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Budget Outlook is Better, but Not Necessarily Good

Writing the state budget might not be as difficult next year as it was two years ago, but things haven't improved enough to make it easy.

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Texas is not floating in cash, but the doom and gloom offered by some of the state’s top budget writers might be overstating the trouble ahead. Some analysts expect things to be tight, but easier than they were in the 2011 session, which resulted in significant cuts.

“Easier” is a relative term. Lawmakers don’t really write the state budget — it’s controlled by their promises, their fears and obligations they don’t control. They promise to maintain roads, prisons, schools and welfare and health care programs, and fear the political consequences of breaking the promises. They’re constrained by growth in programs like Medicaid over which they have little control. They promise not to raise the price of government — not to add taxes or fees — and fear flipping on that

The rest is just math. Add for growth in public school populations, for caseloads, for vehicles on roads, for inflation and other rising costs. Tally the revenue increases that come not from higher tax rates but from increases in tax revenue from oil and gas, sales and property values. The amount of the budget subject to legislative discretion is pretty small.

Legislative sessions start with a tug of war over expectations. If lawmakers say money is relatively plentiful, they will attract a line of supplicants seeking money for their programs. If they say it’s tight, the supplicants expect bad news, even if they still form a line. It has been years since the state had a real surplus, and there’s not one now. The current budget includes Medicaid and public education cuts and a built-in deficit that will have to be addressed in January, before lawmakers write the next budget.

State leaders say the next budget will be tough, too. They’re building their dismal case for that, stressing the need to hold the line on spending.

It won’t be as bad as 2011. A windfall — federal stimulus money — bailed the state out of a budget shortfall in the 2009 session, but when lawmakers returned to write another budget two years later, they found they had merely delayed trouble. They wrote a budget that, an estimate from the nonpartisan Texas Taxpayers and Research Association said, used $8.8 billion in “one-time money” — money not available for continuing expenses. The state’s Rainy Day Fund will have almost that much in it next year. And the state is bringing in more money from sales and other big taxes than the comptroller projected in 2011.

Here’s a semi-rosy prediction, recently presented to legislative staffers by Dale Craymer, TTARA's president: “Current trends suggest that the Legislature may have near sufficient funds to pay for ‘normal’ 2014-15 spending pressures.”

That’s how an economist like Craymer says the state’s budget situation is better than it was two years ago — without saying it’s good.

So-called normal spending pressures don’t include things like pending lawsuits over the state’s school finance system and the repercussions of the Affordable Care Act.

That foreshadows another fight over the money in the state’s savings account, the aforementioned Rainy Day Fund, during the next session. And the school finance lawsuits could spur debate over the mix of local property taxes and state taxes that pay for public education. That recurrent issue inevitably splits into conversations about education spending and how to raise the money for education.

Conservative groups like Americans for Prosperity and the Texas Public Policy Foundation are telling lawmakers to limit spending increases to something less than inflation plus population growth. Liberal groups like the Center for Public Policy Priorities argue that prices of goods and services used by government rise faster than consumer prices, that the so-called limit would actually shrink government.

As for taxes, the arguments range from calls for a personal income tax — that’s as close to breaking stone tablets as you can find in state politics — to suggestions from business groups like the research association that say the state’s current taxes aren’t equal and uniform.

The odds of lawmakers fiddling with taxes are small, especially without a real budget crisis. Sen. Steve Ogden, R-Bryan, who recently stepped down as Finance chairman and who isn’t returning for another term, addressed the suggestion for reforms at the end of a recent hearing.

“I’ve been over here long enough that if I could’ve fixed it, I would’ve,” Ogden said.

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