Today the House Committee on Appropriations reviewed three options to address the current biennium shortfall of $4.3 billion.
Texas Comptroller Susan Combs told the committee that the current cash balances are insufficient to support appropriations for the remaining biennium. Since the budget adopted last session exceeded available revenue, the 82nd Session must now address the shortfall.
To address the shortfall there are three options or some combination of the following three that were discussed:
• Rainy day fund
• Further agency reductions
• Deferring payments
The Legislature has got to fix the $4.3 billion shortfall but be cognizant of the underperforming franchise tax and that sales tax revenues are coming back slowly, Combs told the committee. “Look at it as a two biennium problem,” says Combs.
Rep. Sylvester Turner said such this shortfall is much greater than the one experienced in 2003 when legislators previously accessed the rainy day fund. “I wish it was 2003,” says Turner declaring this situation is much worse.
The committee did explore and discuss:
- · Accessing rainy day fund
To date, the use of the rainy day fund had not hurt Texas’ bond rating. Combs stated there is no specific amount that must remain in the account. The bond ratings Texas currently enjoys is based on a number of factors. The actual cost to Texas if the bond rating went up was not estimated due to numerous time sensitive factors, but it was noted there would be cost to Texas if the bond rates did increase.
Utilizing the rainy day fund would free up $4.3 billion for the coming biennium.
Estimates on revenue going into the rainy day fund were requested.
HB 275 filed by Representative Jim Pitts would appropriate $4,273,557,000 from the rainy day fund to the GR fund available for use during this current fiscal year (ending in August). The bill text can be found at: http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=82R&Bill=HB275
- · Further Agency Reductions
Combs stated that because of the short time frame she does not see how $4.3 billion in revenue can be raised in agency reductions alone. If the legislature wanted to utilize this option, it was noted they would need to use at least one of the other options in tandem as well. Combs further stated that reducing an agency by a certain percent at this point would seem like a much greater percentage of cuts since there are not many days left to absorb the cut for this biennium.
- · Deferring Payments
The discussed option for deferring payments focuses on the Foundation School Program (FSP). To help alleviate the current shortfall, the August 2011 FSP payment to ISDs, estimated at $1.8 billion, would be shifted to September 2011, which moves that amount from one biennium to the next. The delayed payment would be made to the schools about two to three weeks later than scheduled. If the payment was deferred it would have to be unwound at some point, Combs reminded the committee.
The possibility of using this deferral in August 2011 would affect the current biennium, while using this option to defer the August 2013 payment would affect the budget shortfall in the next biennium.
Combs told the committee they were faced with having the next several years to think about when making budget decision. Combs urged the members to think about the tax policy and structure and how to balance revenue. For future budget decisions she said either expenditures need to be curbed, revenue increased or do both.
