Facing huge budget shortfalls for the coming fiscal year, states must decide whether to rely exclusively on spending cuts or pursue a balanced approach that also includes raising new revenue. Look no further than Texas to see the consequences of a cuts-only approach.
The Lone Star State faces a nearly $23 billion shortfall for the two-year budget period that begins September 1. At 26 percent of the state’s 2011 budget, this gap is one of the country’s largest.
The Texas Senate released a proposal last week that, like the budget plan that the state House of Representatives released last month, almost entirely avoids raising new revenue. It ignores the Texas-sized reserve fund of more than $6 billion—just about the biggest such fund in the country. The Senate proposal avoids many of the much deeper cuts that the House proposed by using various budget adjustments, such as deferring a payment to schools for a month to move it to the next budget cycle. Still, the Senate plan would damage Texas’ long-term economic potential and hit hard at families and communities still struggling in a difficult job market. Among other things, the proposal would:
As damaging as the Senate’s proposed cuts would be, they are dwarfed by the cuts in the House plan. For example, the House plan funds K-12 education at 18 percent below the minimum standard – twice as deep a cut as the Senate plan. Because the two chambers must negotiate a final budget, the cuts may well be harsher than the Senate has proposed.
The Texas budget debate revolves around painful choices that rely almost exclusively on spending cuts to core services. Instead, legislators should have pursued a balanced approach that includes raising additional revenue and taking advantage of the state’s large reserve fund.