Budget Leaders: It's Up to the House

If the House doesn't pass legislation that adds $2.6 billion to state revenue with a mix of delayed payments, increased penalties, government efficiencies and the like, the state budget won't balance and a special session will probably be required, House and Senate leaders said today.

That legislation is slated for House debate on Wednesday, and Lt. Gov. David Dewhurst, in a press conference this afternoon, and House Appropriations Chairman Jim Pitts, in a presentation to the full House a short while later, said it is critical to passing a budget during the regular session. Lawmakers have until Memorial Day — Monday, May 30 — but their rules wind down before then. Dewhurst said that the real deadline for agreement on the unresolved education spending in the budget is Thursday. And he and Pitts both said that passage of the savings and non-tax revenues in the fiscal matters bills — particularly in Senate Bill 1811 — is critical to getting an agreement on the budget.

Without the money in that bill, they don't have the money to balance the budget they're trying to reconcile.

The non-revenue measures have been stripped of accelerated tax deadlines. The Senate wasn't crazy about those, but passed them along to the House. Pitts stripped them in committee, certain that he couldn't pass them in the full House. He also promised to remove the controversial suspension of the back-to-school sales tax holiday in August. That holiday from taxes costs the state money, but it's popular with consumers and retailers, and because of that, it's popular with legislators, too.

Those omissions took about $1 billion out of the fiscal matters package. Pitts told the House Tuesday that every other dollar is critical to make the budget balance.

In a presentation to the full House, Pitts started by saying he had promised to bring the budget back to them with improvements, adding enough money to prevent nursing home closures, to fund transportation bonds, to fund prison capacity, to "boost our presence on the border."

None of that will work, he said, if the House doesn't pass SB 1811, which he called "vital to completing the conference committee's work."

The differences between the House and Senate are in the education section of the budget, Pitts said, saying the two bodies are $3.8 billion apart on public education and $1 billion apart on higher education. "I know the members of the House want to fund public schools," he said, and he broke it into two problems, saying one is the amount of money needed and the other is how its distributed.

The distribution fix he supports will come in an amendment to the fiscal matters bill. As for the other, the $1.2 billion added to the state's revenue forecast by Comptroller Susan Combs will help. It still fall short, and Pitts said the outcome of tomorrow's debate will show the budget writers how far they still have to go. They'll raise the money they need, he promised, "without raising taxes and without the Rainy Day Fund."

Dewhurst defended the Senate's budget, saying if it passed it would be the biggest budget cut in state history. He emphasized, as he has before, that while it cuts spending, it doesn't cripple any programs. Public school spending is at what state Education Commissioner Robert Scott has described as the bare-bones minimum. Anything less, by implication, would be less than what's needed.

The lieutenant governor defended his own record as a fiscal hawk. "I certainly don't want to waste $1 more than we need," he said. He talked about keeping money in the Rainy Day Fund as a hedge against future problems and specifically, in case of "possible Medicaid shortfalls" that are built into the part of the budget already agreed upon by House and Senate negotiators.

He warned lawmakers that they need to pass a school finance bill to change state funding formulas for local school districts. Not doing so, Dewhurst said, would add to the state's budget shortfall in 2013.

And he urged them to put enough money into public education to avoid forcing local school districts to raise their property taxes to compensate for money they expected but did not get from the state.

The Senate hasn't used Rainy Day money for anything but the deficit in the current budget, Dewhurst said, and doesn't plan to use more. The Senate used $855 million more than the House for that deficit, but what he said is technically correct.

Asked how much local school property taxes would have to go up under the House's spending proposal, Dewhurst said he hasn't made the calculations. The House bill would cut public education spending by $7.8 billion. The Senate plan would cut it by about $4 billion, but Dewhurst contends that isn't a deep enough cut to force local districts to look to property owners for more money.

Gov. Rick Perry issued a press release that, among other things, cautioned budget writers against using "accounting gimmicks" to balance the budget. Accelerated tax collections are out, but delayed payments are still in the fiscal matters bills that Dewhurst, Pitts and others say must pass for the budget math to work. "There's nothing in the fiscal matters bill… that isn't something we've done in the past," Dewhurst said. The biggest single item in the legislation is a delayed $2.2 billion state payment to schools; holding that payment for one day pushes out of one budget and into the next, producing a "savings" that can be used to balance the budget.

The health and human services portion of the budget, agreed to by House and Senate negotiators on Monday, spends about $4.5 billion less on Medicaid than the experts say is needed to meet federal law. Dewhurst said other measures could save money and wipe out that expense. As a backstop, he said the money to cover those expenses will be in the Rainy Day Fund when lawmakers return in 2013 if it's needed. He spun it as a spur to get the agencies to save money: "The last thing you want to do is fully fund and not give the agencies incentives to save."