2006 school finance reform package that lowered local school property taxes and restructured the business tax. The Texas Supreme Court found the state's school finance system to be unconstitutional and in response the legislature increased public education funding to $14 billion per biennium. The revenue sources meant to pay for it — primarily the revised business tax — had not covered the cost.[20]

Spending Cuts

K-12 Education

Although school districts had been mostly exempt from prior rounds of budget cuts, lawmakers told school district to anticipate approximately $5 billion less in the FY2012-13 budget as lawmakers begin wrestling with a large revenue shortfall.[21] Cuts of $5 billion would leave the state approximately $10 billion short funding levels required by state law, leading officials to recommend legislation that would alter formulas to cut about 14% of state funding to school districts.[22]

Higher Education

In the initial budget proposal, five community colleges would be shut down.[22]

Medicaid

A Senate subcommittee meeting to considering cuts in Medicaid found any cuts difficult to make and expressed their concerns about the effects of the cuts they were being asked to make. After a morning of work, the subcommittee had agreed on about $100 million in cuts, far short of the $9.9 billion in cuts that were a key part of the Senate's budget bill, which led to the committee chair, Sen. Jane Nelson, saying that the committee would be there for 10 years at that rate.[23]

Among the proposed budget cuts, was the reduction of Medicaid provider rates by 10%.[24]

Republicans had suggested that the state should opt out of the federal Medicaid program and said that they were studying the cost savings that would result from the opt out.[25][26] Texas' biennial Medicaid budget was $45 billion. The federal government covers 60% of the state's share and the remaining amount takes up 20% of the state budget.[25] Options before the legislature included remaking Medicaid with only state financing to give states flexibility regarding benefits and cost design, or obtaining federal waivers to allow the state to change portions of its Medicaid program.[25]

Legal Aid

The preliminary state budget cuts legal aid by $23 million.[27]

Possible Sources of Funds

The governor said he opposed tapping into the state's rainy day fund for the FY2012-13 biennium.[28]

The decision marks a reversal by Gov. Perry who had previously opposed tapping into the Rainy Day fund which he said was an "absolute last resort" because doing so meant, "all we've done was kick the can down the road."[29]

Lawmakers agreed to tap the Rainy Day fund for FY2011 budget in March 2011, and that, combined with budget cuts made for FY2011 and a projection from the comptroller that improved sales taxes would generate $300 million in additional revenue, freed up $4.3 billion for lawmakers to use as they write the FY2012-12 state budget. Legislators proposed a plan to use the newly available $4.3 billion in funds for education and Medicaid. Gov. Perry said that he would veto any plans to use more of the reserves to tackle the 2012-2013 budget.[30]

To combat the $18 billion gap, House budget chief Jim Pitts urged the legislature to consider allowing expanded gambling in the state,[31] although that was not considered to be likely.[3] Fee increased were expected, as was a disbursement from the state school trust fund.[3]

Budget background

See also: Texas state budget

The Texas state budget was implemented for two year durations by the Legislative Budget Board. Agencies develop their appropriations requests in the first year, the legislature approves the General Appropriations Act in the second year, and the budget was implemented over the next two years.[32] By constitutional mandate, Texas operates under budgets set for two-year periods.[33]

Texas' fiscal year runs from September 1st to the following August 31st of an odd-numbered year (for example, September 1, 2009 - August 31, 2011.[34] Since 1978, the state constitution had required the State Comptroller to create an itemized estimate of the incoming revenue that would be available to the state for spending in the upcoming two-year fiscal period (biennium).[35] This estimate was submitted to the Governor and the legislature and was used as a baseline to ensure that appropriations did not exceed incoming revenue.[36] Once an appropriation bill was agreed on by both houses of the legislature, it was sent to the State Comptroller for certification that there would be sufficient incoming revenue to cover the bill's appropriations.[37] If the Comptroller concludes that there was not enough money to cover the proposed spending, the bill was sent back to the legislature where any spending in excess of anticipated revenue must be approved by a 4/5 vote in each house.[38]

Once a bill was certified by the Comptroller, the bill was sent to the Governor for review and signature; the state constitution grants the Governor a line-item veto by which he can use to cancel out specific provisions without having to veto the bill in its entirty.[39]

The regular legislative sessions begin the second Tuesday in January every odd-numbered year and convene for not more than 140 days. The governor may call the legislature into special session as deemed appropriate. Special sessions were limited to issues specifically stated in the governor’s call and may meet up to the 30-day maximum.[40]

The Governor submits a recommended budget the 30th day of the regular legislative session. The Legislative Budget Office was responsible for fiscal notes, not the Executive Budget Office. Legislative Budget Board (the legislature’s budget agency) coordinates statewide performance measures and compiles reports.[41]

The state did had a constitutional cap on spending, using the growth of the state's economy, which was determined by the Legislative Budget Board (run by the Gov, Lt Gov, Speaker and Comptroller).[42] The calculation and methodology aren't as precise as the population plus inflation limit used by other states, and some were working to get such a proposal on the Texas ballot.[43]

In January of odd-numbered years. at the start of the legislative session, the comptroller provided an official estimate of state revenue for the coming two years, and that figure was the amount lawmakers can spend when they write the state budget. At any time, the comptroller may update that estimates and they often face pressure to did so late in the legislative session, when budget-writers need additional dollars.[44] Sen. Kirk Watson sent the comptroller a letter in September 2010 requesting an update to her official estimate of how much money the state would collect during the current two-year budget cycle as well as a forecast of the state's revenue outlook over the next two years.[44]

Budget Figures, 2000-2009

The following table provided a history for Texas's budget and actual expenditures from 2000 to 2009.

Biennium Term Estimated/Budgeted Amount Actually Spent
2000-2001 $101.8 billion[45][46] $101.9 billion[47]
2002-2003 $114.1 billion[48] $115.9 billion[49]
2004-2005 $118.2 billion[50] $126.6 billion[51]
2006-2007 $138.2 billion[52] $145.1 billion[53][54]
2008-2009 $167.8 billion[55][56] n/a

Breakdown of Sources of Revenue

The following table breaks down the state budget by sources of revenue for the 2008-2009 term.[57]

Source of Revenue Percentage of Overall Revenue
Tax collections 52.1%
Federal income 31.1%
Miscellaneous 9.8%
Licenses, Fees & Fines 7.9%

Breakdown of spending by area

The following table breaks down the state budget by areas of spending for the 2008-2009 term.[58]

Area of spending Percentage of Overall Spending
Education 44.4%
Health & Human Services 31.6%
Business & Economic Development 12.2%
Public Safety & Criminal Justice 6.2%
General Government 2.4%
Natural Resources 1.9%

Accounting principles

See also: Texas government accounting principles

The Texas State Auditor's Office (SAO) was the independent auditor for Texas state government. The SAO operates with oversight from the Legislative Audit Committee (LAC), a six-member permanent standing committee of the Texas Legislature. The LAC consists of the Lieutenant Governor, the Speaker of the House of Representatives, one member of the Senate appointed by the Lieutenant Governor, and the chairmen of the Senate Finance Committee, House Appropriations Committee and the House Ways and Means Committee.[59]

The Institute for Truth in Accounting (IFTA) rates Texas “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA did not consider Texas' CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis did not included significant liabilities for the pension plans and for other post employment benefits, such as health care.[60] Texas' CAFRs were annual publications of the Texas Comptroller of Public Accounts. Susan Combs was elected Texas Comptroller of Public Accounts in 2006. The Comptroller was the chief steward of the state’s finances, acting as tax collector, chief accountant, chief revenue estimator and chief treasurer for all of state government.[61][62]

Credit Rating Fitch Moody's S&P
Texas[63] AA+ Aa1 AA+

Despite the state's deficit, it had the second highest bond rating from Standard & Poor's.[64]

Budget transparency

The Texas Window on State Government page provided a searchable expenditures function for Texans. Specifically, it provided information on how much each agency spends and which vendors receive state funds. The database was updated nightly, and was managed by the State Comptroller.[65]

The following table was helpful in evaluating the level of transparency provided by the Texas Window on State Government.

Criteria for evaluating spending databases
State Database Searchability Grants Contracts Line Item Expenditures Dept/Agency Budgets Public Employee Salary
Texas: Where the Money Goes Y
600px-Yes check.png
N
600px-Red x.png
Y
600px-Yes check.png
Y
600px-Yes check.png
N
600px-Red x.png
N
600px-Red x.png

For further information, see

Legislation

State Sen. Kirk Watson had said that he'll propose legislation that would publish the state budget five days before voting, allowing one work week, instead of the current custom of publishing it 48 hours before the vote.[66] The proposal had been endorsed by the Texas Public Policy Foundation and the Center for Public Policy Priorities.[67][68]

See also: Evaluation of Texas state website

Economic stimulus transparency

The state would receive approximately $3 million from the federal government under HR 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.[69] The directors of a $2.3 million stimulus-funded summer youth program claimed the program created or retained 680 jobs but an audit found that only 124 were created.[70] Additionally, the TxDOT, had only spent 38 percent of it's $2.25 billion in funding, because it did not had enough "shovel-ready" projects.[71][72]

Another agency under fire for their stimulus spending was the Texas Port Arthur Housing Authority. Port Arthur would be losing $725,546 in stimulus funds after failing to keep sound financial controls, violating procurement regulations, failing to meet stimulus reporting requirements and not getting environmental clearance before beginning site work on two low income level development projects.[73]

At least a dozen Texas public officials who voted against the stimulus, later applied for grants from the program.[74]

  • Texas established an economic recovery website to show how legislators and government officials in Texas were spending Federal funds.[75]


Independent transparency sites

The Texas Public Policy Foundation had created Texas Budget Source an independent website focused on Texas's budget and transparency. In addition to state transparency information, it posts data about local and school district transparency.[76]

Public employee salary information

The Houston Chronicle had complied this list of Houston public employee salaries in 2007, and News 4 had provided school superintendent salaries across the state for 2007-2008.[77][78]

See also

Texas government sector lobbying

Texas state budget

Texas public pensions

External links

References

  1. The Texas Tribune "Documents Reveal Deficit in Texas State Budget" Aug. 18, 2010
  2. Cite error: Invalid <ref> tag; no text was provided for refs named daunting
  3. 3.0 3.1 3.2 The Houston Chronicle "State services unlikely to escape budget ax" Dec. 19, 2010
  4. The Wall Street Journal "Budget Battles Roil Straitened States" Feb. 25, 2011
  5. The Dallas Morning News "How bad was the budget crunch?" Oct. 24, 2010
  6. State Budget Solutions “States Hide Trillions in Debt” July 22, 2010
  7. Texas Budget Source Spending, State Budget by Area
  8. USA Spending, State Guesstimated* Government Spending
  9. 9.0 9.1 9.2 The Fort Worth Star Telegram "GOP leaders say state budget can be balanced without tax hike" Jan. 12, 2011
  10. 10.0 10.1 10.2 The Gonzales Inquirer "Senate finds ways to shore up State budget" May 3, 2011
  11. The El Paso Times "Texas House passes state budget by 98-49 vote" April 4, 2011
  12. 12.0 12.1 cnbc.com "Texas Senate gears up for budget fight with House" April 18, 2011
  13. The Dallas Morning News "Let the Texas budget wars commence ..." Nov. 29, 2010
  14. The Texas Tribune "Some Eying Sales Tax Increase to Plug Budget Hole" Jan. 4, 2011
  15. 15.0 15.1 The Wall Street Journal ""Texas Senate Passes State Budget" May 4, 2011
  16. SB 1811
  17. SB 23
  18. The Austin American-Statesman "Thousands protest budget cuts at Capitol" April 6, 2011
  19. The Houston Chronicle "Budget talks at Texas Capitol draws protesters" April 6, 2011
  20. 20.0 20.1 The Austin American-Statesman "Texas' budget challenges could persist beyond 2011" Feb. 1, 2011
  21. The Austin American-Statesman "Texas schools no longer shielded from state budget cuts" Nov. 16, 2010
  22. 22.0 22.1 The Fort Worth Star Telegram "Highlights of proposed state budget cuts" Jan. 20, 2011
  23. The Houston Chronicle "Senate panel finds it tough to wield budget knife" March 3, 2011
  24. The Fort Worth Star Telegram "Highlights of proposed state budget cuts" Jan. 20, 2011
  25. 25.0 25.1 25.2 The New York Times "Battle Lines Drawn Over Medicaid in Texas" Nov. 11, 2010
  26. The Texas Tribune "Pitts Readies Constituents for Coming Budget Cuts" Nov. 29, 2010
  27. Bloomberg "Advocates: Texas budget slashes legal aid for poor" Feb. 17, 2011
  28. The Houston Chronicle "Perry lets Lege tap into rainy day fund" March 15, 2011
  29. The Dallas Morning News "In Dallas visit, Perry urges not tapping Rainy Day fund" March 9, 2011
  30. Businessweek "Deal to tap reserves won't did much to avoid cuts" March 18, 2011
  31. Cite error: Invalid <ref> tag; no text was provided for refs named axe
  32. Texas Legislative Budget Board, Budget 101
  33. Legislative Budget Board, History
  34. Senate Research Center, Budget 101
  35. Legislative Budget Board, History
  36. Senate Research Center, Budget 101
  37. Senate Research Center, Budget 101
  38. Legislative Budget Board
  39. Senate Research Center, Budget 101
  40. Texas State Senate, "Citizen Handbook: How the Texas Legislature Works," February 2007
  41. National Association of Budget Officers, "Budget Processes in the States," 2008
  42. Comparison of Spending Limits
  43. Texas Monthly
  44. 44.0 44.1 The Austin American-Statesman "Lawmakers seek answers on Texas' budget outlook" September 8, 2010
  45. Legislative Budget Board, Fiscal Size-up 2008-09 Biennium, March 2008
  46. Legislative Budget Board, Fiscal Size-up, March 2008
  47. Legislative Budget Board, Fiscal Size-up, January 2002
  48. Legislative Budget Board Fiscal Size-up, 2002-2003 Biennium, January 2002
  49. Legislative Budget Board, Fiscal Size-up, March 2008
  50. Legislative Budget Board, Fiscal Size-up, 2004-2005 Biennium, Dcember 2004
  51. Legislative Budget Board, Fiscal Size-up 2008-09 Biennium, March 2008
  52. Legislative Budget Board, Fiscal Size-up 2006-207 Biennium, December 2005
  53. Texas Budget Source, Fast Facts about Texas Spending
  54. Legislative Budget Board, Fiscal Size-up 2008-09 Biennium, March 2008
  55. Texas Budget Source, Fast Facts about Texas Spending
  56. Legislative Budget Board, Fiscal Size-up 2008-09 Biennium, March 2008
  57. Texas Budget Source, Budget by Area
  58. Texas Budget Source, Budget by Area
  59. Texas State Auditor's Office Web site, accessed November 13, 2009
  60. Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  61. Texas Comptroller of Public Accounts Web site, accessed November 13, 2009
  62. CAFRs
  63. State of Indiana, “State Credit Ratings-as of June 24, 2009"
  64. Businessweek "California, Texas, and State Workers' Pay" April 28, 2011
  65. Texas Window on State Government
  66. Krik Watson Newsroom, Count to Five Before Voting, Jan. 9, 2011
  67. Texas Budget Source, Watson wants five days before final budget vote, Jan. 6, 2011
  68. Austin American-Statesman, Watson’s proposed budget rule draws praise from right and left, Jan. 7, 2011
  69. Federal Fund Information for States “ARRA FMAP Extension & Education Jobs Fund Totals” Aug. 11, 2010
  70. Texas Watchdog, Jobs estimates in federal stimulus program 5 times true figure: Audit, Aug. 3, 2010
  71. Texas Watchdog, Shovel-ready? TxDOT stimulus spending at 38 percent, Sept. 28, 2010
  72. H.R. 1586
  73. Texas Watchdog, Port Arthur Housing Authority violated competitive bidding, other stimulus rules, must return $725K federal stimulus grant, Jan. 31, 2011
  74. Texas Watchdog, Texas stimulus opponents later sought stimulus funds for their district, Oct. 18, 2010
  75. Texas Stimulus Fund
  76. www.texasbudgetsource.com,
  77. Houston public employee salaries in 2007
  78. school superintendent salaries