Budget Notes: School Finance Remains the Key

Lawmakers made progress today on solving the current budget deficit but still haven't solved the major problem in the 2012-2013 budget: school finance.

Legislation that spends about $3.2 billion from the Rainy Day Fund to close the $4 billion gap in the current budget is now on its way to Gov. Rick Perry's desk. That's HB 275. The other bill that helps close that budget hole, HB 4, won Senate approval this evening. "We're on a roll," Ogden said after it passed unanimously. The House gets another pass at that; they're expected to approve it as is and then send it, too, to the governor.

Democrats made another attempt to dip into Rainy Day Funds to boost school funding, but again that effort was shut down. State Sen. Royce West, D-Dallas, proposed spending another $1.1 billion on schools, but the amendment failed in a 17-14 vote. "I think that, if left to our own devices, this would be a good thing," Ogden said. "But we cannot achieve agreement on this floor and we have no agreement in the House on doing this."

Meanwhile, negotiations on SB 1811, the unresolved bill needed to settle up the next two-year budget, continued. After a late afternoon meeting with House and Senate budget negotiators, Lt. Gov. David Dewhurst said more work remains. "We're down to a few dogs and cats," he said.

State Sen. Robert Duncan, R-Lubbock, and state Rep. Jim Pitts, R-Waxahachie, were charged with ironing out differences in the parts of the bill that don't include school finance. That portion of the legislation is designed to gather $3.5 billion in "non-tax revenue" to help pay for the budget. A big difference between the House and Senate versions is the statewide smoking ban that the House added to the measure on Friday. Dewhurst said he was uncertain about the future of that provision. "I know there are a number of advocates in the Senate," he said. "So, we'll see."

State Sen. Florence Shapiro, R-Plano, and state Rep. Rob Eissler, R-The Woodlands, were still working to find some agreement on how to finance public schools over the next two years — the other part of the legislation, and the most troublesome. Eissler and the Texas House still favor proration, or cutting funding to every school district by 6 percent. The Senate wants higher-wealth districts to take bigger cuts in its plan. Shapiro said she and Eissler are considering options, including ways to blend their two plans. "The Senate likes their proposal," Shapiro said. "They really believe it is a long-term solution."

Two other bills are also key to the Legislature's exit strategy. 

HB 9 relates to higher education funding and the state’s goal of graduating more students by 2015. The formulas in it are intended to de-emphasize funding based on enrollment and to instead reward outcomes. The legislation got out of the House but was stuck in the Senate until Gov. Rick Perry insisted it should be included in the budget negotiations. The Senate Higher Education Committee revived the bill, and it passed the full Senate this afternoon. Some amendments were made, so it still awaits a final nod from the House. 

The budget itself, HB 1, sets the spending guidelines for the state in the next biennium. The House passed a bare-bones $164.5 billion budget in late March that slashed spending by $23 billion. The Senate version was a $187.5 billion proposal that still cut overall spending by $11 billion. The bill is now in conference committee, and members hope to vote on the final report tomorrow. Once it emerges from the conference, it needs a simple majority of support from each chamber to become law.

While the budget writers were negotiating, Rep. Garnet Coleman, D-Houston, wrote to Comptroller Susan Combs expressing doubts that the budget is in balance. In particular, he says the way they've handled Medicaid spending is suspect. The chief budget-writers have admitted openly that they've cut $4.8 billion from the official estimates of the state funds needed to cover Medicaid spending over the next two years. Coleman wants to know whether the comptroller will base her evaluation of the budget on the appropriations bill alone or on all of the bills that are part of the state budget puzzle.

"Relying on debt, deferrals, and delays to solve our state’s budget process is irresponsible," Coleman wrote. "Passing a balanced budget is the only requirement of the Texas Legislature. I respectfully appreciate your response to these questions, in order to help my colleagues and I determine whether the budget we will likely be asked to vote on in the final week is balanced, or — as I and others are starting to fear — if the unbalanced budget is in violation of our state’s constitution."

He doesn't have a formal answer yet, but there's an informal one: Sen. Steve Ogden, R-Bryan, said he met with the comptroller and got her assurance that the budget will balance if the package of fiscal bills passes without changes. That includes the 2012-13 budget itself, the fiscal matters bill that raises $3.5 billion in "non-tax revenue" and contains new funding formulas for schools, and the two bills that together erase the deficit in the current fiscal year. "It all balances," Ogden said.

Combs isn't required to decide whether the budget is legal or whether the assumptions about population growth and inflation and program costs are correct. Her job is simply to certify that there's enough money coming into state government coffers over the next two years to cover the spending spelled out in the budget. According to Ogden, she says it does.

The comptroller's official opinion on that matter won't come until after the budget and the bills that go with it have been finally approved and her staff has had time to study it in more detail.