The Texas Legislature will have $101.4 billion to haggle over in crafting its next two-year budget, along with an extra $11.8 billion in the Rainy Day Fund, Comptroller Susan Combs announced Monday morning. (Listen to her full announcement here.)
Combs’ official biennial revenue estimate sets the limit of the state’s general fund, the portion of the budget that lawmakers have the most control over. The general fund typically makes up nearly half of the state’s total budget.
Combs predicted that the state will collect $96.2 billion in revenue from taxes, fees and other income during the 2014-15 biennium. The fund already had $8.8 billion left over from the current biennium. Of the new revenue, $3.6 billion will be transferred to the state’s Rainy Day Fund, which Combs predicted will grow to $11.8 billion.
Factoring in federal funds and other revenue sources, the total available revenue for the next budget is $208.2 billion.
Monday’s news sets a different tone for the legislative session that begins tomorrow compared with the previous one, in which lawmakers faced a multibillion-dollar shortfall and a protracted budget battle over how to spread the pain.
Combs said Monday that many economic forecasters did not forsee the size of the recession and that the ensuing volatility has continued to make budget estimates difficult to pin down.
In January 2011, Combs projected $72.2 billion in general revenue would be available for the current 2012-13 biennium.
“We had a whopper of a recession, and my hope is we don’t see a sort of European-style slowdown,” Combs said.
Combs offered a similar defense two years ago, when she acknowledged that her previous revenue estimate for the 2010-11 biennium had been overly optimistic by about $4.3 billion.
Anticipating the announcement of a surplus, Republican leaders in recent months have been speaking about the need to control the state’s spending growth. Gov. Rick Perry has called for a constitutional amendment making it tougher for lawmakers to increase state spending by more than the combined rate of inflation plus population growth. Lt. Gov. David Dewhurst has pledged to keep the next budget’s growth within that rate, which would be less than 10 percent according to one estimate provided by the Legislative Budget Board.
Various Democrats and education groups are pushing for lawmakers to restore the cuts from the last session and to account for the state’s population growth over the last two years.
“$108 billion is what it takes to actually undo the last session and get us back to where we used to be,” said Eva DeLuna Castro, senior budget analyst for the Center for Public Policy Priorities, a left-leaning Austin-based think tank.
Early in the session, lawmakers are expected to commit several billion dollars to paying off bills that were purposely left unpaid at the conclusion of the 2011 session, including nearly $5 billion for Medicaid. That leaves the actual size of the surplus unclear.
“A lot of that gets sucked up right away just paying for the last session,” Castro said.
Talmadge Heflin, a budget expert with the conservative Texas Public Policy Foundation and a former legislator, said lawmakers should see last year’s budget cuts as a good start. He and other conservative groups have offered suggestions for ways the state could further trim expenses, including privatizing parts of the Texas Parks and Wildlife Department and eliminating the Texas Commission on the Arts.
“They didn’t cut everywhere they could,” Heflin said. “There are still a number of programs or agencies that could be reduced or eliminated.”
House Speaker Joe Straus has signaled an interest in using the state’s better financial position to make investments to prepare Texas for its more crowded future. The state is expected to grow from its current population of 26 million to 33 million by 2030, according to some estimates.
“Those of us who have been chosen to lead this state need to focus on the core functions of government so that Texas continues to be a place where businesses want to expand, where people have the opportunity to reach their full potential, even when there are 33 million of us here,” Straus said a luncheon of Austin business leaders last month. “To put it another way, we have to get serious about our future.”
In Monday’s announcement, Combs projected that the Texas economy would, adjusted for inflation, grow 3.4 percent in the 2013 fiscal year and in 2014 fiscal year. She predicted the state’s unemployment rate, currently at 6.8 percent, would average about 6 percent by 2015.
While she praised Texas lawmakers for passing conservative budgets, Combs said the state's booming oil and gas sector and a boost in motor vehicle sales contributed significantly to the rosy budget picture.
"Other states do not have some of these extra benefits," Combs said. "If you were in North Dakota, you would see a lot of the same picture. California, however, does not. It’s going to be very different state by state."
Combs urged the Legislature to not assume that the surpluses will keep coming. She recommended that lawmakers use the Rainy Day Fund for one-time expenses instead of recurring needs.
"What goes up must come down and what you have in the agricultural sector is you have droughts and rain and you can have financial droughts as well," Combs said. "It’s always best to be prepared for upturns and downturns.”