A Stiff Cocktail of Budget Cuts

The Texas House opened the conversation on state spending Tuesday with a $156.4 billion budget that's $31.1 billion smaller than its predecessor, a drop of 16.6 percent from the current two-year spending plan.

The cuts are deep, but the proposed budget doesn't call for an increase in taxes or tapping the state's $9.4 billion Rainy Day Fund. The budget was released to legislators on Tuesday night and is now available to the public online. The Senate will follow with a proposal of its own next week — lawmakers say the differences are relatively small. And Gov. Rick Perry says he'll follow with his own proposal before his State of the State speech in the first week of February.

The state's current budget totals $187.5 billion, including $88.5 billion in general revenue. The proposed replacement, prepared for the House by the Legislative Budget Board, totals $156.4 billion, including $79.3 billion in general revenue. General revenue is the part of the budget over which lawmakers have direct control; the remainder consists of federal and other funds. In this proposal, general revenue spending would drop by 10.4 percent from current levels.

Estimates of the state's budget shortfall — the difference between the amount of money needed to fund the state and the amount that's actually available — range from $15 billion to $27 billion. Going from this proposal, there's no shortfall in the state budget at all. The House's initial plan cuts spending in virtually every area of government and doesn't include funding increases that would cover current services, population growth and inflation. 

The health and human services portion of the proposal would cut Medicaid provider rates — what doctors and hospitals and others are paid — by 10 percent. And it doesn't include funding for population growth or for increased costs or utilization rates. There's also a $4.3 billion cut included to account for the federal stimulus money used in the current budget that's not available for the next budget. The proposal would cut a total of $16.1 billion in health and human services spending. That's a 24.6 percent cut.

Public education spending would drop, too. The notes included with the proposal say it falls $9.8 billion short of the amount needed under current school finance formulas, which means that the Legislature will have to alter them or find the money. The proposed budget doesn't include funding for increased numbers of students, for projected declines in property values and related local school taxes, or $3.3 billion in the current budget from federal stimulus money. Public education spending would drop a total of $7 billion from current levels. Higher education would be cut $1.7 billion, or 7.6 percent, from current levels.

The House proposal chops $3.3 billion from the business and economic development section of the budget, a 14.3 percent drop. Public safety and criminal justice would lose $1.5 billion from current levels, a 12.7 percent drop.

The LBB, which guides lawmakers as they write the state's budget, also revealed its long-awaited recommendations for how to save and raise money to help balance the 2012-13 budget and make the state function more efficiently, from lifting the ban on Sunday liquor sales to tying the summer sales tax holiday to the state's financial condition. Here are the headlines from the LBB's Government Effectiveness and Efficiency Recommendations.  

CROSS-AGENCY RECOMMENDATIONS | Download .PDF 

—  Move administration of the Texas Economic Development Act. Allow the comptroller — instead of local school districts — to negotiate property tax breaks based on economic development and separate wind farms from other development categories.

—  Reduce the time money sits idle in bank accounts. Shorten the amount of time bank deposits and other instruments lie dormant before going into the state's unclaimed property funds. Worth $72 million to the state.

—  Require electronic banking for state business. Replace paper checks with direct deposit for all state employees and others who receive regular payments from the state.

—  Make it easier to understand state and local government borrowing. Increase the transparency of the state's constitutional debt limit so people can see how it's calculated and how close the state is to its borrowing capacity.

—  Steer veterans to benefits that aren't state-funded. Use national public assistance databases to make sure veterans in Texas aren't using Medicaid — which costs the state money — for benefits that are available from veterans programs that don't use state money.

—  Strengthen regulation to improve food safety. Coordinate food safety regulation between the four main agencies involved to cut down on the 6 million cases of food poisoning reported each year in Texas.

—  Consolidate the state's poison control centers. There are six now; merging them into one would save $2.6 million annually.

—  Raise prices for storing documents for local governments. The state's archives aren't covering their costs with current pricing, and doing so would cut $1.6 million from state spending.

—  Charge state employees for parking in state garages. The state could bring in $5.5 million every two years, the LBB estimates, if it charged state employees as it now charges visitors who don't work for the state.

EMPLOYEE BENEFITS | Download .PDF

—  Address solvency of the state's employee and teacher retirement systems. This doesn't have a number on it, but LBB presents three options: Fully fund the systems, which would require the state (and possible the members) to spend more money; lower benefit levels to fit the amount of funding currently in those plans (which the LBB emphasizes are solvent and in better condition than many of their counterparts elsewhere); or create a hybrid plan that would, for instance, provide different benefits for existing and new members.

—  Cut state contribution to state employee insurance plans. This would save the state $298.1 million in the next biennium by shifting health insurance costs to employees or by keeping those contributions level and lowering benefits under those plans.

—  Raise insurance premiums for state employees who use tobacco. This one would save $24.5 million by adding a surcharge of $30 per month for people who smoke or chew tobacco. And it would extend the idea to members of the Teacher Retirement System and the state's biggest university systems — the University of Texas and Texas A&M.

—  Change coinsurance rates for state employees. Using tiered rates would cost employees more for higher-priced procedures while lowering the percentage they pay on lower-cost care, saving the state $59.7 million.

—  Create a voluntary pill-splitting program. A voluntary program for state employees that would let them buy prescription pills with twice the recommended dosage and splitting them in half at home would save the state $710,190 in the next biennium, according to the LBB.

—  Charge state retirees extra to keep current health benefit levels. The state could save $95.5 million if it charged retirees to pay part of their insurance premiums based on their years of service, and if it lowered the state's subsidies for those retirees' dependents to 40 percent of their premiums (it's 50 percent now).

TAX POLICY | Download .PDF

—  Watch the streamlined sales tax. It would cost Texas $88.3 million to change state laws to conform to a national standard on origin-based taxes (the idea is that the state should be able to collect sales taxes for items bought online or through mail order from out of state). But if Congress enacts legislation that allows states to require sellers to collect those taxes, the state could net $500 million a year in new sales taxes. LBB filed a report on this without making a recommendation.

—  Shrink the discounts for paying sales taxes early. This would save $152 million by limiting the so-called timely filer discount for businesses that remit taxes on time, and the discount rate for sellers that prepay their sales taxes.

—  Tie the August sales tax holiday to budget conditions. This would save $111.8 million by canceling the sales tax holiday in August 2011 and 2012 and by then conditioning it on the health of the state budget. If the state has a surplus in 2013, there would be a holiday, and if available revenue for the 2014-15 budget — the one that'll be written in two years — is greater than available revenue now, then they can have the holiday then, too.

—  Repeal restrictions on Sunday liquor sales. Getting rid of the state's ban would increase revenue from state alcohol and sales taxes by $7.4 million. Texas is one of 14 states that don't allow hard liquor sales on Sundays.

—  Lose the exemption on hotel taxes for permanent residents. Hotels don't charge occupancy taxes on people who stay for 30 days or more. If they did, the state would bring in another $16.1 million in taxes every two years.

HEALTH AND HUMAN SERVICES | Download .PDF

—  Reform how health care is delivered and paid for to reduce costs. The LBB suggests legislation that encourages Texas health care providers to try out new payment and delivery models, and to consider using bundled payments in the Texas Medicaid program. The LBB recommendations also seem to suggest lifting — at least in part — the ban on the corporate practice of medicine, or hospitals hiring doctors.

—  Expand Medicaid managed care into South Texas. The LBB suggests lifting the ban on Medicaid managed care in the Rio Grande Valley, which has been offered by the Health and Human Services Commission as a potential cost-saver.

—  Reduce Medicaid patients’ reliance on emergency rooms. The LBB says redirecting patients with non-emergency conditions from the ER to a clinic could save $184.2 million a year. They suggest physician incentive programs, making urgent care centers Medicaid clinics and encouraging Medicaid managed care to put tougher restrictions in place.

—  Continue and expand the Medicaid Women’s Health Program. Expanding a program that uses preventative screenings to avoid pregnancy-related Medicaid costs would save $3.8 million in the next biennium, the LBB says.

—  Allow advanced practice nurses to prescribe certain drugs. The LBB says advanced practice nurses are poised to ease Texas’ physician shortage, if the state allows them to diagnose and prescribe in some capacity. The cost to patients would be less too, LBB argues.

—  Decrease the number of state-supported living centers. The state could save up to $16.4 million in the next biennium by closing at least one of its state-supported living centers, the LBB says. Another recommendation calls for improving care at Texas’ 13 institutions, which are now being monitored by the U.S. Department of Justice.

—  Strengthen certified nurse aide training. The LBB recommends that lawmakers increase the training required of nurse's aides in nursing homes. Twenty-six states require more education than the federal minimum standard, and Texas isn't one of them.

—  Improve abuse reporting of licensed professionals. Although state law requires state agencies to report misconduct by nurses to the board that licenses them, it's not happening consistently. From fiscal years 2005 to 2010, just a quarter of nurses at state-supported living centers and 33 percent of nurses at state hospitals who had committed confirmed acts of abuse were reported to the Board of Nursing. 

CRIMINAL JUSTICE | Download .PDF 

—  Establish a supervised re-entry program to reduce costs and improve efficiency. The LBB is recommending that lawmakers consider closing one or more prison units. That's a big deal, because tough-on-crime Texas has never closed a prison. The board says the state could save up to $33 million in the next biennium if the Texas Department of Criminal Justice does a better job of helping released prisoners stay out of the big house, reducing prison population.

—  Eliminate statutory barriers to contain costs in correctional managed health care. The LBB says the state could save about $1.2 million in the next biennium by improving health care processes in prisons, like prescription drug distribution and dialysis treatments, and by allowing more really sick and really old prisoners out under the Medically Recommended Intensive Supervision Program. The LBB says that in fiscal year 2009, 74 offenders died while awaiting review for medical parole. 

NATURAL RESOURCES | Download .PDF 

—  Implement a fuel inefficiency surcharge. In 2010, Texans bought nearly 566,000 cars with less-than-efficient fuel ratings. The LBB says adding a $100 surcharge to the purchase of new vehicles with poor fuel efficiency could raise $115.3 million over the next biennium.

—  Solicit park donations. The LBB recommends amending the limits on private contributions to state parks to enable the development of corporate partnerships and promotional campaigns. It also suggests mimicking states like Washington, which asks for a voluntary $5 donation with vehicle registration, to raise more support for state parks.

TRANSPORTATION | Download .PDF 

—  Maximize the federal funds Texas receives for transportation. Texas could get more than $223 million from federal transportation dollars if lawmakers changed some laws to improve the transportation planning process and the coordination among transportation-related agencies, according to the LBB.

—  Increase the state traffic fine to improve traffic safety. Texas could gain about $53 million in general revenue and another $31.7 million in dedicated general revenue over the biennium by increasing the state traffic fine. Already, Texans found guilty of a traffic violation pay a $30 traffic fine to the state in addition to whatever the cost of the citation is. The LBB recommends ramping that fine up to $45.

—  Improve traffic safety by banning the use of wireless communication devices while driving. This ought to make state Rep. Jose Menendez, D-San Antonio, happy, since he's tried session after session to ban cell phone use while driving. The LBB says Texas could save lives and generate about $2.3 million by making it illegal to use your mobile device while driving, and also making it an offense under the much-maligned Driver Responsibility Program. 

INSURANCE | Download .PDF 

—  Develop and operate a state health insurance exchange a la federal health care reform. LBB says creating a marketplace for health insurance would increase the availability of affordable coverage for Texans. Plus, the federal health reform signed into law last year requires it — and if the state doesn’t do it first, the feds will do it for Texas. The version the LBB recommends would be a quasi-independent state agency overseen by the Texas Department of Insurance. 

HIGHER EDUCATION | Download .PDF 

—  Monitor outcomes and limit course offerings to ensure dual credit course equality. With the state’s encouragement, enrollment in courses that provide both high school and college credit has been skyrocketing. To ensure the quality of these courses, the LBB would like the Texas Higher Education Coordinating Board to more closely monitor and analyze the outcomes of such programs — and see to it that courses like physical education are not eligible for funding.

—  Strengthen financial oversight of community colleges. The LBB wants to put community colleges on more solid financial footing. It calls for an annual report on the condition of the state’s community colleges based on financial indicators.

—  Improve the effectiveness of the Texas common course numbering system. The recommendation would make it easier for students to transfer course credit between state universities and community colleges for their core classes. The LBB recommends guaranteeing transfer credit for all courses in the Texas Common Course Numbering System if the university offers an equivalent course. 

PUBLIC EDUCATION | Download .PDF 

—  Limit subsidies for AP exams. The Texas Education Agency currently provides a $30 per test subsidy to help cover the costs of public school students taking Advanced Placement and International Baccalaureate exams as an incentive to increase students' participation and success. The LBB says restricting that subsidy — which while increasing participation rates has not increased students' success rates — only to low-income students would save the state $18 million in general revenue.

—   Increase monitoring of alternative schools. In 2007, the Legislature enacted standards for alternative schools — but the TEA still doesn't monitor or enforce the standards beyond examining compliance with placement, suspension and expulsion requirements. LBB says the TEA should use performance measures to make sure alternative schools are meeting the standards.

—   Enhance teacher retention programs. In Texas, the least-experienced educators teach in the districts with the most economically disadvantaged students — and the state doesn't have any programs that address specifically the retention problem in those districts. Among the incentives LBB suggests are giving priority for loan repayment assistance to teachers in hard-to-staff districts.