State lawmakers were prepared for a budget crunch, since the COVID-19 pandemic slashed revenues from sales taxes, energy taxes, and other sources. The question they now face is how to close the shortfall without choking off long-term growth.
The answer is far from clear, but it’s certain to involve cuts to popular programs.
In fact, such cuts are what’s expected this session. The state comptroller’s office says lawmakers need to close a shortfall of nearly $1 billion in revenues. And Republican state Sen. Brandon Creighton of Conroe, who serves on the Senate Finance Committee, noted that Gov. Greg Abbott has asked state agencies to reduce budgets by 5%.
“The base budget that we have already passed reflects that,” Creighton said. “But the base budget is just a starting point.”
Creighton said there’s no way to balance the budget without looking at big-ticket items like education and health care.
“When you set aside public education, higher education, and health care expenditures, that’s close to 86 to 87 percent of the budget,” he said.
In the past, the legislature has faced similar shortfalls, and has managed them without significant cuts. But that’s only part of the problem.
One of the biggest challenges lawmakers face is that the base budget proposed by both chambers is about $7 billion more than what the comptroller’s office gave in its biennial revenue estimate, according to Democratic state Rep. Donna Howard of Austin, who sits on the House Appropriations Committee.
“We have constitutional requirements that we can only spend what we have,” Howard said.
That’s forced lawmakers to weigh their options carefully. There is some money coming from the federal government to offset the damage caused by the pandemic. There are also accounting gimmicks that would allow the state to push some bills down the road.
“The Legislature does have ways of rolling money over into the next cycle,” said Jim Henson, director of the Texas Politics Project at the University of Texas at Austin. “Almost every budget cycle begins with an early appropriation to cover what was rolled over from the previous session, and those appropriations often count in the billions of dollars.”
After that, things get a little tricky.
One possibility is raising taxes through things like legalizing gaming or cannabis. Another possibility would be to use the state’s Economic Stabilization Fund, better known as the “Rainy Day Fund,” which holds about $10.7 billion.
But neither of those proposals have support from the Republican majority.
State Sen. Creighton, of Conroe, said he remembers dipping into the Rainy Day Fund after Hurricane Harvey, withdrawing roughly $1 billion. But he doesn’t want to make that a habit.
“I think it’s important that the Rainy Day Fund is reserved for one-time expenses,” Creighton said, “And if we did use it as part of our budget culture, we might become reliant on it to an extent that we couldn’t deliver on in future budgets. So, I think first we need to look for ways to reduce spending and the cost of government and efficiencies overall and save that as a last resort.”