Naked City

Word is the state's revenue woes are lessening – Gov. Rick Perry never tires of bragging that the Texas economy is rebounding out of recession more quickly than the national economy. But you wouldn't know that from the budget instructions for 2006-2007 that the governor and the Legislative Budget Board just sent out to state agencies. Those instructions, distributed last week, ask all state agencies – from the Texas Department of Transportation to state universities – to limit their baseline requests for the next biennium to "95% of the sum of amounts expended in fiscal year 2004 and budgeted in fiscal year 2005." Agency heads can also submit additional requests beyond their projected baseline budgets, but those will generally be considered exceptional by legislative committees, and they do not allow at all for any increase in need due to population growth or similar factors. These instructions came despite state sales tax revenues that are running 4.5% above last year, and overall tax collections running 5% ahead of last year.

The governor's office defended the instructions as preventing the sort of last-minute adjustment required in 2003 – when the comptroller's pre-session budget estimate of a $5 billion shortfall turned out to be too optimistic by 100%. Spokeswoman Kathy Walt said Gov. Perry didn't want the agencies to be caught "flat-footed" as they had been before the last regular session. (The existence of real shortfalls in the current biennial budget – such as the $60 million gap in the state textbook fund, temporarily patched with other Texas Education Agency funds – likely provided an added incentive.)

But Dick Lavine, fiscal analyst for the Center for Public Policy Priorities, said that while the 2003 cuts had been in response to a revenue crisis, the new budget projections would result in a "man-made disaster." "Texas already ranks near the bottom in state spending per resident," said Lavine. "There is no revenue reason for agencies to be instructed to cut back even more on already-inadequate services. With our recovering economy, we should have enough money to reverse some of the most harmful cuts made in the last legislative session, not make more."

Republican legislators welcomed the budget instructions as effectively leaving more discretion to legislative committees. House Appropriations Chair Talmadge Heflin, D-Houston, said "it would be foolish not to learn from our experience last time. We need to be prepared to deal with it if our economy does not come back as we expect." But the CPPP pointed out that a 95% budget will already leave out predictable expenses such as enrollment growth for schools and universities, new instructional materials for public schools, expected increases in the number of prison inmates, or increases in health costs.

Lavine said if the state truly intends to proceed in this fashion, any public school finance plan should also wait until the regular session to balance competing social needs. "Changes in school finance or the state's tax system should wait until the regular session, so that the needs for health and human services, higher education, and other vital programs can be given equal consideration."