September 8, 2010
A lack of clear, updated information about just how much financial hardship the state faces heading into next year’s legislative session is starting to frustrate some lawmakers.
Bad news about the state’s fiscal condition has trickled out over the past year: Sales and business tax collections are beneath official projections, the state’s Rainy Day Fund won’t have as much money as state officials believed it would a year ago, and a $1.3 billion deficit is expected in the general revenue fund at the end of the current two-year budget.
But Comptroller Susan Combs, the state’s chief financial officer, has done little to offer a big-picture public assessment of the revenue outlook as the November elections and 2011 legislative session approach. And trying to guess just how large a budget shortfall the state faces has become a popular parlor game at the Capitol.
Seeking clarity, state Sen. Kirk Watson sent Combs a letter last week asking that she update her official estimate of how much money the state will collect during the current two-year budget cycle. He also asked that she offer a forecast of the state’s revenue outlook over the next two years.
“A private business of any size should never fly into a fiscal storm blindly, and neither should Texans or their elected officials,” wrote Watson, D-Austin. “Without a clear picture of the state’s financial condition, we find ourselves in the situation of working on a problem that has not yet been actually defined.”
Watson’s request for Combs to speak up on the budget comes as Gov. Rick Perry, who is campaigning for re-election on an economic climate that encourages job creation, has sought to downplay talk of a coming budget crisis.
On Tuesday, Perry called Watson’s request bizarre. But Perry’s Democratic challenger, former Houston Mayor Bill White, said Combs should provide frequent, public updates on the state’s fiscal status.
In January of odd-numbered years as each legislative session begins, the comptroller provides an official estimate of how much money the state will take in over the coming two years. That is the amount lawmakers can spend when they write the state budget.
Comptrollers can update their estimates at any time and often face pressure to do so late in the legislative session, when budget-writers are hoping to squeeze out a few extra dollars.
Despite the national economic downturn that came to the forefront in the fall of 2008 and began to visibly hit Texas in 2009, Combs has not updated her January 2009 revenue estimate. That estimate said that, during the fiscal year that began in September 2009 and ended last week, state sales tax collections would increase slightly compared with the previous year.
In fact, during the first 11 months of the fiscal year, sales tax collections fell more than $1 billion short of Combs’ projections. The sales tax is the state’s largest revenue source.
Combs spokesman Allen Spelce said Tuesday that the comptroller will answer Watson’s questions but does not plan to officially update her revenue forecast.
“We’re still looking at the numbers,” Spelce said.
Intentionally or not, waiting until January to officially discuss the revenue outlook helps keep the state’s fiscal picture in the background until after the November elections. While Combs has no Democratic opponent and is likely to win re-election easily, Perry, her ally and fellow Republican, is facing a spirited challenge from White.
Perry dismissed Watson’s call Tuesday. “I don’t think there’s any great need to have our comptroller going through a process right now to satisfy some people’s political desires,” Perry said, according to the Houston Chronicle.
State Rep. Mike Villarreal, a San Antonio Democrat who sits on the budget-writing House Appropriations Committee, echoed Watson’s call for a public airing of updated budget data. Villarreal said the coming election underscores the need for Texans to have up-to-date information about state revenue.
“We owe it to the voters because this is a democratic process where the people they elect get to make the decisions next session,” Villarreal said. “We need to be respectful to this process and have candidates talking in real terms about the decision ahead of us.”
Watson noted in his letter that the Texas Constitution calls for the comptroller to update the revenue estimate “when it may be necessary to show probable changes” to that estimate.
Spelce said Combs has been keeping Perry, House Speaker Joe Straus and Lt. Gov. David Dewhurst apprised of the revenue outlook.
“The speaker is in regular contact with the comptroller’s office, and we receive the information we need,” said Straus spokeswoman Tracy Young .
Lawmakers have planned for years to face a budget shortfall in 2011, in large part because they cut school property taxes by $14 billion in 2006 but have chosen not to replace most of that money in the state treasury.
State surpluses helped pay for that tax cut in its early years, but those surpluses have disappeared, and lawmakers have not made corresponding reductions in spending to offset the annual cost of the tax cut.
Then came the national economic downturn, making the expected shortfall worse. Straus said in a recent speech that he expects the shortfall in the next two-year budget will be at least $18 billion. Perry has declined to estimate the shortfall, calling the $18 billion figure “a number that somebody just reached up in the air and grabbed.”
To prepare for coming spending cuts, Perry, Dewhurst and Straus asked some state agencies to reduce spending by 5 percent in the current budget cycle, which ends in August 2011. Perry’s office and the Legislative Budget Board have also asked some agencies to identify ways they could cut spending by an additional 10 percent over the next two years.
Last month, bond rating agencies gave Texas top marks. But in documents provided to those agencies, Combs said a $1.3 billion deficit is expected in the state’s general revenue fund at the end of the current budget, even after factoring in the 5 percent cuts.