In Texas, a Businesslike Budget, After a Fashion

House Appropriations Committee Chairman Jim Pitts (l), R-Waxahachie, and Senate Finance Chaigman Steve Ogden (r), R-Bryan, talk to the press after the conference committee vote on HB1 on May 26, 2011.
House Appropriations Committee Chairman Jim Pitts (l), R-Waxahachie, and Senate Finance Chaigman Steve Ogden (r), R-Bryan, talk to the press after the conference committee vote on HB1 on May 26, 2011.

When Texas lawmakers said they wanted to run government like a business, they left out the part about using Enron and Countrywide as their models.

Starting with a $4.3 billion deficit in the current budget and a $27 billion shortfall in the next budget, Texas lawmakers began by saying they would take care of their financial problems without raising taxes and without tapping the Rainy Day Fund, the state’s $9.7 billion savings account.

In a state where legislators are constitutionally required to balance the budget, you might think that leaves only budget cuts as a way out, and you would be incorrect.

It does, of course, involve budget cuts, and big ones. Lawmakers are finalizing a 2012-13 budget that cuts more than $15 billion from current spending, including $4 billion in public education cuts. That’s a serious sign of hard times — it’s nearly impossible to get a Texas legislator to cut the amount of money being sent home for the kids in the local school district. In fact, the biggest legislative threats to getting a state budget completed are the printouts showing how the $4 billion would be spread among the state’s schools.

But budget cuts aren’t enough, or aren’t deep enough to balance the budget, given those other promises. Lawmakers, somewhat reluctantly, did agree to use $3.2 billion of the Rainy Day savings — that and the addition of money scrounged from elsewhere got them out of the current year’s deficit. Then they started acting like real business people. Bad ones. They cheated.

At first, it was just a little fiddling with the deadlines. Lawmakers did some things they’ve done before, like taking the monthly payments in the 24th month of the two-year budget and pushing them into the first month of the budget that follows. That “saves” the money this time and can be used to balance this budget. The recipients of the money — school districts expecting a $2.2 billion payment are the biggest group by far — get their money 24 hours late. No biggie. The trick works because the state can either pay it back or just permanently adjust its payment deadlines.

Endless businesses have fallen apart when management booked revenue before it was actually in hand. Unlike them, the state can pass laws that require taxpayers to pay early.

So the state is dragging its feet on some big obligations, and forcing early payments from taxpayers who owe it money. That’s good for an astonishing $3.5 billion, and if the state gets ahead and puts everything back as it was, it can be used again.

The brassiest move would constitute fraud, except that lawmakers have been open and honest about what they’re doing. They falsified an estimate of the costs of one of the most expensive programs in the budget, lowering it to make state spending fit within tight state revenues.

Federal law sets a minimum standard for Medicaid spending — a basic level of services, and spending, below which a state can’t go. That standard, however, isn’t part of the equation when the state comptroller checks to see that the budget is balanced.

The state’s share of Medicaid spending over the next two years will be $4.8 billion higher than it says, in black-and-white, in the new budget. We know this because the authors say it’s so, openly explaining that they made their spending plans fit the available revenue by simply lowering their estimates of how many people will need those services and how much those services will cost.

Things might change over the next year or so. Federal law might change, easing the state’s obligation to Medicaid recipients. If not, maybe the economy will get better — and by so much that money will rush in like a cavalry to rescue the state from the self-made sinkhole in its health and human services budget. Or lawmakers who return for the next session in 2013 could do what they did this year, covering their deficit with the Rainy Day Fund. It’s like spending the fund now without alarming the public and suffering any political damage.

It’s not an outside possibility, either. The chief budget writers, Sen. Steve Ogden, R-Bryan, and Rep. Jim Pitts, R-Waxahachie, both cited the Medicaid shuffle as the reason they can’t tap the Rainy Day Fund for education spending. “We can’t kick the can down the road on school finance and Medicaid at the same time,” Ogden said.

A few hours later, he said he’d checked all of the budget bills with the comptroller and had won her assurance that the magic had worked. “It’s all balanced,” he said.

 

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