by George Christian
The proposed appropriations bills introduced in the Texas House and Senate over the past two weeks merely confirm that Texas is in a budget crisis of historical proportions. Both bills assume there will be no additional revenue beyond what the Comptroller says is available for the next biennium (roughly $77 billion, give or take a few hundred million), and both bills cut total funding for state government by roughly 17%. The heaviest cuts are where most of the money is: in public education (15%), higher education (17%), and health and human services (22%). No part of the budget, however, has escaped unscathed. All in all, the starting point for writing the 2012-2013 state budget is more than $16 billion lower than what was budgeted for 2010-2011.
As we have seen, however, the Legislature has been here before, both in 1987 and 2003. In the first crisis, which broke during the summer of 1986, Governor Mark White called the Legislature into special session to deal with a $1 billion actual deficit, brought on by a sudden collapse of the state’s real estate and oil and gas markets. The Legislature responded by enacting a supplemental appropriations bill that cut revenue appropriations previously made by Legislature by a then-staggering $511.7 million, and further cancelled a 3% pay raise for state employees, netting an additional $70.5 million. These cuts amounted to about a 5% across-the-board cut in state spending for fiscal year 1987. To make up the rest of the deficit, the Legislature temporarily raised the sales tax rate from 4.125% to 5.25%.
Prior to the regular legislative session in the spring of 1987, Governor William P. Clements, who had previously been elected in 1978 as the first Republican Governor of Texas since Reconstruction, defeated incumbent Governor Mark White, who advocated the combination of budget cuts and temporary tax increases the Legislature adopted in the early fall of 1986. When the Legislature convened under the new governor, it soon became clear that a budget deadlock would occur. Defying the Governor’s call for $5.7 billion in further budget cuts, both the House and Senate decided that the best response to the crisis was to raise $5.7 billion in revenue to restore funding for public and higher education, health care, and other essential state services. The regular session ended without a resolution of the budget, and legislators spent most of the broiling summer of 1987 in political gridlock. Only when House Speaker Gib Lewis and Lieutenant Governor Bill Hobby finally convinced the Governor to agree to another increase in the sales tax (from the temporary 5.25% to 6%), did the crisis end.
As Texas emerged from recession, the 1989 and 1991 Legislatures faced lingering budget problems, as well as a school finance crisis, but neither session had to reduce the overall level of state spending and in fact increased it. Another major reckoning didn’t occur until 2003, when the post-9/11 recession hit Texas, resulting in a $1.8 billion deficit and projected shortfall of $10 billion. This time, the Legislature made significant cuts in state spending, but it is often overlooked that in 2003 state lawmakers also adopted a number of revenue-raising measures and accounting practices that offset part of the shortfall. The bulk of these reductions were made in health and human services, both by reducing eligibility for Medicaid services and cutting back on the Children’s Health Insurance Program and other services. Most of this funding was restored in 2005, when the state returned to a positive revenue position, and in both 2007 and 2009 the Legislature got the benefit of substantial fund balances to increase overall spending.
That, of course, brings us to the present crisis. It appears that the current state of thinking is to follow the 2003 model: significant cuts with the possibility of some non-tax revenue at the end of the day. The 1987 model, however, is not being considered.
H.B. 1, 69th Legislature, 3rd Called Session, 1986
Legislative Budget Board, Recommended 2002-2003 Appropriations Bill, 78th Legislature
Comptroller of Public Accounts, Sources of Revenue Growth: A History of State Taxes and Fees in Texas, 1972-2001
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