Texas’ Expected Surplus Won’t Lessen 2013 Budget Fight

Shortfall and sacrifice: that’s how the Texas Legislature two years ago defended gutting $5.4 billion from public education, laying off thousands of public workers with slashed spending and stripping Medicaid to the bone.

The new budget s-word this time around? Surplus.

But when lawmakers next week begin the 83rd legislative session with a potentially record amount of unspent revenue – more than $8 billion, according to many observers – that money won’t last long or go far.

Nor has Texas’ far rosier economic picture put budget-writers in the mood to spend more or reverse historic cuts. The battle in 2013 will be over how much bigger, not smaller, the budget will get.

“The basic needs look like they can be taken care of,” said Dale Craymer, president of the Texas Taxpayers and Research Association and former state official who has worked in the budget offices of both the governor and comptroller. “It’s just going to be a fight for the icing.”

The Texas economy is humming. Unemployment is at a four-year low of 6.2 percent, sales tax receipts are skyrocketing and money is pouring in to state coffers behind a new energy boom, fueled by oil gushing in West Texas and a fracking frenzy from North Texas to San Antonio. Even the Rainy Day Fund, the state’s emergency piggybank, has replenished most of the $3.2 billion borrowed during the last session after much hand-wringing by reluctant conservatives.

Contrast that with 2011. As the country began lurching out of the Great Recession, lawmakers gathered at the Capitol facing a $27 billion shortfall and unemployment at a decade-high peak of 8.2 percent. They left after passing a budget that was $15 billion lighter than the previous one in a state that has thousands of new residents to serve by the day and is among the nation’s fastest-growing.

“We’re in a very different place than we were two years ago,” said John Heleman, the chief revenue estimator for the state comptroller’s office.

That may be true, but still in place from two years ago are expensive IOUs the state needs to settle.

Medicaid is the biggest one. Lawmakers must pay a $4.7 billion tab on the state’s health program for its poorest residents and the disabled before writing a new budget for 2014-15. They’ll write that check in a supplemental spending bill that will also need to pay for the $600-million cost of fighting devastating wildfires of 2011.

Once those bills are paid up, lawmakers can begin writing the budget for the next two years.

But no one is betting on a spending spree.

Exactly how much money lawmakers will have at their disposal won’t be known until Monday, when Comptroller Susan Combs releases a two-year revenue estimate. Republicans _ who don’t have the House supermajority they enjoyed in 2011, but will still be calling the shots _ already want new restraints on how much lawmakers can spend.

Gov. Rick Perry and other top GOP leaders want to limit spending increases to a formula of population growth plus inflation. That would be less than the $77.9 billion cap set by the Legislative Budget Board, which is a 10 percent increase over current levels.

Democrats and others view such self-imposed restrictions as unnecessary. The Center for Public Policy Priorities, a progressive-leaning think tank in Austin, said the state has enough money on the table now to undo the steep cuts in 2011 and retain current services if the lawmakers were willing to exhaust the Rainy Day Fund that now has a balance of about $8.1 billion.

But there is little appetite to do so.

“That’s a tough, tough challenge for the makeup of the new legislature,” said Eva DeLuna Castro, a senior budget analyst for the CPPP. “And it’s also not letting us undo all the other smoke and mirrors the legislative leadership has said is a priority.”

Republican House Speaker Joe Straus, who has pledged to pump money back into schools this session, is signaling more optimism than two years ago.

“I don’t want to be misleading and say `Oh we’re back to complete blue skies,”‘ Straus said. “But certainly our economy has recovered nicely. But you need to keep it in perspective that we were in a serious hole.”