Have We Learned the Lessons from 2003 Budget Cuts?

This is my first post in quite a while. I’m happy to report that I spent last week lying on a beach. I hoped to return from vacation to find Texas’ fiscal problems magically solved. Crazy thinking, I know. But, hey, when you’re staring at the ocean and daydreaming, it’s easy to fantasize that the projected $18 billion budget deficit was maybe just an accounting error…perhaps someone put a decimal point in the wrong place or something.

But, alas, like waking from a pleasant dream, I returned to work this week to find the state’s finances still a mess.

The $18 billion shortfall would represent about 20 percent of all state spending. That’s a daunting problem.

The state’s Republican leaders would rather roll themselves down a hill of razorblades than raise taxes. But can we really rely on spending cuts and the Rainy Day fund to balance the budget?

Well, there’s fresh evidence this week that reducing state spending that much could be a disaster.

Cutting too deeply can have disastrous and long-lasting impact. Take the Texas food stamp program. Food stamps are administered by the states, but paid for and overseen by the federal government.

Texas’ program is a mess. It’s gotten so bad that the feds announced this week that they would fine Texas nearly $4 million for having high error rates. That means the state isn’t enrolling people correctly—Texans eligible for the program are being turned away and people who shouldn’t get the benefits are receiving them by mistake.

The shame of it is that Texas used to have a well-running food stamp program. So good, in fact, that it routinely won awards from the feds for having low error rates. But no more.

In 2003—as many will remember—Texas lawmakers passed an unprecedented effort to privatize the system that enrolls Texans in government programs—everything from Medicaid to food stamps. Thousands of state workers were laid off and their jobs were turned over to privately run call centers overseen by Accenture. The effort was supposed to save $600 million. Lawmakers were desperate to cut the budget in 2003 and those promised savings were too tempting to resist. It turned out to be fool’s gold, though. The call center plan quickly turned into a fiasco and the whole effort was scrapped.

The state’s eligibility system hasn’t been the same since and nowhere has the impact been more pronounced than in the high error rates now plaguing food stamps.

Corrie MacLaggan at the Statesman has done excellent reporting on Texas’ troubled food stamp program. You can read her story on the recent federal fine here.

State officials blame the problem partly on a rise in food stamp applications following Hurricane Ike in 2008, MacLaggan reports. And that surely had some impact. But the problems with food stamps can be traced directly back to the budget-cutting session of 2003. Seven years later, we’re still feeling the effects.

It’s a tale worth remembering as we once again head into a legislative session facing a huge budget shortfall.