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State warned not to spend much of Rainy Day Fund
Tuesday, February 3, 2009 by Kimberly Reeves
The State of
The state has $77.1 billion to spend this biennium, roughly $9.1 billion less than two years ago. An anticipated $9 billion surplus was adjusted down to no more than $2 billion because of current commitments, including the cost of a property tax cut approved last session. And the state is sending more money back to businesses than it is taking in under the new franchise tax, due to last-minute appeals the Comptroller’s Office is settling.
Already, Lt. Gov. David Dewhurst and Speaker of the House Joe Straus have asked state agencies to cut an additional 2.5 percent out of the current year’s budget. At yesterday’s Finance Committee meeting that was estimated to be about $300 million in new revenues, once dedicated funding was excluded from cuts.
“As we begin budget discussions for this Session, the Legislature needs to be mindful of the uncertain economic conditions around us and every family in
Yesterday’s budget presentation to Senate Finance had two parts. John Helleman, chief revenue estimator for the Comptroller’s Office, presented the anticipated revenues – and lack thereof — for the upcoming biennium. Director John O’Brien and Assistant Director Ursula Parks of the Legislative Budget Board then presented a conservative baseline budget, one that indicates what Dewhurst would term a “structural deficit” – or shortfall – of $4 billion.
So the Senate starts in the hole this session in the budget-writing department, even before it touches high-cost promises like reversing tuition deregulation. O’Brien also noted that the baseline budget also does not carry the cost of debt service payments on the promised cancer and transportation bonds.
Constitutional prohibitions also have stopped the Permanent School Fund from disbursing any payouts this biennium for textbook costs, to the tune of $1.1 billion. The only way that will be reversed will be if a sudden market upswing in the second year of the biennium pushes the growth of the PSF out of the red and into the black.
Sales tax, the lion’s share of state revenues, is expected to take a big hit this biennium. Helleman has downgraded growth from a robust rate of about 10 percent three years ago to about one-half of one percent in the upcoming biennium. Also, growth in property values – which would increase the state’s share of school funding – is expected to be no more than 2.5 percent this biennium.
Unlike the recession of the mid-80s, the current economic downturn will not come with a
According to
Still, the state appears to be more resistant to economic downturns than states in the Rust Belt. Helleman predicted a continued downturn through the fourth quarter of the current fiscal year, at which time he predicted a slight uptick in job growth. Helleman predicted the state should regain its financial footing, slowly, as it enters Fiscal Year 2011.
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