U-G-L-Y: The Budget Ain’t Got No Alibi

It’s not usually polite to point out ugly things.  It’s really wrong to discuss them in an open setting with people looking on.

But that’s what Evan Smith and I spent a huge chunk of our interview talking about last Wednesday morning.  We focused on the ugliest pig in the policy poke: the state budget.

tribune pic

In fairness, it had been a pretty ugly few days.  In quick succession, we found out that:

— The $11 billion to $15 billion budget shortfall that we’re all worrying about (“worrying about”, of course, being much easier than “acting on”) could actually be around $18 billion.

— The state’s new business tax – affectionately known as the “Margins Tax” – is still not living up to the promises made by the state’s leadership.

— And the final so-called 5 percent budget cuts, orchestrated by the Governor, Lieutenant Governor, and Speaker of the House, saved even less money than the leadership at least implied they would.

In the interview, I made clear that Texas shouldn’t (and I won’t) use reserves like the Rainy Day Fund, new taxes or fees, or budget gimmicks to plug this structurally flawed budget, or to kick this broken process a little further down the road.

Because at this point, spending more on this broken process would be throwing good money after bad, and no one can assure you that funds will pay for what you think they will.

Here’s some of coverage – not only of Wednesday’s event, but also of the problems we’re facing and my comments about where we should go from here:

Watson rips state budgeting process

by Jason Embry
Austin American-Statesman

Sen. Kirk Watson, D-Austin, gave a pretty thorough critique Wednesday of how the Legislature writes the state budget, saying he wouldn’t vote for tax increases or taking money out of the Rainy Day Fund until the budget-balancing gimmicks end.

For some time now, Watson has been one of the Legislature’s most outspoken critics of the practice of collecting money for one purpose and then spending it on something else — a practice that has become a cornerstone of the budget-writing process in Texas.

“My vote will not be there for taxes, my vote will not be there for the Rainy Day Fund, until we have real budget reform,” Watson said at a breakfast event hosted by the Texas Tribune.

He said the budgeting process in Texas has become about debt, diversions and delay. “Over and over again, it’s about how we can kick the can down the road,” Watson said.

He said state leaders are focusing too much on one piece of the economic-development puzzle — low taxes — while neglecting to “invest in Texans,” through, for example, higher education.

Asked about Lt. Gov. David Dewhurst’s claim that stimulus dollars weren’t necessary to balance the budget, Watson said, “I could be playing in the NBA Finals right now if I weren’t four feet tall.”

Absent meaningful budget reform, Sen. Kirk Watson says he’ll vote no on tapping Rainy Day Fund 

by John Reynolds
Quorum Report

Show Sen. Kirk Watson voting no on new taxes and on tapping the Rainy Day Fund – at least until state leaders provide meaningful reform on how the biennial budget is put together . . .

The threat of a no vote on taxes might not amount to much since Republican leadership will be loath to put new taxes up for a vote anyway. But on the second issue of tapping the Rainy Day Fund, Watson is throwing down a marker that could be significant.

Using at least part of the Rainy Day Fund, which will have a balance of $8.2 billion by year’s end and could have somewhere north of $9 billion in the next biennium, is part of the fundamental calculus in how lawmakers plan to tackle a budget shortfall next session of $18 billion.

Getting at that money requires a two-thirds vote in both chambers, which makes a single Senator’s vote valuable.

“As a fundamental principle, we have dug such a deep hole by engaging in budget games that I can’t look at anybody in this audience and tell you that if we were to raise a tax … we might even agree with each other it might need to be raised, I can’t promise you that that tax would be used for what you believe it will be used for,” Watson said. “And I will not vote to increase the tax under those circumstances.”

He pointed to the practice of using unspent money in dedicated general revenue accounts for parks and for the system benefit as an example of what needs to be reformed. Watson has been down this road before. QR readers will recall that at the outset of the last legislative session, Watson unveiled a series of policy proposals that included moving the Texas Performance Review back to the Comptroller’s Office, creating a Google-type search tool for the state budget and setting a floor on the state’s funding commitment to the Children’s Health Insurance Program.

Watson noted ruefully this morning that his initiatives didn’t merit so much as a committee hearing last session but he noted one victory. He was able to amend the funds consolidation bill with a provision that would make it easier for the public to track funds diversions in the future.

Democrat says this may be right time for budget reform

by Peggy Fikac
San Antonio Express-News

It’s pretty much assumed the state will have to dip into its rainy-day savings account to help bridge a huge budget shortfall, but Sen. Kirk Watson just made the challenge of getting enough votes look a little tougher.

Watson said before he’ll vote to spend any of the $8.2 billion expected to be in the fund when lawmakers write the next two-year budget, leaders and lawmakers must first agree to budget reform.

Any opposition is important because budget writers must get a two-thirds vote of the Legislature to spend money from the fund. “It’s going to be hard,” said House Appropriations Committee Chairman Jim Pitts, R-Waxahachie.

Watson’s an Austin Democrat, so his position highlights the notion that budget writers will have to do more than convince the most conservative Republicans to spend rainy-day money. They’ll also have to satisfy Democrats pushing their agendas.

Watson takes issue with tricks like the use of nearly $3.7 billion in levies ostensibly collected for particular purposes – from combating pollution to helping people struggling to pay their electric bills – being used instead to balance the budget. He’s concerned about debt. He’s alarmed over the continuing effects of the finance package that cut local school property tax rates without raising other state taxes enough to cover the cost.

Watson’s position got widespread attention last week when he talked about it to the Texas Tribune’s Evan Smith. Watson told me later he’s not suggesting that tax money diversions, for example, must stop immediately — but he wants a plan.

“It does cause concerns,” Pitts said. “If we try to start ending diversions this session — we’ve got a pretty ugly picture already, and if we paint it with things like that, it’s going to get uglier. But … if he has proposals, I’d sure be glad to listen to ‘em.”

Senate Finance Committee Chairman Steve Ogden, R-Bryan, said, “It’s premature to comment until it’s clear what our revenue picture’s going to be exactly.” But he added, “We’re going to need to use some of the rainy-day fund.”

Why insist on budget reform when lawmakers are scrambling to fill a huge hole? “The huge hole is a result of a process that needs to be reformed,” Watson said. “It may be the best time to do it.”