Of all the decisions that the Texas Legislature will make this year, none may be more important than this: How do we manage the state’s resources in a way that is prudent, responsible and supportive of economic growth?
Over the last two years, state sales tax collections have come in weaker than expected. Meanwhile, Texas has continued to grow as fast as almost any other state; key facilities are in disrepair; and we have committed to spending hundreds of millions of dollars more to protect children from abuse. Add it all up and the state of Texas faces a multibillion-dollar budget shortfall.
The Texas House Appropriations Committee is working diligently to close this shortfall. To be clear, tax increases are not on the table. The committee is making meaningful spending reductions in health care, education, government contracts and economic incentive programs. Texas will continue to have one of the lowest per-capita spending rates in the country.
But should we balance the budget with spending reductions alone?
If we pursue a cuts-only approach, there will be no new per-student resources for public education. The burden for funding education will shift further toward local property taxes. The Legislature will also make deep cuts in higher education, research and student financial aid.
For example, the cuts-only budget proposed earlier this year in the Texas Senate threatens to wipe out a $90 million funding stream for the University of Texas Southwestern Medical Center in Dallas. State funding for Texas A&M-San Antonio would be cut in half under that same plan. Other universities are talking about canceling hundreds of classes.
In short, the institutions that we entrust with our future are facing serious setbacks that would harm our entire state. Our economic success begins in our schools, colleges and universities. In order to compete, we need a well-educated workforce with diverse skills.
And the cuts would hardly be limited to education. Across the state, state mental hospitals are crumbling. Without significant repairs, for example, the Rusk State Hospital in East Texas will remain a public health hazard. Nursing homes could be forced to reduce their staffs.
And perhaps nobody should watch this debate closer than the retired teachers who put so many of us on the path to success. There is a $1 billion shortfall in the health care program for retired school employees. Without an injection of hundreds of millions of dollars to address that shortfall, retired teachers could face massive increases in their health insurance deductibles and very sizable increases in monthly premiums.
Of course, there’s more than one path to a balanced budget.
Another idea is to combine spending reductions with a modest withdrawal from the state’s Economic Stabilization Fund, also known as the Rainy Day Fund. The comptroller projects that $12 billion will be in that fund by the end of the next budget cycle. The Legislature has withdrawn money from this savings account seven times since its inception. A little more than a decade ago, the fund was virtually empty. And now its balance is higher than ever.
Ratings agencies say we could maintain the state’s strong credit rating with as little as $5 billion in the fund. Nobody in the Legislature is talking about reducing the balance of the fund to such a low level.
There are some accounting maneuvers that the Legislature can use to lessen the impact of budget cuts. For example, one trick we may use is to delay a payment to school districts by a few days, pushing it into the next budget cycle without any real harm to education. But those bills will eventually come due, and with each delay we use, we put the next Legislature in a deeper hole. The Texas House has worked diligently in recent years to phase out budget gimmick — and we should be extremely careful about bringing even some of those gimmicks back.
Those who serve in public office often compare balancing a government budget to the decisions a family faces when its income dips. Though it’s a flawed metaphor, perhaps it’s worth using this time to illustrate the choices we face: Will we really decide not to buy school supplies for our children because we as parents want to brag about all the money in our savings account?
Republican Joe Straus is speaker of the Texas House.