Thursday, July 14, 2011

Texas’ Debt and Deficit Spending Growing Faster Than The Nation’s

Think Progress: [...Texas] is racking up debt at a faster rate than the national government and in greater amounts than most other states.

Perry regularly attacks President Obama for engaging in “too much spending” and running up too much debt, but as the Fort Worth Star-Telegram’s Mitchell Schnurman writes today, Texas’ refusal to raise taxes has led to its own debt ballooning faster than Washington’s:

From 2001 to 2010, state debt alone grew from $13.4 billion to $37.8 billion, according to the Texas Bond Review Board. That’s an increase of 281 percent. Over the same time, the national debt rose almost 234 percent. [...]

Still, the trend is undeniable. While Texas lawmakers have refused to raise taxes — and often criticize Washington for borrowing and spending — the state has been paying for much of its expansion with borrowed money.

While the state has had to borrow for infrastructure building to keep up with rapid population growth, as Schnurman points out, Texas didn’t have two wars, the budget-busting Bush tax cuts, recession-combating measurs, and other big-ticket national expenditures. And Texas’ “borrowing isn’t slowing.”

The state’s debt belies Perry’s boisterous rhetoric on his economic stewardship. While conservatives boast of Perry’s “Texas miracle,” California, which Perry often bashes as the antithesis of his approach, has seen faster GDP per capita growth than Texas under Perry. Meanwhile, Texas’ obstinate refusal to raise taxes helped create the largest budget shortfall in the state’s history, leading to devastating cuts to government services — one town had to lay off its entire police force — and Perry using budget gimmicks and federal stimulus dollars to balance his budget.

At his appearance before the Republican Leadership Conference in New Orleans on June 18th , Texas Gov. Rick Perry crowed that the Republican Super Majority 2011 legislative session balanced the 2011-13 state budget while leaving billions in reserve. Perry told the Republican Leadership Conference:

"To preserve our job-friendly climate, the Texas Legislature didn’t raises taxes this last legislative session while balancing their budget and maintaining essential services. And I might add, that new budget leaves $6 billion in a rainy day fund."
In January, state Comptroller Susan Combs predicted the rainy day fund would have a balance of $9.7 billion by the end of August 2013. That figure was later whittled to $6.4 billion after legislators took $3.2 billion from the rainy day fund in April to cover a deficit in the current 2009-2011 budget that runs through August 31, 2011.

In January 2011 Texas Comptroller Susan Combs projected a $27 billion deficit for fiscal 2012-2013. State lawmakers then proposed an austere budget for the 2012-2013 fiscal years that cut $31 billion in spending from public schools, colleges, collage students, Medicaid and social services, public safety (police and prisons) and transportation. That austerity budget cut $7.8 billion from health and human services and $8 billion for K-12 public schools.

On June 28, 2011 Gov. Perry signed a $172 billion budget passed by the super Republican majority Texas House and Senate. The budget signed by Gov. Perry cuts $15 billion from the level of spending last authorized in the 2009-11 state budget. The largest individual cut was to public education, which lost over $4 billion over the biennium.

While public education received the deepest cuts, other agencies that saw their budgets reduced, too. Other agencies cut included public universities and community colleges (with the two largest universities in the state losing $100 million in funding) and state health and welfare programs, which saw Medicaid and food stamp funds slashed by up to $2 billion.

San Antonio News-Express reports up to 1,500 jobs in the state prison system, run by the Texas Department of Criminal Justice (TDCJ), may also be eliminated. These cuts will have the most immediate effect on Texas citizens, resulting in direct hits to consumers' wallets as college tuition rates increase, state employees are laid off, and social welfare programs cut levels of financial assistance.

The cuts to the Texas Department of Criminal Justice may also hurt poorer areas disproportionately due to the increased reliance of these areas, such as rural areas, on TDCJ services and employment. Prisons, for example, are often not located in the midst of urban centers, meaning that a reduction in correctional staff at these rural-based facilities would increase local unemployment.

Any losses in Texas Highway Patrol personnel may also be disproportionately felt by citizens of small towns, whose municipal law enforcement agencies are small and often rely on state-level services.

Even after cutting billions of dollars from state education, Medicaid and other state agencies Republican legislative leaders in Texas acknowledge the 2011-13 budget signed into law by Perry under-funds the state’s projected Medicaid costs by about $5 billion. A summary portion of the budget says that’s the amount the state expects the program to need in supplemental state aid in 2013. Also, the 2011-13 budget defers $2.3 billion state payment to K-12 public school districts to fiscal 2014. [TexasTrib, Politifact, StarTribune/AP]

Schools will need that deferred money when they have to write checks to teachers and librarians and janitors and principals long before September 2013 and senior citizens in nursing homes will need Medicaid to continue to pay for their health care long before September 2013. So at least $7 billion in payments to both the education and Medicare will be sitting there, due, as soon as the next Texas legislature takes their oath in January 2013.

The new budget signed by Gov. Perry also assumes there will be no growth in the number of school children in Texas, even though Texas is one of the fastest-growing states in the nation. Critics say state legislators have shorted school districts by an additional $2 billion by ignoring the number of new students who will crowd into the classrooms over the next two years. There are several other budget deceptions the Republican Super majority engaged in, but the bottom line is that they passed a budget that did not balance without deceptive accounting tricks and ignoring Texas' rapid population growth.

On top of the deceptive accounting tricks used to pass a supposed "balanced" 2011-13 budget, Texas has a recurring $10 billion budget shortfall between tax revenues collected and budgeted spending, according to John Heleman, chief revenue estimator for Texas Comptroller Susan Combs. Pressed by Democratic Senators on the Senate Finance Committee, Heleman told the committee last January the state has a $10 billion recurring structural deficit. [Structural deficit - ABC News]

That structural shortfall comes from a tax cutting "tax swap" measure that lowered property taxes and substituted, or swapped, a new business margins tax to offset the lost property tax revenue.

Even at the time, the swap was projected to be $5.9 billion short of balancing each biennium. That tax cutting measure ended up being at least $14 billion short because the new business tax produced less than half of the needed revenue and the property tax cut cost more than promised. Lt. Governor Dewhurst and others rightly say the 2006 tax swap created a structural deficit.

Up till the 2011-13 budget period Texas Republican lawmakers covered the shortfall with federal Recovery Act (stimulus) money—all of which is gone. "We need to not fool ourselves that this is a one-time phenomenon," says state Sen. John Whitmire, D-Houston, who instigated the discussion at the Senate Finance Committee meeting. "We need to be grown up and deal with reality and make plans for the future of Texas."
Texas lawmakers started 2011 promising to make hard choices to solve the largest budget shortfall in the state's history. They delivered one speech after another about not "kicking the can" down the road. Yet that's exactly what they did - and that can is getting mighty big, too!

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