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.

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