AUSTIN AMERICAN-STATESMAN

Tuesday, May 11, 2010

By Kate Alexander

Straus vows no new taxes to close budget gap

House speaker says state should consider furloughs, four-day workweeks and no new programs.

Speaker Joe Straus on Tuesday gave House budget-writers their marching orders for next year: Cover a hefty state budget shortfall without raising taxes.

Everything other than taxes, however, appears to be under consideration to deal with a 2012-13 budget gap that is now estimated to be as much as $18 billion.

Unpaid worker furloughs, a moratorium on new programs and a four-day workweek were all discussed at the Appropriations Committee hearing Tuesday morning.

"We cannot afford business as usual," Straus said, adding that significant budget cuts will be unavoidable.

Agencies have already been told to find budget savings that should reduce spending in the current budget by about $1 billion.

Those cuts are "absolutely necessary but not nearly sufficient," Straus said.

Appropriations Chairman Jim Pitts , R-Waxahachie, also mentioned that "revenue enhancements," such as expanded gambling, need to be part of the mix to address the state's long-term budget needs.

Legislators can reasonably expect a budget gap of $15 billion to $18 billion when they return to Austin in January to write the next two-year budget, said Wayne Pulver, assistant director of the Legislative Budget Board.

Budget board officials have been very conservative when publicly discussing the size of the projected shortfall. The last figure mentioned publicly was $11 billion.

But Pulver acknowledged, when pressed by Pitts , that the shortfall will probably be bigger because of rising health care costs and demand for certain state services that cannot be cut, such as Medicaid.

Straus laid much of the blame for the state's budget uncertainty at the feet of the federal government.

The Legislature must be mindful that Texans will be facing higher federal taxes as the nation deals with the deficit, so state leaders should not add to that burden, Straus said.

"Increasing taxes would restrain economic growth and hinder our ability to create jobs," Straus said.

But Straus' assessment ignores the role that state decisions have played in creating the budget hole.

Last year, the Legislature used $11 billion in one-time money to balance the $182 billion two-year budget.

That amount includes the $3 billion that had been set aside to pay for the ongoing cost of the 2006 school property tax cuts. The major revenue source that was meant to pay for that tax cut, the revised business tax, has come in woefully below expectations, and the set-aside is now gone.

Another $6 billion came from the federal stimulus package and allowed Texas to keep state dollars stashed away for a rainier day. That day seems to have arrived.

The so-called rainy day fund is expected to have about $9 billion available for the 2012-13 budget. But there is a difference of opinion about whether legislators should drain the fund or leave a little something for the next budget, when conditions are expected to be equally tough.

Slower than expected sales tax collections are also a major factor in the shortfall. Collections are now about $1 billion behind where they were expected to be at this point in the fiscal year, though they appear to be picking up a bit.

Sales tax revenue pays for about 60 percent of the state's basic functions, such as education and prisons.

Straus did not endorse any particular steps to cutting the budget, though he did seem to focus heavily on reducing the state's payroll costs.

Andy Homer , director of governmental relations for the Texas Public Employees Association, said squeezing state workers won't solve the problem.

"Everyone needs to share in the responsibility of resolving the situation, not just state employees," Homer said.

kalexander@statesman.com; 445-3618