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The Next Budget Crisis

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If you liked the Texas Budget Massacre of 2011, you’re gonna love the sequel set for release in 2013. Right now Republican politicians are congratulating themselves on handling a $23 billion budget shortfall this session with (all together now!) no new taxes. But in two years, they’ll be back in Austin for the 2013 legislative session, and the state’s finances could be just as bad.

How can that be? First, lawmakers failed to address the state’s long-term financial flaws this session; they simply papered over them (again). And, second, budget writers relied on a series of accounting tricks that could put the state in a precarious fiscal spot in two years.

Take a look at the state’s books and you will find a permanent deficit that runs about $5 billion a year. This is the result of a poorly designed scheme in 2006 to swap a property-tax reduction for a business tax that doesn’t generate enough money. Everyone at the Capitol knows about this mess. But no one has the guts—or the sense of responsibility—to deal with it. As a result, the structural deficit has now become as much a part of state government as the Capitol’s pink granite. In 2013—for the fourth session in a row—the state will start its budget process in a $10 billion hole at a minimum.

Then there are the accounting tricks. To balance the 2012-2013 budget without more revenue, lawmakers used every budget gimmick a dishonest accountant could think off. For instance, the budget proposals delay billions in payments to schools and Medicaid providers until the next biennium and count that as “savings” now. The state will have to pay those bills eventually, probably with a multi-billion-dollar emergency spending plan in 2013.

Lawmakers are recklessly gambling that an improving economy will help alleviate these problems, and they are making wing-and-a-prayer assumptions about future actions of the federal government. The Legislature assumes billions in cost-savings from Medicaid and other health-care waivers that Texas has requested from its dear friends in the Obama administration. That’s not likely, especially given that the Bush administration turned down those very same requests. Another ludicrous rider in the budget assumes the feds will pick up 100 percent of the health-care costs of undocumented immigrants. If these assumptions don’t pan out, Texas’ 2013 bill will be even higher.

This budget not only implements drastic cuts to education and health care, but sets us up for another round of painful reductions in two years.