The state will collect $77.3 billion in general revenue during the next two-year budget cycle, Comptroller Susan Combs said this morning. The comptroller estimated the Rainy Day Fund will have $9.4 billion in it at the end of the 2012-2013 biennium and that the size of the current deficit is $4.3 billion. This leaves lawmakers with a net of $72.2 billion to spend.
Two years ago, the Comptroller estimated the state would bring in $76.7 billion in general revenue; the economic downturn turned that number into $72.4 billion.
Lawmakers budgeted $87 billion in general revenue spending in the current biennium; at least $6.4 billion of that money came from federal stimulus funds which aren't available to budget-writers this time. Public and higher education and health and human services spending accounted for $73 billion of that; without the stimulus money, that leaves just over $7 billion that's not in those two major categories.
The comptroller's official biennial revenue estimate sets the limit, effectively, on what lawmakers have available to spend during the two-year period that will begin in September. There's a shortfall between what's available and what's needed, but estimates of the size of that shortfall depend on the size of what's needed. For instance, the Center for Public Policy Priorities, a think tank that advocates for the poor, estimates it would cost $99 billion over the next two years to maintain the services the state provides now; they put the size of the shortfall at about $27 billion. Former Appropriations Chairman Talmadge Heflin, now with the Texas Public Policy Foundation, a think tank that advocates for small government and free markets, estimates the shortfall at "$15 or $16 billion."
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Lawmakers will unveil their starting proposal for state spending later this week, and have said it will fit within what the comptroller says is available. Appropriations Chairman Jim Pitts, R-Waxahachie, has said the House won't include money from the Rainy Day Fund in that first proposal. It requires approval from two-thirds of the Legislature to spend that money, but using it could spare more than $8 billion in cuts that might otherwise be needed to make the budget balance.
On the Senate side, estimates of the size of the shortfall have been smaller, partly because budget-writers on that side of the building seem more willing to include some or all of the Rainy Day money in their estimates.
There were enough numbers let go to produce a fog, and that's just what happened when the media took its first crack. Here's how the numbers work: Combs said the state will collect $77.3 billion in taxes and fees during the next biennium. Of that, about $866 million is bound for the Rainy Day Fund, and another $4.3 billion will have to be used to cover the deficit in the current budget. That leaves $72.2 billion for general purpose spending. But, she added, that deficit doesn't include savings from budget cuts ordered by state leaders in the current fiscal year, even though those savings are already stacking up. Any money saved by the agencies in the year that started in September and ends next August is a reduction in that deficit, and it's that much more money that's available for general spending in the next two-year budget.
Likewise, there are two different numbers floating around for the balance in the state's Rainy Day Fund. Combs said it will have $8.2 billion in it at the end of August, and $9.4 billion at the end of the next biennium. That second number is the one to watch — that's the amount available for spending in the 2012-13 budget lawmakers will write this spring.
Combs said sales taxes were 6 percent lower than projected during the current budget biennium and that they're expected to rise 8 percent over the next two years. That's the state's biggest source of general revenue, accounting for about 64 percent of the total. The state's franchise tax will grow about 11 percent over the next two years, bringing in $8.8 billion over the next two years.
John Heleman, the state's chief revenue estimator, said the real news here is that Texas is in recovery and that the worst of the recession is over. The state has added back 220,000 of the 431,000 jobs it lost between the summer of 2008 and the fall of 2009. He's predicting the state economy will grow 2.6 percent in the current fiscal year, 2.8 percent in 2012 and 3.4 percent in 2013.
The numbers laid out today are close to what the comptroller predicted two years ago — had there been no recession, we'd be reporting that Texas is in a no-growth mode. In fact, the state is returning, according to these estimates, to about where it was before the recession began. The comptroller said two years ago that the state would collect $76.1 billion — a figure that dropped to $72.4 billion because of the economic recession's effect on sales taxes and other state revenues. Now we're back to an estimated two-year total of $77.3 billion — within a billion or so of where we started.
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