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Texas Governor Rails Against 'Bailouts,' But Uses Stimulus To Prop Up Budget

The Huffington Post   First Posted: 01/24/11 09:51 AM ET Updated: 05/25/11 07:25 PM ET

Texas Stimulus

The nation's states face budget strains -- even one that says it doesn't.

Texas filled nearly 97 percent of its shortfall last year with Federal stimulus dollars, even as its governor has been sharply critical of "bailout" policies, CNN Money reports, citing the National Conference of State Legislatures. In the wake of the recession, Texas is one of many states that, contending with diminished revenue, have benefited from Federal support.

After facing a $6.6 billion budget hole, Texas used $6.4 billion of Federal money to help patch it, allowing the state to keep its $9.1 billion emergency fund intact, CNN reports.

But on the same day he asked for the bailout money, governor Rick Perry started a petition called "No Government Bailouts." Indeed, Perry is a consistent critic of government spending, frequently pointing to his own state as proof that budget austerity -- spending cuts coupled with low taxes -- works.

But now, with the stimulus money running out, and with the economy still sluggish, Texas is projected to run a nearly $27 billion deficit over the next two years, according to the state's own estimate.

To stave off that shortfall, lawmakers are planning cuts that include funds for Medicaid, education and child care, CNN reports.

Texas is hardly alone in its struggles. State tax collections, adjusted for inflation, are now 12 percent lower than their pre-recession levels, according to a new report from the Center on Budget and Policy Priorities. As real estate values continue to slide, and as Americans' wealth continues to erode, governments have suffered from less money coming in.

The state budget situation is so dire that some conservative lawmakers are reportedly trying to find a way for states to declare bankruptcy, a drastic and illegal step that would, in theory, allow them to restructure their obligations. But a far more immediate issue, some experts warn, is the prospect of default: Analyst Christopher Whalen has predicted that California will default on its debt. The last time a state defaulted on its debt was during the Depression.

As Texas must contend with an economy limping out of recession, liberal economist Paul Krugman has noted that the state's conservative budget doctrine hasn't, in this case, seemed to yield successful results:

"Texas is where the modern conservative theory of budgeting -- the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending -- has been implemented most completely. If the theory can't make it there, it can't make it anywhere."
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