Texas public policy foundation
The myth of the $27 billion shortfall
Jan 10, 2011  |  BLOG

State budget writers have a challenging session in front of them, but it may not be as bad as you've heard.

First, the facts. According to the newly released 2012-13 Biennial Revenue Estimate, the state is expected to collect $76.5 billion over the next two years for general purpose spending. Of this total, $4.3 billion is needed to cover expenses leftover from the last budget, leaving lawmakers with roughly $72.2 billion to cover general expenses for the next two years.

Since the announcement, several media reports are citing the estimate from Comptroller Susan Combs as the basis for a $27 billion budget shortfall. However, Combs specifically stated that she could not give a shortfall estimate - she is responsible only for the revenue side of the budget equation, and that spending levels are the prerogative of the Legislature.

The $27 billion figure in certain media accounts is premised on the belief that the state should carry forward all current spending and assumptions regarding program growth. But in difficult times, taxpayers cannot continue to spend money for programs and agencies in the same fashion as previous times when more resources were available.

Additionally, policy advocates touting the $27 billion figure are simply tallying the state agencies' Legislative Appropriations Requests. But these requests are almost never fully funded - even at the start of the budget process - because they include many unnecessary spending items that appropriators recognize and quickly weed out.

Beyond that, Combs said that her estimate of a $4.3 billion deficit in the current budget cycle did not account for the implementation of agency budget cuts requested last year by Gov. Rick Perry, Lt. Gov. David Dewhurst, and Speaker Joe Straus. Once these agreed-to cuts are implemented, that will reduce the deficit by approximately $2 billion in this budget and increase available revenue by $2 billion in 2012-13.

The most important point tracks back to Combs' statement that spending levels are the prerogative of the Legislature. Officially, there is no shortfall until there is an introduced budget that provides a preliminary expression of the Legislature's desired spending level. If the House leadership follows through on its stated intention to introduce a budget that fits within available revenues, there will be no shortfall.

This is not to say that the process of developing a 2012-13 state budget will be a walk in the park. But claims that Texas is $27 billion in the red are flat-out false.

- Talmadge Heflin