How the Budget Got Cut
The story of Texas’ leanest budget in 19 short acts.
The 82nd Texas Legislature passed perhaps the leanest and cruelest budget in state history. That’s really saying something. The Legislature isn’t exactly known for generosity; Texas spends less per resident than any state in the country. But the two-year spending plan that lawmakers approved on Memorial Day weekend is especially cold-blooded.
The plan slices 8 percent from state spending. In 2012-2013, for the first time in decades, the Legislature will significantly reduce funding for public schools. Thousands of teachers will lose their jobs, and some schools may close. But at least public school remains free (for now). For those who graduate high school, the budget makes college more difficult to afford; it cuts more than a billion from higher education, which will likely lead to tuition increases at the same time that lawmakers are slashing state grants for college. And God help you if you get sick; Medicaid and other critical health care programs will lose billions. The budget treats family-planning services like a plague—something Texans should avoid. Lawmakers chopped 60 percent from the family planning budget.
As bad all that sounds—and is—it could have been far worse.
The session began with the dispiriting announcement from the comptroller’s office that Texas’ budget shortfall was larger than anyone had guessed—$27 billion. Gov. Rick Perry and Tea Party legislators were adamant that the Legislature couldn’t raise taxes or tap the more than $9 billion in the Economic Stabilization (Rainy Day) Fund.
Without new revenue or money from the Rainy Day Fund, budget writers had to resort to unseemly accounting tricks. They delayed payments, intentionally monkeyed with enrollment estimates and raised every fee in sight. Those efforts added billions of “non-tax” revenue, which helped defray the worst budget cuts. But still it’s not enough.
The dirty secret of this budget is that it doesn’t pay for itself. The two-year spending plan only covers about 18 months of state operations. For instance, lawmakers intentionally shorted the Medicaid program by $4.8 billion. Those payments will have to be dispensed eventually.
Where will the extra money come from? Lawmakers are hoping and praying the economy improves. Failing that, the poor saps who show up for the 83rd Legislature in 2013 will have to pass a massive emergency spending plan. Essentially, the Legislature has engaged in deficit spending—much like the federal government. The only difference is that instead of borrowing from the Chinese, Texans are borrowing from our future selves.
But whatever occurs in 2013, millions of Texans will begin feeling the pain of this budget when the state’s 2012 fiscal year begins on September 1. How did Texas end up in this spot? The following list recounts not only how lawmakers constructed the spending plan, but also charts how we felt about this slimmest of budgets at each step during the past five months.
The Budget Deficit from Hell
The day before the Legislature convenes, Comptroller Susan Combs releases revenue estimate and projects a $27 billion budget shortfall for 2012-2013—one of the largest in state history and the fourth-largest in the nation. Yikes.
For months the estimates of Texas’ budget deficit kept rising—$11 billion, $18 billion, $20 billion, $24 billion. Each seemed more unfathomable than the one before.
The high-end estimates were in the $22 billion to $24 billion range. Surely, it couldn’t be worse than that.
Well, yesterday, it officially got worse.
The Comptroller’s office released its official revenue estimate, and the news must have made jaws hit the floor (at least mine did): $27 billion.
And with that, Texas became one of those states—the kind of place that makes national news for its budget woes, the place that closes state parks, that doesn’t just cut public programs, but wipes them out entirely, that combines school districts and lays off thousands of public employees.
My friends, we’ve entered California territory.
No Rainy Day Fund, really?
Jim Pitts, the House Appropriations chair, tells the Texas Tribune and, later, a conservative policy forum that lawmakers likely won’t vote to use the $9 billion Rainy Day Fund to close 2012-2013 budget deficit. Double yikes.
Perry Promises It All
Gov. Rick Perry is sworn in to a record fourth term in office. In his speech, Perry promises that Texas will take care of its neediest without raising taxes. He also remains opposed to using the Rainy Day Fund.
“As Texans,” Perry said, “we always take care of the least among our population—the frail, the young, the elderly. The people on fixed income. Those in situations of abuse and neglect. We’ve always done that….We’re going to protect them, support them, empower them. But we cannot risk the future of millions of taxpayers in the process. We must cut spending to keep our economic engine on track.”
[U]nabashed contradictions. The state cannot protect and empower the needy and cut spending. It will have to prioritize one over the other.
Pitts’ Sticker-Shock Budget
Pitts unveils a draft budget that relies exclusively on budget cuts—no new taxes or Rainy Day Fund. House members promptly freak out. The cuts to public schools, health care and community colleges are so deep that Pitts is berated on the House floor with panicky questions. If he wanted to shock his colleagues, Pitts accomplished his mission. This budget seems part of a plan to convince Republicans to at least use the Rainy Day Fund. Surely, the final budget won’t be nearly this bad.
Senate Gets the Bad News
The Senate Finance Committee begins its budget hearings, and the picture ain’t pretty. A state economist tells the committee that this recession is, in some ways, worse than the downturns of the 1980s. State revenue is way down and there’s also the matter of a $10 billion structural deficit.
When asked how many Texans would lose specific services, agency officials repeatedly said they didn’t know yet. They said their agencies were still calculating the impact of proposed cuts.
This frustrated state Sen. John Whitmire, D-Houston. Though it’s early in the game, Whitmire pressed department heads and LBB analysts for more information, specifically how many clients would lose services should reductions get approved.
“I need a face to these cuts,” he said repeatedly. “How do I get real life examples? These aren’t normal times—the cuts and impacts are significant.”
Indeed they are.
Burn Down Your House Now or Burn it Down Later
The heads of state agencies trudge before the Senate Finance Committee to describe how proposed cuts would impact services. It’s a jarring meeting. Balancing the budget without new revenue or the Rainy Day Fund could severely
damage the state.
If you want to understand the consequences of balancing Texas’ budget without raising taxes, just listen to Anne Heiligenstein. She heads the Department of Family and Protective Services, which runs the state’s foster care system.
We can’t pay for all the state’s current services—not without raising taxes. And Texas already spends less per resident than nearly every other state. So almost all our spending could already be considered essential.
The question hanging over the committee hearings the past two days was: Who’s most essential? Who’s most desperate for help—the abused children or the nursing home residents or the mentally ill? How do you decide whose program takes precedence?
Some of the senators grilled Heiligenstein on why she wasn’t prioritizing prevention programs. In her answer, she hit on the ludicrous choices she faces.
‘’I have this house on fire over here,” she said, referring to proposed foster care cuts that might lead to kids sleeping on sofas in state offices. She then termed cuts to prevention programs “a house with bad wiring that might be on fire in a couple of years…..I made the decision to deal with the house that’s on fire right now.”
And there you have it—the 2011 budget process in summary: Burn down your house now or burn it down in a couple of years.
February 2 & 3
The Budget Cuts Get a Human Face
Over two days, hundreds of Texans from all walks of life come before the Senate Finance Committee to plead with lawmakers not to slash life-saving programs. Texans with mental illness, mental disabilities, severe brain injuries and their parents, doctors and caregivers all show up. It’s an outpouring the likes of which even veteran lawmakers said they’d never seen. Even conservative Republicans appear deeply moved and reluctant to cut key programs.
They had three minutes to share their life stories. Just 180 seconds to describe all that had befallen them. The details were different. Some were parents of the mentally disabled, some ran group homes and treatment centers, others were dealing with severe mental illness or recovering from traumatic brain injuries. But they all came before the Senate Finance Committee on Wednesday and Thursday with the same message: Don’t cut funding for programs that are saving lives.
The sheer number of people signed up to provide public testimony on the health and human services section of Senate Bill 1—the draft state budget—necessitated a time limit of three minutes. More than 200 testified during nearly 15 hours spread over two days.
Ruth Hansen took Wednesday off from her job and waited all day to speak her three minutes. Her daughter Andrea has Down’s syndrome. She gained a slot in a Medicaid waiver program that allowed her to live in an Austin group home with two other disabled women. “We’re getting older,” Ruth said. “I know she has safe care, a beautiful life.” The senators will decide if that continues. Andrea’s group home—like so many other providers in the state—is facing a 29-percent cut in funding under the proposed Senate budget. If the 29-percent cut goes into effect, Andrea’s group home will close.
Many of the advocates and parents, including self-described Republicans, argued for higher taxes. David Walker, the county attorney in the conservative Houston suburb of Montgomery County, testified that his county had just built a treatment center to divert mentally ill offenders from jail. “If there must be budget cuts, let’s not cut human beings,” he said. “My Lord Jesus tells me ‘What you do unto the least of my brethren, you do unto me.’ I believe that and that’s why I’m here. If it means raising taxes, then raise mine first.”
Good Cuts Hard to Find
House and Senate budget writers break into subcommittees to find “cost efficiencies” in various sections of the budget. That proves especially hard for the Senate subcommittee on Medicaid. Cutting programs that save people’s lives is awfully tough.
The No-Fat Budget
Rep. Pitts tells the Observer that the Texas budget has no fat. In other words, he can’t close the budget gap by cutting “waste and fraud” as some Republicans are claiming. It seems some sanity is returning to the budget process. Perhaps that Rainy Day Fund will be tapped, after all.
When Pitts laid out the draft version of the budget, which featured enormous cuts to education and health and human services—and no money from the Rainy Day Fund—he was visibly distressed by the worst-case-scenario document. “I promise you that I’ll work day and night to make this budget better,” he promised his colleagues.
Now he’s hoping some of his peers have recognized the urgency of the situation—and the need for some Rainy Day cash. “A lot of people thought, ‘Well, we can cut $30 billion off the total budget and that’s no big deal,’” he said. “But that’s a big deal.”
“A lot of people when they run for election they [say they’ll] cut the fat in our budget,” he continued. “Well, the Texas budget doesn’t have fat.”
NURSING HOME PATIENTS IN THE STREETS
In stunning testimony to a House Appropriations subcommittee, Chris Traylor, the Department of Aging and Disability Services commissioner, acknowledges that 30-percent rate cuts contained in the draft budget could shutter hundreds of nursing homes. Is this what Tea Partiers voted for—seniors living under bridges?
“I want to talk in terms of persons and business,” [Rep. Sylvester] Turner said. “Is it true that under the bill as introduced that if it goes through that a number of nursing homes would close? If what we’re doing is irresponsible, we need to hear it.”
After a few minutes, Traylor finally said what everyone already knew. “I am unaware of any business model that could accept a 37-percent reduction in one year and continue to operate … I cannot tell you where those individuals would receive their assistance.”
Just where people will go is a big question. About half of nursing homes in Texas, the majority of clients depend on Medicaid to cover their expenses, and all those clients would be at risk. If the Medicaid reimbursement rates get too low, providers won’t be able to care for the patients. While normally patients could turn to other places for help, like community-based assistance and independent living services, the proposed budget also makes drastic cuts in those areas.
“Where are these people going to go?” Turner asked. “There is but one answer. They will go to the streets. We’re cutting every other place they can turn.”
SAVE OUR SCHOOLS
In one of the largest Austin rallies in recent memory, 11,000 parents and teachers storm the Capitol steps on a Saturday to rally against cuts to public education. Outraged by proposed school closures and teacher layoffs, they want lawmakers to use the Rainy Day Fund to offset education cuts.
THE RAINY DAY FUND DEAL
Pitts and Perry strike a deal to use $3.2 billion from the Rainy Day Fund to close the budget hole for 2011. That’s progress. But there’s a catch: Perry makes clear he won’t budge on using any money from the emergency fund for the 2012-2013 budget. This feels like a deal with the devil.
The deal really does nothing to address the larger problem—the roughly $27 billion budget deficit we’re facing for the next two years. …
I’ve started imagining the state budget like a submarine that’s taking on water. There are many compartments filled with vulnerable people who will drown without help, but we can’t save everyone. And state lawmakers are trying to decide which people to save and which hatches to close off and let people fend for themselves.
So, yes, lawmakers made progress on the budget yesterday. The deal had to be done. But there’s no reason to celebrate. If Perry holds firm to his no-more-Rainy-Day-Fund-use stance, then yesterday’s events might have actually made things worse.
Did They Really Pass That Budget?
Pitts brings the House version of the budget to the floor. It looks distressingly similar to the draft bill he unveiled two months earlier. The budget is all cuts—$23 billion worth—that will gut education and health care programs. On the House floor, Republicans tack on amendments that slice 60 percent of the state family planning funds. After three days of heated debate, the bill passes. The budget process is half over and things look grim.
After over 22 hours of debate, the Texas House passed a budget Sunday night that looked an awful lot like the first draft offered in January. The same drastic cuts to education and health and human services are there. College scholarships remain largely zeroed out for incoming freshmen as do grants for pre-k. Rate cuts to Medicaid providers still stand at almost 33 percent and services for poor and elderly are drastically reduced. “I know this bill is not perfect,” said Rep. Jim Pitts, the Appropriations Committee chair. “I believe it can be improved further and I believe it will be.”
But that improvement will have to happen in the Senate or in the conference committee.
The mood, respectful and quiet, seemed to heighten the gravitas as Appropriations Vice-Chair Sylvester Turner, D-Houston, took the floor. He was the last of eight Democrats to speak against the bill, and he didn’t hold back. ”Not one of us will leave this chamber and go back to our district and take ownership of those cuts,” he said.
Who Needs the Rainy Day Fund Anyway?
A heretofore secret Legislative Budget Board analysis surfaces showing a tax break for major natural gas producers is costing the state $1.2 billion a year—the same amount of money needed to offset rate cuts to nursing homes. At the hearing, Villarreal quizzed LBB head John O’Brien about the report. “It was more or less a background piece so that we’d have it available if anybody was interested,” O’Brien said. Was it censored?, asked Villarreal. “No sir,” responded O’Brien.
All We Can Say Is #&@%!
Not only do lawmakers refuse to tap the natural gas tax exemption, but—on tax day, no less—a House committee hears (and later approves) a bill to give a sales tax break to buyers of mega-yachts. This says it all.
Given all the pressing needs of the state, it’s good to know that our state lawmakers have time this session for an especially down-on-their-luck group. Not nursing home residents, not schoolkids, not state employees or the disabled. Nope, it’s yacht owners. Yes, today a House committee discussed giving a tax break to wealthy yacht-buyers.
Finally, Rep. Mike Villarreal, a San Antonio Democrat, arriving late to the committee, piped up.
“So this bill is a tax break for mega-yacht owners?,” he asked. “I feel like i just walked through the twilight zone. Is that what we’re talking about – a tax break for mega-yacht owners?”
The hapless yacht-booster at the dais certainly didn’t help his case when he parried, “This is not just for rich people. You can get used yachts as well.”
A Little Help from the Senate
The budget comes to the Senate floor. After 10 days of scrounging for enough votes, Republicans decide to bypass the traditional rule that calls for two-thirds support to debate a bill. All 12 Democrats vote against it. But the Senate bill is at least some what responsible. It spends $11 billion more than the House version and undoes many of the worst cuts in the House bill. Finance Chair Steve Ogden isn’t thrilled but calls his bill “adequate.”
Special Session or Bust
Budget writers are close to a deal melding the Senate and House versions, but there’s a bigger problem: How do they pay for it? A series of “fiscal matters” bills which provides the necessary revenue for the budget keeps getting hung up. Many lawmakers aren’t thrilled with the many accounting gimmicks needed to balance the budget. And to make the cuts to education work, lawmakers are reworking the school-finance system on the fly in the session’s final week.
Wednesday was supposedly the pivotal day for the Legislature. If the House could agree and vote out the Senate’s technical ‘fiscal matters” bills then there was a chance we would see a budget by the end of session. The bills would generate billions in additional revenue through some accounting tricks like deferred payments and some cost-saving maneuvers, particularly regarding Medicaid. Without those bills (and the money they would bring in), the budget is dead in the water, for the regular session anyway.
According to Democratic Rep. Mike Villarreal, the measures have been postponed a total of 15 times in some form or another. Today, yet again, we’ll wait with bated breath to see if fiscal matters actually get debated and passed.
The Deal Is Done—Sorta
The House and Senate compromise on a budget that spends $80 billion—about $19 billion less than state agencies have said the state needs to maintain current services. The cuts will be tough. And with all the budget gimmicks, there’s a chance the state could run out of money in March 2013. We thought these guys were conservative.
The Senate appears to have prevailed on public education, where there will likely be a $4 billion cut to funding, rather than the House’s proposal of a $7.8 billion cut… .
For his part, Villarreal is hoping for a special session, although he maintains the Democrats have no impact on the matter. “I don’t think it can get any worse if we go into special session,” he says. “The Senate budget is harmful to the quality of our kids’ education. The House budget is a disaster.”
Wendy Davis’ Last Stand
Both chambers pass the final budget bill. But Sen. Wendy Davis, a Democrat from Fort. Worth, blows up the session’s final night by filibustering a key revenue and school finance bill needed to balance the budget. After Davis talks the bill to death over 77 minutes, the Legislature readies for an immediate special session on school finance. You had to know this session wouldn’t end neatly.
It was a night few Capitol watchers will forget, a night when the best-laid plans of the governor and the legislative leadership were obliterated by a first-term Democrat. When Davis rose to speak, everyone knew why. “I think I know why, but Sen. Davis, for what purpose do you rise?” asked Lt. Gov. David Dewhurst.
“To speak against the bill,” she said. And with that, the filibuster was on, and the course of the session drastically changed.