House Budget-Writers Vote to Use Part of Rainy Day Fund; Governor Says the Rest is Off the Table, Fiddling While Rome Burns; Senators Keep Looking for More Revenue

Today the Texas House Appropriations Committee made a small step toward common sense on the state budget, voting unanimously to spend $3.2 billion of the state’s Economic Stabilization Fund to cover a portion of the state’s huge revenue shortfall. The committee did so as Gov. Rick Perry, House Speaker Joe Straus, and state Comptroller Susan Combs issued a joint statement backing the move as a necessary one “to help our budget deal with the impact of the national recession” on state revenue for the current 2011 fiscal year.

However, Gov. Perry, having erased his original line in the sand against any use at all of this so-called Rainy Day Fund this session, immediately drew a new one concerning any further use of the fund, for the next two-year budget period. Said he: “I remain steadfastly committed to protecting the remaining balance of the Rainy Day Fund, and will not sign a 2012-2013 state budget that uses the Rainy Day Fund.”  The governor added that more than $6 billion remaining in the fund must not be used to address the current budget emergency but must be reserved instead “to cover unexpected emergencies in the future.” Speaker Straus also spoke of the need to “preserve” the fund.

But the limited use of the Rainy Day Fund these leaders endorsed today still leaves the state deep in a yawning hole for the coming 2012-2013 biennium—more than $23 billion in the hole, by generally accepted estimates. That reality prompted a sharp response to the governor from a leading advocate for a more balanced approach to balancing the state budget. Said Scott McCown, director of the Center for Public Policy Priorities:  “Governor Perry has things backwards. Texans aren’t supposed to protect the Rainy Day Fund. The Rainy Day Fund is supposed to protect Texans. Voters created the Rainy Day Fund by constitutional amendment in 1988 to offset unforeseen falls in state revenue just like the state faces in 2012-13. The Legislature and Governor should use the Rainy Day Fund to bridge the revenue hole created by the Great Recession.”

McCown added:  “As our economy recovers, revenue will recover, and because it has a dedicated revenue source, the Rainy Day Fund will automatically replenish. Governor Perry himself approved using all the Rainy Day Fund in 2003 and 2005….Writing the 2012-13 budget with none of the remaining $6.2 billion in Rainy Day Funds would do too much damage to Texas. Leaving $6.2 billion in savings while making deep cuts to public education, higher education, and health and human services would be irresponsible.”

The Texas Senate was not a party to the Rainy Day Fund deal-making between the House and the governor today, and indeed senators are still on the lookout for more revenue. In the area of school finance, for instance, senators are working on alternative plans that assume at least $4 billion more in school funding than the best-case scenario on the House side. Just today Democratic Sen. Royce West of Dallas asked the Texas Education Agency to present a model for school finance that would assume restoration of all but $2 billion of the $9.3 billion slated for cuts in the original Senate version of the budget. And earlier this week Republican Sen. Steve Ogden of Bryan has called for consideration of a corporate income tax to replace the business margins tax, which has produced far less revenue than promised for our schools.

So this story is still unfolding. The rest of the story will depend not just on what the governor and lawmakers say today but on what we ourselves do to keep up the pressure for a balanced approach to balancing the budget in the remaining half of the legislative session. We’ll let you know as crucial moments arrive that call for your direct intervention. Remember in the meantime:  The governor started this session saying he would never budge on use of the Rainy Day Fund. Yet today, halfway through the session, he has budged.

Coming Tomorrow:  The next Hotline will report on Texas AFT’s pushback in the House Public Education Committee this evening against ongoing attempts to roll back state quality standards for class size, educator contracts, and salaries.

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