Huffpost Politics

Texas Economic Miracle Beginning To Tarnish

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RICK PERRY TEXAS BUDGET

AUSTIN, Texas — Some in Texas had talked tough about solving the state's budget problem by austerity alone, but lawmakers finally faced a hard fact: Texas is in serious financial trouble.

The severity of the state's $27 billion budget crisis was evident in the furrowed brows, sad eyes and pained expressions of legislators. They fidgeted in their seats as hundreds of teachers, parents and disabled people explained in testimony in recent weeks how proposed budget cuts would ruin their lives.

Legislatures elsewhere are facing budget problems, but most are blending cuts with asset sales, increased fees and tax modifications to soften the impact. Texas prides itself on lean government so Republicans here promised to solve the crisis here by budget cuts alone.

Then rhetoric hit reality this week. The result was the latest and most vivid example of a state taking steps it had fiercely resisted.

The Republican committee chairman's southern accent turned plaintive as he urged legislators who had campaigned on preserving the state's $9.2 billion Rainy Day Fund to now break that promise to ease the budget pressure.

"If you want to close this shortfall through cuts alone, you have to either (completely) cut payments to Medicaid providers, cut payments to school districts or lay-off a substantial number of state employees," said state Rep. Jim Pitts, chairman of the House Appropriations Committee. "You would have to do these things immediately."

Magnifying the difficulty of the move here was that Pitts and other conservatives knew they had to get the state's – and perhaps the nation's – most outspoken advocate of budget cutting -- Gov. Rick Perry -- to climb down from the no-spending pledge with them. It took a week of convincing, but Perry, Lt. Gov. David Dewhurst and Speaker Joe Strauss – all Republicans – issued a statement on Tuesday approving a $3.2 billion withdrawal from the reserve fund to plug the budget hole, in addition to making $1 billion in cuts.

That deal will solve the budget problem – until Aug. 31. Lawmakers still need to cut another $23 billion from the next two-year budget.

"In other words, the state only has about three-fourths of the money it needs to continue doing what it is doing now," explained F. Scott McCown, director of the Center for Public Policy Priorities, an advocacy group for the poor. "And every single thing the state does now is something that the governor previously agreed it ought to be doing."

Several months into the current legislative session, the government fiscal crisis across the nation is proving as difficult for states with a tradition of austerity as for those more accustomed to spending. Other conservative states are struggling with how to pay for keeping tough-on-crime corrections policies in place.

Perry, the state's longest serving governor, has signed every budget over the last 10 years and praised lawmakers for spending only what's necessary. Last week lawmakers pressed Perry's budget experts to help cut $4 billion from the current budget, but neither side could reach the goal.

So Perry relented, but his support for tapping the Rainy Day Fund now came with an ultimatum about the budget that begins Sept. 1.

"I remain steadfastly committed to protecting the remaining balance of the Rainy Day Fund, and will not sign a 2012-2013 state budget that uses the Rainy Day Fund," Perry warned. So the dilemma may return.

The Texas Public Policy Foundation, one of the most influential conservative groups in Texas, opposed this week's concession and will fight any future solutions involving spending.

"We are disappointed to learn that Texas will likely resort to using its Rainy Day Fund this early in the legislative session," said Talmadge Heflin, director of the group's Center for Fiscal Policy. "Those who seek to empty the fund because it is raining today have not checked the long-range weather forecast."

That Republican leaders' posture in the financial crisis came in stark contrast to their campaign rhetoric.

"Texas is better off than practically any state in the country," Perry said in September, well after the coming problem was identified. When asked about the budget deficit in December, Perry dismissed the question as speculative.

Even though Texas' budget shortfall is among the worst in the nation, Perry says Texas remains an example for other states.

Last week, he touted a Federal Reserve Bank statement forecasting that Texas could add more than 264,000 jobs in 2011. Proposed budget cuts, though, could lay-off 100,000 school employees, 60,000 nursing home workers and eliminate 9,600 state jobs this year.

Democrats question why Perry and Republican lawmakers would tap the Rainy Day Fund to pay bills to creditors due in August, but not to save jobs.

Using the fund, which is made up of revenue from oil and gas taxes, could "mitigate the cuts to our children's education, the zeroing out of pre-kindergarten, the zeroing out of college scholarships for all freshman starting in 2012 and 2013," Democratic state Rep. Mike Villarreal said.

But there is little for Democrats to do. Republicans hold every statewide office in Texas, two-thirds of the state House seats and 19 out of the 31 seats in the Senate. The main political division is between veteran conservatives and ultra-conservative Tea Party Caucus members.

State Rep. Debbie Riddle, a caucus member, said her constituents expect her to slash state spending. In the end, though, she voted to spend the Rainy Day Fund.

"I don't think there is one of us ... who has not had our heart hurt and even broken in two with a lot of the testimony we have heard," she said. To tap the Rainy Day Fund "is a long step for me, and I imagine it is for others here, too."

Pitts, the appropriations committee chair, acknowledged that making $23 billion in cuts for the next budget would be devastating. Pitts said. He added that he has a plan that he doesn't want to make public yet. But if it involves the Rainy Day Fund, the question will be whether he can rally enough conservative support for it when the time comes.

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