House Appropriations Committee considers tapping the Rainy Day Fund

To address the $4.3 billion budget shortfall Texas faces this biennium (2010 and 2011), state legislators have three options – tap the Rainy Day Fund, make even more cuts from the budget they’re writing for 2012 and 2013 or defer certain payments until the next budget cycle.

House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, laid out two bills today addressing two of those three options. While House Bill 4 detailed state agency budget reductions made last year at the request of Gov. Rick Perry, which total to almost $2 billion, House Bill 275 proposes using $4.27 billion of the $9.4 billion Rainy Day Fund, a state piggy bank.

“We heard (State Comptroller Susan Combs) testify last week, members – we cannot address the shortfall with cuts alone,” Pitts said to representatives and an audience that filled just half the room by late afternoon. “This is not an option.”

State Rep. Jimmie Aycock opened discussion with a simple question to the Comptroller’s Chief Revenue Estimator John Heleman: What would happen if we didn’t address the current shortfall?

Without considering any of three choices, “the state would start losing cash when we get into the summer months,” he said. “We’d reach a point where we couldn’t pay our bills.”

Along with using half of the Rainy Day Fund and passing HB 4 (the supplemental bill), members discussed deferring certain payments from the middle of the August to the beginning of September, basically pushing the debt into the next biennium. Heleman told members that method has been used in the past, most recently in 2003 when the legislature voted to delay the Foundation School Program payment, “saving” about $1.8 billion.

“Are we just borrowing from the future to pay for today?” asked state Rep. Mike Villarreal, D-San Antonio. “We’d be putting a tough decision off on a future legislature instead of paying our bills today.”

Recalling the uncertainty she felt when voting to defer Foundation School money in 2003, state Rep. Myra Crownover, R-Lake Dallas, cautioned members against delaying too many payments at one time.

“You can’t let deferrals stack up,” she advised. “To me it’s a responsibility you take on; it’s not free money.”

Earlier in the afternoon while laying out Perry’s suggestions to cut the current budget, top Perry aide Ken Armbrister and budget man Mike Morrissey were grilled on quite a few inconsistencies in the governor’s rhetoric and budget balancing principles. Although Perry has continuously told representatives not to touch the Rainy Day Fund, Armbrister indicated Perry has not “drawn a line in the sand” when it comes to using Rainy Day money.

“I don’t know where it came from that the governor was hardball on this,” Armbrister said. “All he said was to go through the process.” (Actually, as Statesman reporter Jason Embry pointed out, Perry, repeatedly said he was against using the Rainy Day Fund).

State Rep. Sylvester Turner, D-Houston, in true form, got riled up at the fact that Perry’s list of current budget cuts didn’t include franchise tax reform. The tax has been underperforming by $2 billion since its inception in 2006 and will cost the state $1 billion per year, what Turner called “a leak in our roof” and “a loophole.” Armbrister told Turner that the governor is not interested in fixing the franchise tax.

“We know it’s underperforming,” Armbrister said. “To close a loophole, that is a tax increase, and he will not sign a bill that increases taxes on anybody.”

Pitts did not take public testimony on either bill today and told members he plans to vote both out of committee on Monday morning.