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Guest Column: How to Bridge the Budget Gap

As the clock counts down to the end of the regular session on May 30, it’s fair to ask House and Senate leaders — and all members — to meet our needs, not our wants. Here's how they can bridge the multi-billion-dollar gap between their budget plans without any new taxes.

By Bill Hammond
Bill Hammond is the CEO of the Texas Association of Business.

At the risk of sounding like a broken record, I’ve told lawmakers repeatedly that the task of balancing our state’s budget this go-round would be difficult but doable. Now, as the clock counts down to the end of the regular session on May 30, it’s fair to ask our leaders to meet our needs, not our wants.

The House and Senate budgets may seem worlds — or billions of dollars — apart in their budgets for state spending over the next two years. To bridge the $6 billion to $7 billion gap in their versions of the budget, there’s a workable solution that does not include any new taxes.

I’ve long advocated for use of the Rainy Day Fund, and I’m encouraged to see at least some leaders at the Legislature acknowledge that it’s time to pull out our umbrellas. While some at the Capitol want to dig in their heels and call the fund off-limits for fear of retribution at the polls during the next election cycle, we cannot afford the very real costs of not tapping a portion of this fund to help pay for our essential needs and state priorities — including education — over the next two years. Take $3 billion from the Rainy Day Fund and save at least $1.5 billion by delaying the date of payments by the state, by only one day, into the next fiscal year.

We’ll see $850 million more now that the political retribution of the Doggett Amendment on education was stripped out of the federal budget compromise.

There are plenty of worthwhile revenue options that both House and Senate leaders have floated and that the business community would support, including:

• $1 billion if lawmakers will reflect the public’s strong, statewide support for slot machines at racetracks and casinos. This change in policy will also add billions of dollars to our state budget in the coming years, when the money will also be needed greatly;

• $500 million if we securitize tobacco money; and

• $500 million if smart-minded prison reforms, including probation for first-time, non-violent drug offenses, are enacted.

In addition, by supporting a quality assurance fee on nursing homes and hospitals, we can increase our return on investment by drawing down billions more in federal dollars.

Then there’s the revenue estimate. While the Comptroller has suggested thus far that lawmakers won’t be seeing a revised estimate from her office with more money available for the next two years, I beg to differ. With the continued uptick in the Texas economy and trends in tax collections, I think it’s fair to count another $1.5 billion to $3 billion in available revenue coming our way. Through a contingency rider, lawmakers could ensure that we have access to the additional revenue when and if it becomes available.

Now that I’ve proven that we can bridge the gap between the Senate and the House budgets, how should the money be spent?

The next state budget must embrace our needs first — the essentials — not the luxuries of our wants. To that end, let’s make sure that we fully fund textbooks for pre-kindergarten through 12th grade. Let’s make higher education within reach by funding the TEXAS Grants program at current levels to serve the most deserving low-income students. Let’s also make sure that we spur further job creation and investment towards a world-class transportation system by issuing $3 billion in bonds to provide capital for road construction. Finally, we must maintain the small business franchise tax exemption at $1 million by adjusting fees on tobacco products.

The clock is ticking. Only time will tell if state leaders have the courage to do right by Texans and make reasonable, responsible decisions about the state’s spending and priorities for the next two years.

Bill Hammond is president and CEO of the Texas Association of Business.

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State government 82nd Legislative Session Budget Rainy Day Fund Texas Legislature