Capitol Offenses

Bush's Budget Crunch


On the day after his State of the State address in January, Governor Bush invited the media over for a preview of his budget. It was a typical George W. press conference: he engaged the Capitol press corps in friendly banter, then reached into a large box filled with bound copies of the budget – only to demur. “I want your undivided attention. I don’t want you flipping pages while I talk,” he said. When he finished his fifteen-minute budget overview, the Governor went so far as to announce that the first copy would be handed out as a prize: “And the winner is the reporter least likely to read the budget – Wayne Slater.”

Slater, a Dallas Morning News veteran known to read budgets, comptroller’s reports, and House Research Organization briefing books in his leisure time, went along with the gag and stepped up to receive his copy. There was even a grip-and-grin photo, as Associated Press photographer Harry Cabluck stepped forward to shoot the Governor handing the budget to a sheepish Slater. Then the Governor’s budget director, Albert Hawkins, stepped in to do the heavy lifting, until the press conference ended as many of them do – Press Secretary Karen Hughes answered questions, then went head to head with reporters in an aggressive defense of her boss. This occasion was one of those “definition of what is is” arguments, when Hughes went ballistic after two reporters said the Governor had broken a campaign promise by failing to deliver on his tax holiday for the purchase of school supplies. “It wasn’t a promise, it was a proposal!” Hughes said, growing angrier as several reporters argued that the Governor had repeatedly promised voters a sales tax holiday. Finally, A.P. bureau chief Michael Holmes announced that in the future we will refer to all campaign “promises” as “proposals.” Everyone laughed, and Hughes departed.

The Governor’s proposed budget, however, is no laughing matter. We will soon have a better idea of which of his budget proposals will fly at the Lege. By late March, Comptroller Carole Keeton Rylander will release her updated revenue projections, determining the precise amount of surplus revenue available to divide between education and Bush’s proposed $2-billion tax cut. (“The story of this whole session,” Senate Finance Committee Chair Bill Ratliff said earlier, “is the debate between education and tax cuts. Everything else is almost miscellaneous.”)

Also by late March, the House Appropriations Committee, chaired by San Angelo Democrat Rob Junell, will have a final draft of Article XI of the appropriations bill. “All the unfunded needs and requests,” Appropriations Committee member Vilma Luna said, “are compiled in Article XI. It’s the state’s wish list.” Many of the requests, Luna added, will not be funded. The dollar amount of those unmet needs, according the Austin-based Center for Public Policy Priorities (February 23, Policy Page is $3.9 billion, with human services funding being hardest hit.

I set out to find Article XI, but was told it does not yet exist. “It’s a bunch of file boxes,” someone in the Appropriations Committee office said. “Pages and pages of agency requests.” With much of the budget already drafted, Article XI looks suspiciously like “The X Files”: a basement archive packed with information the government doesn’t want us to have.

How big is the gap between the state’s needs and its budget appropriations? It all depends on who you ask. Talmadge Heflin, a Houston Republican who sits on Appropriations and chairs an Appropriations subcommittee, would tell you there is no gap. Government lives within its means on the revenue it collects, returns excess funds to taxpayers, and funds agencies in accordance with the constitution, which makes deficit spending illegal.

Howard Dutton, a Houston Democrat and the thoughtful and cautious vice chair of House Public Education, sees things differently. On the day I talked to Dutton, he said that House Public Education – which works much harder than its counterpart in the Senate – was about to learn exactly how much new money it will have to work with.

“Chairman Junell is about to turn over to us about three billion dollars in surplus funds that we will have to divide up among competing interests in public education. And right now, we have about twelve billion in very legitimate requests for very real needs for public education.” So the Solomonic demand on the education committee will be to turn $3 billion into $12 billion – which of course will not happen. At the end of the session, Dutton said, public education in Texas will again be underfunded.

In this context, the Governor’s $2 billion giveback in property tax relief (on a tax that Center for Public Policy Priorities economist Dick Lavine describes as the most progressive in the state, as it is based on the value of real property) hardly seems like prudent management of the state’s economy. “Is the tax giveback a political move by the Governor?” I asked another Appropriations Committee member. She said she would answer my question if I would comply with two requests. “Don’t use my name and turn off your tape recorder.” When I did, she responded: “You’re goddamned right it’s political. Everybody on the committee knows it.”

But how to prove the obvious – beyond looking at the state’s budgetary needs as they compare to the bottom line of the appropriation bill? Austin American-Statesman editorial page editor Mary Alice Davis, whose years of editing at the House Research Organization has made her one of the best policy analysts working for any Texas newspaper, quietly argued in her column that there is no surplus – or at least, that there would be no surplus if Texas kept its books as every other state does. The unique cooking of the books in Texas, however, creates a surplus where there is none. Davis referred readers to a wonky newsletter, State Policy Reports – in this particular case, Volume 17, Issue 3, which was put out by national budget expert Hal Hovey after Governor Bush submitted his budget.

In fifteen fairly dense pages, Hovey explains that the budget process in Texas fails to take into account important variables that are part of the budget equations in almost every other state. In Texas’ unique budget process, inflation and growth factors are not built into the budget. If they were, the Governor’s 9.2 percent in “new spending” would become a no-growth budget that simply reflects 2 percent annual inflation plus the 1.9 percent annual population growth the state is experiencing. Compounded over the biennium, those percentages come close to 8 percent. Were the Texas budget calculated as are budgets in other states, we would be facing something like a $2.3-billion deficit. Hovey also observes that the state’s rainy day fund – a genuinely conservative budget category – is underfunded. The budget process, he writes, leaves the state in an extremely precarious position in the event of an economic downturn. But it leaves Governor Bush in “a good position to pursue the presidency: The 1999 session will adopt a biennial budget that will not require additional fiscal decisions until the 2001 session. Unless something dramatic occurs that would require a special session, the Legislature would not even meet again until after the elections in the year 2000…. Texas officials would not have to recognize the magnitude of potential fiscal problems until after the presidential elections.”

While Hovey considered the budget process, the Center for Public Policy Priorities was looking at the budget content. What the C.P.P.P. found – in a state in which the Governor is proposing a $2-billion property tax break following the $1-billion property tax cut he pushed through the Legislature in 1997 – is egregious underfunding. Spending $2,270 per resident in 1997, Texas is at a rock-bottom fiftieth among the fifty states in per capita spending. C.P.P.P. budget analysts also found:

Texas is thirty-fifth in per capita spending on elementary and secondary education, in a state system that enrolls a higher percentage of poor children than any other system in the nation. Two million children in Texas public schools are economically disadvantaged.Texas ranks fortieth in per capita spending on health and human services (while it is fifth in percentage of the population living in poverty). Despite a booming economy, the state “struggles to provide a safety net for its most needy.” And in health care, Texas is tied with Arizona for dead last in the number of residents with health insurance.Texas is forty-ninth in per capita spending on protection of natural resources, despite the double impact of the nation’s largest oil and gas refinery economy and 1,400 colonias scattered along the Texas-Mexico border, where public health statistics compare to what is found in underdeveloped countries.Only in public safety and criminal justice does Texas spending come close to the national average. Texas ranks twenty-fifth in spending on criminal justice and public safety, a figure skewed to the criminal justice side of those two categories by the state’s burgeoning prison system. Over the past five years, spending on public safety and corrections has grown 10.7 percent annually, while spending on education grew 5.4 percent and health and human services grew 5.5 percent.

The Governor, however, doesn’t seem inclined to budge on his demand that $2 billion in “surplus revenue” be returned “to the hands that earned it, the taxpayers of Texas.” The press corps got a laugh out of George W.’s charming antics at the budget-preview press conference. But a day earlier during his State of the State in the House chamber, not even the most cynical Democrat laughed when Bush leaned into the mike and earnestly proclaimed: “I will propose consumer sales tax cuts to eliminate taxes on diapers.” When you propose to give away what little money the state has for programs, it’s just not easy to write good punchlines for a programmatic speech.