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Analysis: A high-stakes budget duel — if Texas lawmakers want one

The Senate doesn't like the House's hit on the Rainy Day Fund. The House doesn't like the Senate's delay of a deposit into the state's highway fund. Neither wants to raise taxes. But all is not yet lost — unless they want to fight about it.

House Appropriations Chairman John Zerwas, R-Richmond, and Senate Finance Chairwoman Jane Nelson, R-Flower Mound.

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While the Texas House and Senate are reconciling the differences in their proposed state budgets, they’re still wrestling over which money to spend — a debate that imperils the only legislation they must pass to avoid going into overtime this summer.

The House’s dependence on tapping the state’s swollen savings account is a no-no in the Senate. That’s a $2.5 billion difference.

The Senate wants to delay a newly established deposit into the state’s highway fund, a bit of magic that would fill a $2.5 billion hole in their proposed budget. The House has questioned its constitutionality and, perhaps more importantly, has said it would violate the House’s official rules.

It’s a classic end-of-session legislative standoff, fueling speculation of extra legislative sessions after the current session’s Memorial Day finish, of government shutdowns and political posturing. The two budgets are always different; the end of every legislative session features a committee of 10 members — five from the Senate, five from the House — who iron out the differences and then take a negotiated settlement back to their chambers for final approval.

Their differences over spending are significant this year — they usually are. But their squabble over what money to spend is a new wrinkle.

Neither side has endorsed a full-tilt raid on the state’s $10.2 billion economic stabilization fund, better known as the Rainy Day Fund. But the House would hit that savings account for $2.5 billion. Senators have talked about using the fund for one-time expenses — long overdue repairs to state hospitals for Texans with mental illness, for example — but not for ongoing operations.

The Senate wants to balance its budget with an untested accounting trick that delays, from one budget cycle to the next, a transfer from the state’s general fund to its dedicated highway fund. Such bookkeeping dodges are commonplace in Texas state government; delaying an expense avoids red ink in one period and pushes it to the next, for a future Legislature to remedy.

This one is different because the transfer itself — using sales tax windfalls for highway spending — was only added to the state Constitution in November 2015. This is the first time it’s been available for financial chicanery.

The regularly used bag of tricks involves normal and large payments the state makes to local school districts, to retirement funds for state employees and teachers. Pushing one or more of those from one period to another pushes the red ink along and helps balance a current, tight budget.

In fact, the House is using its own delay of payment to local schools to balance its budget — a $1.9 billion shift. That one is time-tested — proven to be beyond the interest of voters or anyone else who’s not an accountant or a bond dealer.

Texas Attorney General Ken Paxton tried to clear up the legality of the Senate ploy, saying last week in a nonbinding opinion that he believes a judge would side with the Senate. That’s important, but it doesn’t answer the violation of the House rules cited in a letter to the AG from an attorney for House Speaker Joe Straus — a foul that would allow any member to raise a state budget-killing objection.

On the Senate’s end of the building, Lt. Gov. Dan Patrick has objected, a little more strongly each time, to using the Rainy Day Fund to get through a tight budget year. He’s not creating a rule, but in the Senate, what this lieutenant governor says amounts to the same thing.

As a practical matter, Texas lawmakers have plenty of options even if they stay out of savings, leave the transportation money alone, don’t raise taxes and don’t cut the spending they’ve planned. They have plenty of other tricks in their bags — tricks that have been used before and that have not been challenged on either end of the Capitol.

It’s not a matter of finding a way to fix this — there are plenty of ways. It’s a question of whether fixing this is what Texas legislators — and their leaders — want to do.

More columns from Ross Ramsey:

  • Some Texas lawmakers want to kill the franchise tax that so many businesses hate. So far, so good. But it might leave a hole in the state's pocket when it inevitably comes time to rebalance the state's financing for public schools.
  • The state of Texas has been on a losing streak when it comes to redistricting and voter ID laws, with federal judges repeatedly finding that the state intentionally discriminated against minorities. Whose legal advice were they following? 
  • If you're in favor, Texas lawmakers will meet with you and put your legislation on the fast track. Others have to wait, sometimes for weeks, for a chance to talk for a few minutes in a committee hearing room in the middle of the night. 

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State government Transportation 85th Legislative Session Budget Dan Patrick Joe Straus Rainy Day Fund Texas Legislature