Decision Time

The Texas Legislature today starts its 140-day effort to puzzle out a massive budget deficit, political redistricting, immigration and a slew of other gnarly problems. The budget issues came into focus Monday with new numbers from the comptroller, who says the state is recovering, slowly, from the recession.

But first, legislators will get organized, voting on new rules, getting sworn in and putting the final touches on a race for speaker of the House that was all but settled on Monday afternoon.

The 101-member Republican caucus is for House Speaker Joe Straus. The Democrats (all but the six who weren't here two years ago) have previously voted for him. The question now is what the 30 Republicans who voted against the incumbent in caucus Monday will do when the House meets at noon today. That vote will be the first public test of whether the Republicans are going to stick together as a party or split into factions.

"I think this is a strong uniting step toward what will be a difficult session," Straus said after the caucus vote.

Not everyone is ready for unity. Straus supporters scrambled and lobbied to turn the opening session into a coronation instead of a public display of the GOP's family fight. But Ken Paxton of McKinney, one of two candidates on the short end of that caucus vote, decided to stay in the race and to force a public choice when the session begins today. He said he'll have the support of the other challenger, Warren Chisum of Pampa. [Editor's note: Chisum released a letter Tuesday morning saying he'll honor the will of the caucus and will support Straus — not Paxton.]

"Texans who provided us with our historic governing mandate should be embraced and welcomed into the process. They deserve openness and transparency — including a public vote — and that is why I will remain a candidate for Speaker on the floor of the Texas House," Paxton said in a statement released Monday night.

Straus took the office two years ago, starting with a small band of Republicans and almost all of the Democrats. That coalition, and the fact that he knocked off a sitting Republican speaker, Tom Craddick of Midland, made him a target of some conservatives.

Chisum and Paxton emerged as candidates, but neither could muster the votes to mount a serious challenge. Straus claimed 120-plus pledges right after the election, and most of that support appears to be holding.

A small crowd of activists and political consultants and reporters gathered in the lobby of the Reagan Building north of the Capitol on Monday, waiting while House Republicans met to talk about their preferences in the race for speaker. The caucus met privately, but members said later that they first voted on whether to express a preference at all and, having agreed to do that, started the voting on the three candidates.

That vote wasn't done by secret ballot, but in a way that everyone in the caucus — but not anyone outside — knows who voted for Straus and who didn't. One member, Sarah Davis of Houston, was absent. Seventy members stood up for Straus, and with that support apparent, no vote was held to measure support for either of the challengers.

That done, Rep. Larry Taylor of Friendswood, who heads the caucus, held a press conference, announced the results and handed it over to Straus for questions. Straus said then that he wasn't sure whether any challengers will be nominated on the floor of the House during their session today. Shortly after the caucus broke up, his supporters began beseeching Chisum and Paxton to drop their bids and avoid a public exhibition. Chisum is out; Paxton remains.

That exhibition is just what some want. The conservative and Tea Party activists who braved cold weather to demonstrate were strongly anti-Straus, and would love to have a list of the people who voted for him. As members walked away, several demonstrators were yelling that they'd be held accountable. Many of the demonstrators wore stickers with 3/6/12 on them: That's the date of the next Republican primary election.

Straus' election two years ago was, when the official tally was taken, unanimous. The fight that led up to it was over and members simply made him speaker by acclamation with no other candidates from which to choose. If there is actually a vote by the full House, choosing from more than one candidate, there will probably also be a conversation — as in previous races — about whether that should be by open or secret ballot. Four years ago, in a similar circumstance, the House voted 80-68 against a secret ballot.

The revenue estimate

The state will collect $77.3 billion in general revenue during the next two-year budget cycle, according to Comptroller Susan Combs. She estimated the Rainy Day Fund will have $9.4 billion in it at the end of the 2012-2013 biennium and that the size of the current deficit is $4.3 billion. This leaves lawmakers with a net of $72.2 billion to spend.

Two years ago, the comptroller estimated the state would bring in $76.7 billion in general revenue; the economic downturn turned that number into $72.2 billion.

The numbers led groups on the left and the right to estimate the state's 2012-13 budget shortfall at anywhere between $15 billion and $27 billion.

Lawmakers budgeted $87 billion in general revenue spending in the current biennium; at least $6.4 billion of that money came from federal stimulus funds, which aren't available to budget-writers this time around. Public and higher education and health and human services spending accounted for $73 billion of that; without the stimulus money, that leaves just over $7 billion that's not in those two major categories. Given the size of the projected shortfall, that means those two big areas of the budget are in for cuts.

There were enough numbers released to produce a fog, and that's just what happened when the media took its first crack on Monday. Here's how the numbers work: Combs said the state will collect $77.3 billion in taxes and fees during the next biennium. Of that, about $866 million is bound for the Rainy Day Fund, and another $4.3 billion will have to be used to cover the deficit in the current budget. That leaves $72.2 billion for general purpose spending. But, she added, that deficit doesn't include savings from budget cuts ordered by state leaders in the current fiscal year, even though those savings are already stacking up. Any money saved by the agencies in the year that started in September and ends next August is a reduction in that deficit, and it's that much more money that's available for general spending in the next two-year budget.

Likewise, there are two different numbers floating around for the balance in the state's Rainy Day Fund. Combs said it will have $8.2 billion in it at the end of August, and $9.4 billion at the end of the next biennium. That second number is the one to watch — that's the amount available for spending in the 2012-13 budget lawmakers will write this spring.

The comptroller's official biennial revenue estimate sets the limit, effectively, on what lawmakers have available to spend during the two-year period that will begin in September. The revenue estimate is half of the equation for figuring out the size of the state's shortfall for the next budget period. The shortfall is the difference between what's available and what's needed. Because the amount that's needed is a matter of debate, so is the shortfall.

For example, the Center for Public Policy Priorities, a nonprofit that looks out for low- and moderate-income Texans, studied budget requests from several of the state's biggest agencies and estimates that it would cost $99 billion in general revenue just to keep up with the programs the state already offers. That figure includes population growth — there are more kids in schools and more people on the state's Medicaid rolls this year than last, for instance — and growth in what it costs to serve each of them.

Former Appropriations Chairman Talmadge Heflin, now with the Texas Public Policy Foundation, a think tank that advocates for personal responsibility and free enterprise, estimates the shortfall at "$15 or $16 billion." He didn't provide details of how he arrived at the number, but his figures would put general revenue spending by the state at about $87 billion — close to where it stands now.

Lawmakers will unveil their starting proposal for state spending later this week and have said it will fit within what the comptroller says is available. Appropriations Chairman Jim Pitts, R-Waxahachie, has said the House won't include money from the Rainy Day Fund in that first proposal. Spending from that pot requires approval from two-thirds of the Legislature, but using it could spare up to $9.4 billion in cuts that might otherwise be needed to make the budget balance.

On the Senate side, estimates of the shortfall's size have been smaller, partly because budget-writers on that side of the building seem more willing to include some or all of the Rainy Day money in their estimates.

Combs said sales taxes were 6 percent lower than projected during the current budget biennium and that they're expected to rise 8 percent over the next two years. That's the state's biggest source of general revenue, accounting for about 64 percent of the total. The state's franchise tax will grow about 11 percent over the next two years, bringing in $8.8 billion over the next two years.

John Heleman, the state's chief revenue estimator, said the real news here is that Texas is in recovery and that the worst of the recession is over. The state has added back 220,000 of the 431,000 jobs it lost between the summer of 2008 and the fall of 2009. He's predicting the state economy will grow 2.6 percent in the current fiscal year, 2.8 percent in 2012 and 3.4 percent in 2013.

The numbers laid out today are close to what the comptroller predicted two years ago — had there been no recession, we'd be reporting that Texas is in a no-growth mode. In fact, the state is returning, according to these estimates, to about where it was before the recession began. The comptroller said two years ago that the state would collect $76.1 billion — a figure that dropped to $72.2 billion because of the economic recession's effect on sales taxes and other state revenues. Now we're back to an estimated two-year total of $77.3 billion — within a billion or so of where we started.