The Texas Senate Finance Committee on Wednesday unanimously approved a $106.3 billion two-year budget using an accounting trick that delays a $2.5 billion payment for transportation funding to the following budget cycle.
The maneuver prompted harsh criticism from House Speaker Joe Straus and further distanced the two chambers as they struggle to find common ground in a tight budget year.
Finance Committee Chairwoman Sen. Jane Nelson, R-Flower Mound, said delaying the transportation payment, a move she said Comptroller Glenn Hegar has approved, “solved a lot of our problems.”
“Even with that, it’s a tight budget. I could not be prouder of the product we are putting forward,” she said after the 15-0 vote.
Straus, R-San Antonio, fired back minutes later, telling reporters that the Senate plan amounts to “cooking the books.”
“Counting money twice in order to balance a budget is not a good idea. This is the Texas Legislature. We are not Enron,” Straus said.
Straus, whose initial budget proposal totaled $108.9 billion, would prefer to tap the state’s $10.2 billion rainy day fund to avoid more severe cuts, but hard-line Republicans have said the fund should only be tapped for one-time expenses or natural disasters.
“I’m not interested in cooking the books just to avoid a vote on the rainy day fund. We have options,” Straus said.
The transportation money in question was set aside by a state constitutional amendment proposed by the last Legislature and adopted by voters in a 2015 referendum. The amendment, known as Proposition 7, takes up to $2.5 billion per year of the state’s general sales tax money — which can go to schools, prisons and health services — and directs it to highway spending.
The Senate Finance Committee’s budget would delay by one month the transportation payment from August to September. Because the budget year ends at the end of August, the 2019 payment would come during the first month of the 2020 budget year.
That maneuver frees up money by allowing the state to exceed the $104.9 billion Hegar has said is available for lawmakers to spend in the 2018-19 budget.
But Straus said that delaying the payment while also allowing the transportation projects that depend on it to move forward, which Nelson said the Senate plans to do, amounts to double-counting the same $2.5 billion in sales tax revenue because it will appear on the books of both the state’s general fund and the highway fund during 2019.
After Straus’ comments, Nelson issued a statement saying: “This is a smart money management decision that allows us to responsibly meet our needs without raiding the rainy day fund.”
Lt. Gov. Dan Patrick on the Senate floor called the maneuver “a very sound fiscal method.”
The transportation funding maneuver is the latest in a series of disagreements between the House and Senate that have many wondering whether leaders in both chambers will agree on a budget by the end of May, when lawmakers are scheduled to depart Austin. If they don’t, Gov. Greg Abbott will have to call a special session on the budget.
Nelson said the Senate will vote to approve its budget proposal Tuesday.
Rainy day fund
The House Appropriations Committee hasn’t yet voted on its budget, but Chairman Rep. John Zerwas, R-Richmond, recently unveiled a stop-gap budget measure that spends $2.5 billion from the rainy day fund, formally known as the Economic Stabilization Fund.
The reserve, funded primarily by oil and gas production taxes, is the largest of its kind in the country and is projected to grow to $12 billion by the end of the next budget cycle. Zerwas’ measure, known as a supplemental budget, would use the money to plug holes in the current budget and also pay for some things, such as border security and a shortfall in the teacher retirement health care system, that would otherwise fall to the next budget.
Nelson on Wednesday said there is “no appetite” among members of the more conservative upper chamber to use the reserve money. But she also hinted that using the money for previously deferred maintenance of state infrastructure might be considered a one-time expense, opening the door for compromise with the House.
“I personally wouldn’t object to using rainy day for deferred maintenance needs that are health- and safety-related that we can’t afford to pay for in the budget we just passed,” she said. “But again, that has to be a full Senate decision.”
With federal funds added in, the Senate committee’s 2018-19 budget totals $217.7 billion, which is a 0.7 percent increase over the current two-year budget. After factoring in inflation and population growth, the new plan amounts to a 7.1 percent cut compared with current spending, according to the left-leaning Center for Public Policy Priorities.
The new Senate budget cuts deeply into higher education, trimming 6 to 10 percent off the state money that goes to every public college and university.
It also leaves untouched the state’s K-12 education funding formula, which will result in a $1.4 billion decrease in the state’s share of the funding as school districts’ share increases due to rising property values.
The Senate plan continues the current $800 million funding level for the state’s ongoing border security initiative, which Democrats have been pushing to cut in light of President Donald Trump’s promises to ramp up U.S. Border Patrol spending.
In the committee-approved budget, funding for the scandal-plagued Child Protective Services increases by $430 million, a bigger bump than was originally proposed by Nelson, and mental health services get a $240 million boost.