Comptroller’s office on the current deficit for the current biennium. The state of Texas has a two-year budget and the current budget was written by the 81st legislature in 2009. This biennium’s budget will end on August 31, 2011. On January 10, 2011, Susan Combs, the Texas Comptroller estimated the budget deficit for this biennium to be $4.3 billion. Chairmen Pitts convened the meeting on March 3rd in order to explore the options the legislature has to deal with this deficit. The Texas constitution does not allow the state to run a deficit. Comptroller Combs told the committee that in August, if the state does not have enough money to pay the bills, she would borrow money from the rainy day fund per constitutional provisions. If it came to this, the state would have to repay the fund by August 31st, 2012 which just adds to the already large estimated budget deficit in the next biennium (2012-2013).
When asked what options the state has to close the current biennium’s budget gap, Combs responded by telling the legislators that they could cut spending, defer payments to next year, and/or use the rainy day fund. When asked if the state could close the $4.3 billion gap with spending cuts alone, she and the head of the Legislative Budget Board answered no. Combs stated it wasn’t a question if the rainy day fund should be used, but to what degree. She cautioned that whatever the 82nd Legislature did now would bear fruit in 2013. She predicts that the environment in 2013 may be better but that the economic environment was not likely to return to the levels of 2007 or 2008.
Committee Chairman Jim Pitts, R-Waxahachie, has recently sponsored a bill to use $4.3 billion of the Economic Stabilization Fund (also called the rainy day fund) to close the budget gap. Many of the members of the appropriation committee asked questions of Combs and her staff about the wisdom of tapping into the fund. Several legislators asked questions that pointed out that the fund had been tapped in 1990, 1993, and 2003. It also was pointed out that the fund was used to help fund two of Governor Perry’s initiatives: The Enterprise Fund and the Emerging Technology Fund, neither of which were long-standing appropriations like Medicaid or TRS Care.
Another issue discussed was the major cause of the budget crisis. John Heleman, the Chief Revenue Estimator of the Comptroller’s office, said that it was largely due to the recession. Representative Mike Villarreal, D-San Antonio,
pointed out that 60% of the budget deficit was possibly caused by the recession but that 40% was caused by a structural revenue deficit. This would need to be fixed through a change in tax policy or it would continue to happen. John Heleman explained what a structural revenue deficit was on January 31 to the Senate Finance Committee. It can be watched here:
There are no good choices for legislators and they realize it. The questions are how much will the legislature use of the rainy day fund and will they restructure taxes to make up for the franchise tax that isn’t performing as expected?