Texas lawmakers kick tough decisions down the road

Texas lawmakers started the year promising to make hard choices to solve the largest budget shortfall in the state's history. They delivered one speech after another about not "kicking the can" down the road.

Yet that's exactly what they did.

Gov. Rick Perry signed a budget that was balanced only through accounting maneuvers, rewriting school funding laws, ignoring a growing population and delaying payments on bills coming due in 2013.

It accomplishes, however, what the Republican majority wanted most: It did not raise taxes, took little from the Rainy Day Fund and shifted any future deficits onto the next Legislature.

Those are key talking points for Perry, as he speaks to the conservative faithful around the country and considers a run for president in 2012. Many Republican lawmakers have complained privately, and Democrats publicly, that Perry has heavily influenced the session to make sure nothing passed that would hurt a potential campaign.

States across the nation faced major budget shortfalls this year, but none as big as Texas. While most legislatures chose to raise taxes and fees along with making cuts, Texas tea party activists put enormous pressure on the Republicans, who control every branch of state government, to manage the $27 billion shortfall through cuts alone. That included $7.8 billion to health and human services.

Texas Republicans crowed about their budget accomplishment. Perry, who has touted his budget-cutting prowess as he flirts with running for president, declared victory.

"I am proud Texas will continue to live within its means while encouraging job creation and maintaining essential services," said Perry, who claims that keeping taxes low helps create jobs.

Lt. Gov. David Dewhurst bragged that the $80.6-billion, two-year budget will cut state government spending by $15 billion compared to the previous budget.

Critics, who see things differently on what services are truly essential, say it underfunds the state's needs by $10 billion beyond that.

Democrats also derided the GOP's claim that it was truly a balanced budget.

"It's all smoke and mirrors and misdirection," said state Rep. Garnett Coleman, D-Houston. "There's no way this is a balanced budget. It's billions short of where Texas is supposed to be on Medicaid and education."

Much of the overall savings came through cuts to university and state agency budgets, but the bulk of it came from accounting sleight-of-hand and putting off the biggest problems until lawmakers come back in 2013. At that point, lawmakers will be bound by the balanced budget law to tap the Rainy Day Fund to cover any existing deficit and House rules will require fewer votes to do it.

In Texas, the elected state comptroller — currently a Republican — can certify the budget is balanced if the spending does not exceed the revenues she expects over the next two years. That leaves lawmakers with a lot of leeway to use ploys that have been practiced for more than a century.

The first accounting shift was to delay a $2.3 billion payment owed to public schools in 2012-2013 by one day, so that the bill isn't technically due until 2014, thereby going into the next budget. The new budget also assumes there will be no growth in the number of school children in Texas, even though it is one of the fastest-growing states in the nation. Critics say the state will short school districts $2 billion that way.

Lawmakers also decided to rewrite the laws that determine how Texas pays for public education, since the Legislature could not afford what the law mandated. They slashed $4 billion in what will be the first cut in per-student spending in Texas since World War II. Districts must either lay off thousands of teachers and increase class sizes, increase local property taxes or both.

Republican leaders came up with another $800 million on paper by ordering the Legislative Budget Board, essentially the Legislature's accountants, to forecast a faster increase in land values in order to show more property tax income for schools. While signs do point to a recovering economy, state Rep. Mike Villarreal, D-San Antonio, found the move dishonest.

"The education cuts hurt our children and economy and the accounting tricks will put the state into a deeper ditch in two years," Villarreal said.

Lawmakers also chose to ignore the estimated $4.8 billion extra it would need for the Medicaid health care program because of Texas' fast-growing population and high poverty rate. By simply opting not to budget for it, conservatives showed their hatred for the program and could technically balance the budget.

But all the deferred bills and payments will come due eventually, and the Republican victory in not tapping the $6.5 billion Rainy Day Fund is for this year only. Conservative lawmakers readily admit that one of the first things they'll do when they come back in 2013 is tap that resource.

"The Rainy Day Fund is probably already spent with the Medicaid costs and public education," said Rep. Phil King, R-Weatherford. "I think that's where all of the Rainy Day Fund will go" in 2013.

But the biggest problem lawmakers left unaddressed is the $8 billion structural deficit that recurs every two years. The deficit was created by a deal to lower property taxes while transforming the state's business tax. It has never generated as much money as expected.

The Standard & Poor's rating agency says the problem hurts Texas' credit rating and is the "primary source" of the state's budget woes, not slower revenue growth.

Even the Republican chair of the Senate Finance Committee warned of trouble ahead if Medicaid and public educations were not fully funded.

"This is a really big deal," Sen. Steve Ogden, R-Bryan, said. "We cannot kick the can down the road on everything."