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Analysis: For Budget Cutters, It's Not About Revenue

The experts say the state has plenty of tax revenue coming in, thanks to a thriving economy. Even so, lawmakers are asking state agencies to propose budget cuts before next year's legislative session.

In one corner, the government’s number nerds are telling us that the state treasury will be taking in more money than anyone could have imagined: Thank you, oil and gas industry.

In another corner, the people in the most energetic patches of Texas politics — those would be the fiscal conservatives on the Republican side — are telling us that state government still needs to be smaller whether or not income is up.

In the middle are lawmakers who through their finance agency, the Legislative Budget Board, are asking state agencies to prepare budgets that include details on how to cut up to 10 percent from their current spending plans.

It is a standard exercise, but in a state government unusually flush with cash, it further emphasizes the politics of conservatives who said they would not go to Austin to grow the government. The budget is where they figure out how to stem that growth while still providing the services that voters expect.

This year’s letter to agencies has less pixie dust than previous efforts. Earlier versions have carried the signatures of the governor, the lieutenant governor and the speaker of the House; this one was signed by the directors of the budget board and the governor’s budget office. The distinction is more important outside the government than within it. State leaders put their names on these things for political effect; the agencies are more interested in the instructions for submitting budgets.

“While the state’s revenue landscape is certainly positive and a projected balance is accruing in the treasury, as prudent fiscal managers this does not preclude the possibility that state agencies may be asked to reduce their fiscal year 2015 budgets should either state fiscal conditions or individual agency circumstance warrant such direction,” the letter says.

Translation: The state has extra money in the bank. But there is always a chance that conditions will change and force the state or a particular agency to cut its budget. The agencies were instructed to propose two-year budgets that spend no more than the current budget and to also show the Legislature what would be cut if budgets were trimmed by 5 percent and by 10 percent.

Some things were exempted: public education; debt service for bonds; state pensions and benefit programs; and several health and human services programs, including Medicaid, children’s health insurance, foster care and adoption subsidies. The agencies are allowed to include “exceptional items” that exceed current spending levels.

The exercise gives lawmakers a chance to look at what is on the line when they vote on the budget a little less than a year from now.

Inevitably, something will throw the budget out of whack. A facility that was supposed to be regulated will explode, like the fertilizer plant in West last year. Someone in the state’s care will get hurt or die. Somebody will lose a job or a piece of business because of a regulatory mistake. State leaders will change their minds about where to put resources, as with the recent decision to spend $1.3 million a week for more enforcement on the Texas-Mexico border.

Some of that will be surprising, but a fair amount goes back to the state budget, to lawmakers’ decisions about where to put taxpayers’ money, on where to splurge and where to skimp — on a series of bets about which programs and services need every penny they can get and which ones might get by with less. If lawmakers bet right, the state saves money. When they bet wrong, they leave holes in the safety net that includes everything from prisons and state police to education and health.

Lawmakers cannot close all of the holes. They don’t have enough money or imagination. But they have a pretty good idea of what they can get away with, and politics actually helps make good policy on many budget decisions.

If they leave a hole that voters care about, they can lose their jobs. Exercises like the one now — with the agencies telling them what would happen for this much money, and that much — are supposed to tell them where the holes are. Next year, they will decide which ones matter most to them.

This article originally appeared in The Texas Tribune at http://www.texastribune.org/2014/07/07/analysis-budget-cutters-its-not-about-revenue/.

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