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Analysis: Texas budget writers have the cash, but won't let go of their tricks

The state has a Rainy Day Fund with billions of dollars in it, but Texas lawmakers would rather use accounting tricks to balance their next budget.

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If you were running government like a business, wouldn't you be using your cash-flow fund for cash flow?

Here’s the situation. Comptroller Glenn Hegar said on the eve of the legislative session that taxes and fees would bring in less money during the next two years than during the current two years.

Simple enough: Income is down.

He also said that the state will end its current budget with $10.2 billion in the account formally known as the Economic Stabilization Fund and informally known as the Rainy Day Fund. Lawmakers can expect to end the next budget cycle with $11.9 billion in that fund, he said.

Also simple: Lots of money in the savings account.

If you boil that down, it means the Legislature has to either cut spending or find something beyond its expected income to write a balanced budget for the 2018-19 financial cycle. There’s also the complication of growth in population and inflation, both of which add to the overall cost of continuing the programs and services the state provides now.

Just doing the same things the state does now would require more money. The state has less money, so lawmakers have to cut or scrounge to come up with a balanced budget.

But it’s not that simple. Most Texas legislators are downright skittish about getting into that savings account.

They know the history — the Rainy Day Fund was created to collect money during good times that could be used to avoid or lighten tax hikes in bad times, it’s been used to that effect in several instances, and the fund’s balance has reached a level that might reasonably prompt taxpayers to ask whether they’ve been overcharged by the state.

The Legislature’s position on this has shifted over the years, and the House and Senate remain divided on their willingness to tap the account to balance the budget they are writing this session. Using the Rainy Day Fund started as little more than an accounting measure — much in the spirit of the cash-flow account it was meant (by at least some) to be.

It started as a circuit-breaker — the first financial tool in the appropriators’ toolbox. They have other things in that box — accounting tricks that delay spending from one budget to the next and so on. The order of things was usually to scrub spending and then, to finance things, to: 1) spend current tax and fee income, 2) spend savings, 3) pull out the accounting tricks, and 4) raise taxes and/or fees.

Number 4 is out, at least on the visible level; state lawmakers are once again lowering their share of public education spending (file that under the heading of avoided expenditures) and putting more pressure on local school districts to raise money. It’s disingenuous, because those same lawmakers are prone to decry property tax increases, but it’s legal when local property values are rising.

Even when they're legal — like the House’s proposal to delay a payment to school districts from one fiscal period to another — these tricks can cause future heartburn. They have to be paid back.

And because of many lawmakers’ aversion to spending from the Rainy Day Fund — especially for anything other than one-time expenses — the budgeteers have gone elbow-deep into the accounting tricks.

Voters won’t mind; what raises the eyebrows of a CPA seems to have no effect on the electorate. Most of the time, it’s legal, too. There are questions about the constitutionality of delaying a transfer from the state’s general accounts to its highway fund, but that’s fodder for lawyers and political consultants.

Even when they're legal — like the House’s proposal to delay a payment to school districts from one fiscal period to another — these tricks can cause future heartburn.

They have to be paid back.

Pushing a dollar of spending into the next budget can make the current budget appear smaller and therefore balance; it’s like delaying the payment due on the last day of a year to the first day of the next to make it look like next year’s spending. But it’s a one-time trick. A dollar delayed once has to be paid back before that trick can be pulled again. You can make 11 monthly payments in a year, but you’re eventually going to have to have a 13-payment year to catch up again.

Texas lawmakers have been remarkably disciplined about reconciling their accounting magic — the better to face troublesome budgets down the road. But if they do what the House is suggesting or the Senate is suggesting — delaying this spending or that — they’re going to have to reckon for it later.

Maybe they’ll hit the Rainy Day Fund then; they’re going to have to find the money somewhere.

 More columns from Ross Ramsey:

  • The death of a teen on the run from the state's foster care system stirs deeper questions: Why aren't these programs working, and who will be held to account for that?
  • You might rejoice or bewail the death of a piece of legislation, but remember this time-proven adage: Nothing is really dead while the Texas Legislature is still in Austin. 
  • Things almost never come out of the Texas Legislature — if they come out at all — in the same shape they went in. Principles give way to exceptions and compromise, and the final product can differ greatly from the original idea.

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State government 85th Legislative Session Budget Rainy Day Fund Texas Legislature