Texas revenue estimate brighter on eve of session


Associated Press

Posted on January 8, 2013 at 8:03 AM

AUSTIN, Texas (AP) — A resurgent Texas economy fueled a strong state revenue projection Monday, but while majority Republicans preached restraint Democrats saw enough money on the table under the $101.4 billion estimate to reverse deep cuts currently on the books.

The number is a critical starting point for lawmakers who will begin haggling over the 2014-15 budget when the new legislative session begins Tuesday. It includes $96.2 billion in estimated new revenue — a sharp contrast from a far weaker prediction in 2011, which exacerbated a $27 billion shortfall that triggered mass layoffs of public workers and cut-to-the-bone spending.

Republican Comptroller Susan Combs pointed to a "strong rebound from a severe recession" while unveiling the brighter biennial revenue estimate at her state offices. The figure is 12.4 percent higher than what Combs' office has estimated for the current budget cycle.

Gov. Rick Perry said the healthy revenue estimate validated the lean budget the state crafted two years earlier.

"Even as we head into the 83rd legislative session with higher revenues, we still need to focus on separating our wants from our needs, and continue to follow the conservative fiscal principles that have led to Texas' ongoing success and will keep Texas strong," Perry said.

Combs also defended the announcement of an additional $8.8 billion in unspent revenue from the current biennium — a so-called surplus that reflects how much more money the state took in than originally estimated. Much of that will likely pay off a nearly $5 billion Medicaid tab neglected two years ago.

Critics, however, have argued that if Combs had been less conservative and given lawmakers more money to work with in 2011, cuts that included $5.4 billion to public schools could have been blunted.

"I would suspect there is not anyone at the Federal Reserve or Washington, or any of these large-scale predictors, who saw the scope of this recession," Combs said. "It's our policy always to be careful and prudent and conservative and try the best that we can."

Of the $96.2 billion in estimated revenue, Combs said $3.6 billon will be transferred to the Rainy Day Fund. That would create a nearly $11.8 billion balance in the state's emergency piggyback, which Perry and other top Republicans have generally viewed as off-limits but have seemed somewhat more open to tapping in the months leading up to the session.

A surge in sales tax receipts set the table for the rosier new estimate. More than half of the state's general revenue comes from sales tax, which Combs expects to increase by 9.4 percent in 2014-15. It's part of a booming Texas economy that has emerged from the Great Recession boasting an unemployment rate that is currently at a four-year low of 6.2 percent.

The Center for Public Policy Priorities, a progressive think tank in Austin, estimates that lawmakers will need to spend $96 billion in the next budget cycle to freeze the current level of services in one of the nation's fastest-growing states. That means enough new desks in classrooms, maintained roads and expanded health programs to keep up with about a half-million new Texas residents each year.

Eva DeLuna Castro, a senior budget analyst for CPPP, said Combs' estimate provides enough money to keep the new baseline of spending installed in the last session. Reversing the spending cuts of 2011 are in reach if lawmakers are willing to dip heavily into the Rainy Day Fund, she said, but that's a political longshot at best.

"When you're trying to fit into last year's clothes all of the time, eventually they're not going to fit," DeLuna Castro said. "We can't even fit into 2003's clothes at this point, just factoring in population and inflation."

On the other end of the ideological spectrum, the conservative Texas Public Policy Foundation argued against replacing what was stripped from the budget in 2011.

"We don't know what the future will hold. We need to be sure that the state's business is stable," said Talmadge Heflin, director of the foundation. "That they can continue to fund the programs that they put in place. If you go on a spending binge, and you have a cooling of the economy, you're not able to fund what you promised the people."

Lawmakers don't have to spend all the money Combs says is available — and chances are they probably won't. Perry and Lt. Gov. David Dewhurst are calling for a spending cap that would limit any increase in state spending to a sum of population growth plus inflation, or 9.85 percent. Under current conditions, their plan would create a general revenue budget of around $89.29 billion.

Teachers groups that marched on the Capitol in 2011 used Monday's figure to again call on lawmakers to restore cuts.

"It would be extremely short-sighted for state politicians to stick their heads in the sand and falsely plead 'austerity' in order to pander to ideological extremists intent on privatizing public schools and sacrificing our future," said Rita Haecker, president of the Texas State Teachers Association.


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