Our So-Called Surplus


Kinky Friedman rolled out his first major policy proposal of the gubernatorial campaign recently. This being Kinky, it was a grab bag that included adding 1,000 more cops to the streets of Houston, putting 10,000 National Guard troops and a few Mexican generals on the border, and killing the recently enacted state business tax. To pay for all the goodies, Kinky plans to use the state’s budget surplus, which the Kinkster tagged, varyingly, at $11 billion to $13 billion. (The comptroller’s latest estimate was about $8 billion.) Historically, high prices for oil and natural gas are responsible for this supposed overflow in the state’s coffers. While energy prices are starting to drop, they’re still in the stratosphere, historically speaking. So Kinky, like most Texans, can be forgiven for thinking a surplus still exists.

Truth is, Gov. Rick Perry and Co. already raided the vault. It’s difficult to figure how much surplus is left—we’re dealing with budget projections here, after all—but the safe bet is on the bottom side of “not much.” Even as Kinky was formulating how to spend the supposedly healthy surplus, state agencies were preparing to slice 10 percent from their budgets, as mandated by state leaders. People who win the Lotto don’t usually sign up for food stamps, and governments with surpluses don’t cut budgets.

So where has the money gone? Much of the surplus went to the property tax cut the Legislature passed during last spring’s special session. Of course, the tax cut was much needed, not to mention court-ordered. But Perry and the Lege didn’t provide enough revenue to pay for the estimated $15 billion in property tax cuts over three years. They paid for some of the cuts with an expanded business tax and a good chunk of the estimated surplus. Even with that, the plan still doesn’t balance. As we observed last spring [“Pyrrhic Victory,” June 2, 2006], the tax cuts will cost roughly $5 billion a year more than the state brings in—the five-year deficit totals $25 billion, according to the state’s own Legislative Budget Board. The Lege must balance its budget. So the tax plan’s deficit means looming budget cuts or a sales tax increase, or both. To briefly recap: Not only is most of the surplus gone, but the Lege will face a significant budget gap starting in the 2007 session. Given this outlook, it’s no wonder state agencies have been asked to trim their budget requests by 10 percent.

Finding suitable areas to cut from the state’s already extra-lean budget is a nearly impossible proposition. As usual, lawmakers will end up taking money away from essential government programs. That will come on top of the many unrestored cuts from the 2003 session that knocked hundreds of thousands of kids and poor families off Medicaid and the Children’s Health Insurance Program. (CHIP enrollment remains at half of its 2002 high of 520,000.) This time around, those programs—and others for the mentally ill, the mentally retarded, and the indigent—stand to see their budgets further reduced. Among other proposed cuts is $14 million from the already on-life-support state park system.

We sit at a critical juncture in Texas. Our growing population is increasingly urban, Latino, and poor. If the state government continues to deny these communities access to education and health care, Texas’ future looks bleak. Yet how continued budget cuts will clash with demographic change has yet to surface as an issue in the governor’s race. As for the surplus, well, as Kinky might say, that cash cow has left the barn.