Lawmakers reach agreement on state budget

Deal keeps open Austin state school and hospital, but revives plan for universities to set their own tuition rates

By Gary Susswein
AMERICAN-STATESMAN STAFF
Saturday, May 24, 2003

Legislative leaders reached an agreement in principle early Saturday on a $117 billion budget that will fill the state's massive budget hole largely through service cuts and reinforce Texas' reputation as a low-tax, low-spending state.

Negotiations between the House and Senate had been stalled for several days over the question of how deeply to cut spending on higher education, children's health insurance and several other programs. But Lt. Gov. David Dewhurst, House Speaker Tom Craddick and their lieutenants personally worked out the differences during a eight-hour meeting that lasted until nearly 1:00 AM.

During the marathon meeting, lawmakers decided not to close the Austin state school or hospital, resurrected a proposal to allow public colleges to set their own tuition and reduced benefits offered under the Children's Health Insurance Program.

"Going into a session where we were facing a $10 billion revenue shortfall, so many people were forecasting that we couldn't balance our budget and provide essential services without a tax increase," said Dewhurst. "Yet we were able to keep the people of Texas in mind and not add any more tax burden to hard working Texas families."

But as Dewhurst and his colleagues touted their own efforts, critics said the budget would devastate millions of people who rely on public education, health care and social services — and renewed their calls to overhaul the state's tax system.

"The average Texas family is going to be very unhappy over the next two years when they find out that they're going to be paying higher local taxes because the state has shifted the burden of so many services onto cities and counties, that their school districts are going to be laying off teachers and increasing class sizes and that public services throughout the state are going to deteriorate," said Dick Lavine, senior fiscal analyst for the Center for Public Policy Priorities. "Texas has never really met the needs of our citizens and we're just going to fall further behind with a budget like this."

The two-year budget for fiscal 2004 and 2005 will take effect Sept. 1. It includes about $58.6 billion in all-purpose state money, as opposed to federal aid or money that is legally dedicated to specific programs, such as the gasoline tax. It reduces overall spending in almost every area of state government.

Members of 10-member conference committee that is charged with reconciling the dueling House and Senate budget proposals spent the day Saturday finalizing many of the details so the budget can be printed and approved by the full House and Senate before lawmakers leave town on June 2.

The budget must then be signed by Gov. Rick Perry, whose staff was involved in the final negotiations.

The biggest obstacle, though, could be Comptroller Carole Keeton Strayhorn, who is expected to revise her revenue projections for the 2004-05 biennium.

Lawmakers crafted this compromise based on Strayhorn's earlier assessment that the state will have a $9.9 billion gap between what it collects and what it would need to maintain current services over the next two years. If that number changes, the budget would have to change along with it.

Strayhorn has said for several weeks that the House and Senate have not yet identified all the money they need to fund their budget. As bills that would free up money by streamlining government have stalled in the Legislature, she's hinted that she may not certify the budget.

But Congress' unexpected approval of $1.3 billion in new money for Texas this week eased concerns about the flow of money and convinced lawmakers that Strayhorn will have to certify the budget if revenue projections remain stable.

Lawmakers plan to use most of that federal money to offset cuts to Medicaid.

The budget also includes a slight increase in funding for public schools, though critics say it doesn't keep up with enrollment growth.

Some of the agreements that helped seal the budget deal include:

• Children from families that earn up to 200 percent of the federal poverty level ($36,800 annually for a family of four) will continue to qualify for the Children's Health Insurance Program but will not receive dental or mental health coverage.

The state also plans to reduce that program's rolls by about 100,000 by requiring families to re-enroll every six months and changing rules about whether to count extra income a family earns.

• The state will not close any schools for the mentally retarded or hospitals for the mentally ill but will make a recommendation on whether to close a school beginning in 2006.

• Lawmakers will not push back any payments from the final weeks of 2005 into the first weeks of 2006, except for $800 million for local school districts. The Senate had hoped to defer about $1.75 billion in payments to keep the budget balanced.

• Health workers will continue to provide home care for the same number of frail and elderly Texans but will reduce their hours up to 15 percent.

• The state will cut higher education spending by about 4 percent from the 2002-03 budget. The House had proposed cutting it deeper.

As part of that agreement, the Senate will likely revive a bill that will give colleges and universities freedom in setting their own tuitions. "It will be revived if higher education is to be funded appropriately," said Craddick.

The budget agreement suggests lawmakers probably won't have to meet in a special session this summer to solve the toughest fiscal crisis in more than a half-century. That crisis helped produce a final budget that is starkly different from some of the recent spending plans approved by the legislature.

First, this plan is almost exactly the same size as the state's budget for 2002-2003. In recent years, the budget has grown as much as 10-percent between bienniums.

"The first time in modern history we're going to be spending less general revenue than we're spending in the current biennium. And we're going to do that without a tax cut. That's just unheard of in modern Texas history," said Senate Finance Committee chairman Teel Bivins, R-Amarillo.

And it's the product of a process that Perry and lawmakers called "zero-based budgeting."

Instead of using the current budget as a guide to draw the next budget, lawmakers forced agencies to submit budget proposals that started lower than their current expenses.

But critics said lawmakers should have made history, instead, by expanding some taxes — including those on businesses and cigarettes — so Texas will no longer be ranked nearly-last in the country in per-capita social service and education spending

"Until we fix our revenue problems, every session we're going to continue to fall far behind," said Lavine. "This budget is a tremendous disappointment."

gsusswein@statesman.com; 445-3654