Texas Budget Deficit: $15 Billion or $27 Billion?

We used the $27 billion figure, which the always perspicuous Glenn Hunter challenged in the comments. Yesterday the News‘ Robert Garrett used the $15 billion number. Today the News’ Christy Hoppe uses the $27 billion number.

So which is right? Short answer: both. Here’s how Senator John Carona explains it:

The $15 billion shortfall number is calculated by subtracting the Comptroller’s available general revenue estimate of $72.2 billion for the 2012-13 biennial budget from the $87 billion 2010-11 biennial budget adopted in 2009.  The higher shortfall numbers are calculated by factoring in anticipated increases in program costs associated with growth in population and the cost of goods and services.  For example, there are estimated to be 80,000 new students in the public school system that the budget from last session does not take into account.

In Garrett’s piece, whose information seems to have come from the always What?-Me-No-Worry office of the governor and from State Rep. Talmage Heflin, only the revenue portion of the budget seems to be considered. Heflin dismisses the $27 billion, which was calculated by the liberal Center for Public Policy Priorities. (You can see their calculation here.) Heflin backtracked on that when called by Politifact, which analyzed the Center’s analysis and decided that Heflin’s dismissal was factually “false.” Its summary is useful.

The reason is that the Comptroller only estimates revenue. She cannot estimate what the Legislature will spend. (And she is probably a little gunshy on the revenue, since she overestimated by $4.2 billion for the current budget; her $15 billion shortfall may only be $13 billion.)

The problem on the expense side is growth. One example, as cited by Senator Carona, is the increase in schoolchildren. Texas grew at roughly 2 percent a year during the last decade. Using the same rate of growth, we will have added some added some 2,300,000 new Texans by 2013. That’s more people requiring state services like the DMV, etc. Cut state agencies by 7 percent, as the governor has done, and you’ve effectively cut by 14 percent because not only are you serving few people but you’re also not serving all the new people either. In other words, Texas is far from keeping up with its growth.

Maybe that’s the way it should be done. But the Legislature will have to make those choices, not only only in current spending but in future spending to handle the new influx.

So, to recap: The revenue shortfall is probably $13 billion. However, the amount the Legislature will have to cut, rejiggle, fix, and raise revenue for is closer to $25 billion.

As one commenter put it in an earlier discussion, every businessman knows that success requires cash. The faster the growth, the more cash is required. This is the paradox of business growth, and the reason most successful businesses find themselves scrambling to raise capital. In this case, what’s true for business is true for government. Texas has to deal with its success. How it deals with it will determine whether it thrives or whether that success is short-lived.

6 comments on “Texas Budget Deficit: $15 Billion or $27 Billion?

  1. Thank you for a balanced piece on this subject. Far too many advocay pieces out there using one number of the other to support a position. Keep it up!

  2. The successful business analogy is puzzling to me. The state’s revenue is flat/shrinking, so in a sense, expense control/reduction is exactly how a normal business should respond. Additionally, a business with flat or shrinking revenue wouldn’t take on more employees; Texas can’t exactly turn away the 2.3M new residents or “cut” population to control costs like a regular business would.

  3. Sure, the true figure may be between the two numbers. But I’ll bet towards the smaller one:
    1. New residents mean new tax revenues since they will be newly occupying property, buying more products (sales tax), and creating more commercial growth. …unless growth is disproportionately with heavy users of public services.
    2. Many recent fire and brimstone budget predictions have been exaggerated. The ways it may be attenuated this time may not be the same as last time (e.g., no free federal money this time). I’ll be watching for rabbit and hats.

  4. “Texas has to deal with its success.” Huh? Texas needs to have a tax system that provides sufficient revenue to fund services. If you have student enrollment rising without a revenue source rising with it, then you have a government revenue structure that’s not so successful.

  5. We’re new to Texas in the past few years and have watched the state weather the recession far better than other places we have lived, most recently Oregon. But Texas is not immune to poor planning and over reliance on ‘growth’ as a panacea. I saw a deeply disturbing documentary on the history channel about the nation’s crumbling infrastructure. Well worth watching. And while Texas is faring better than most in this regard it must guard against failing to keep up with the growth which will require adequate planning for schools, police and fire protection, roads, power, and most importantly WATER. We ignore this at our peril. Tax cuts won’t pay for this… it is sheer folly. We must all be willing to pay our fair share to make sure Texas does not go the way of Arizona.