January 10, 2005

Strayhorn Sees `Scant' $400 Million Surplus
as Perry Cheers $14 Billion Revenue Swing

By Mike Hailey
Capitol Inside Editor

With a potential primary election showdown only one year away, a glass that Comptroller Carole Keeton Strayhorn sees as half-empty is brimming at the rim if not flowing over in the eyes of Governor Rick Perry when it comes to the state of the state's financial status going into the regular session that convenes Tuesday.

But while Strayhorn declared that the official revenue estimate reflects a shortfall in leadership at the top of state government, the governor's office was celebrating what it considered to be a budget surplus of more than $6 billion in a ringing confirmation of the economic development and job growth priorities that Perry has embraced during the past two years. Both sides accused the other of playing games of political semantics in their interpretations of the data, which appears to add up to a revenue swing of almost $14 billion compared to the amount of money available two years ago before for subtracting out the funds needed to maintain current services.

Strayhorn set the parameters for the 2005 budget debate by estimating the Legislature will have a total of $130.5 billion to work with when federal funds are included and $64.7 billion to spend out of general revenue when developing an appropriations plan for the 2006-2007 biennium. That computes to $6.4 billion more in general revenue than legislators had at the start of the 2003 session when facing a $9.9 billion deficit that Strayhorn projected then.

While Strayhorn attributed the change in fortunes to an improving economy, the biggest challenge for lawmakers appeared to be trying to compare apples to apples amid the blurring maze of projections, qualifiers and semantic al interpretations of what the bottom-line numbers mean for the upcoming budget debate. For the sake of a valid comparison, the total amount of new money that Strayhorn foresees must be weighed against a $7.4 billion shortfall that she predicted two years ago before adding in the cost of maintaining current services. The deficit would have been almost $10 billion after calculating the additional funds it would take to accommodate growth in caseloads and other state services without reducing their current levels then.

That gives Perry's supporters the opportunity to declare the the state in two years has experienced a $13.8 billion turnaround in revenues that were projected two years ago compared to the total that Strayhorn estimated today before both numbers are adjusted for the amount of money that was needed to keep state programs at 2003 levels in the current budget and the amount required to keep from having to reduce services from their existing levels over the next two years.

Strayhorn's office, however, says the most meaningful comparison is to weigh the projected deficit from two years ago to what the comptroller characterized as a surplus as paltry as her estimation of the governor's leadership over the past two years. By that line of budget reasoning, the state is only $10.4 billion better off than it was on the eve of the regular session in 2003.

“Texas has just enough money to continue following Governor Perry in doing a poor job for our citizens,” Strayhorn said when telling legislators how much money they will have to spend for the next two fiscal years. “It means that we could continue to follow the governor in balancing the budget right on the backs of our school teachers and our most vulnerable Texans with billions and billions of dollars in fees, charges, and out-of-pocket expenses—and avoid hard decisions about the future. That’s the governor’s record, but that’s not what hard-working Texans want. That’s not the Texas way and it cannot continue.

“There is no shortfall when it comes to the budget,” Strayhorn added. “There is a shortfall when it comes to the governor’s leadership."

But Perry's allies said the two-year turnaround in revenues of somewhere between $10 billion and $14 billion is historic and quite possibly without precedent in any other state. They suggested that the revenue forecast will be prime fodder for the Perry to use when making his case for another $300 million for the Texas Enterprise Fund, which the governor has tapped for grants to private businesses to help lure them to Texas when considering expansion here.

Despite the improvement in the state's financial portrait and the conflicting interpretations of the new revenue estimate, legislators appear to still be short of funds they will need for a long list of spending priorities that include restoring funds for health insurance programs for children, increasing the amount of money spent on protective services for children and the high-dollar overhaul of the public school finance system that legislators plan to undertake.