GOP split on bud­get plan to use re­serves

Hard-line con­ser­va­tives op­pose tak­ing $1.4B from ‘rainy day fund.’

Austin American-Statesman - - FRONT PAGE - By Sean Collins Walsh scwalsh@states­man.com

Set­ting up a show­down among GOP fac­tions, the top bud­get writer in the Texas House filed a bill Fri­day to plug bud­get holes by tak­ing $1.4 bil­lion from the “rainy day fund.”

Hard-line con­ser­va­tives adamantly op­pose tap­ping the $10 bil­lion re­serve fund.

But House Ap­pro­pri­a­tions Com­mit­tee Chair­man John Zer­was, R-Rich­mond, said it made sense, in a dif­fi­cult econ­omy, to tap a fund that is pro­jected to grow to about $12 bil­lion by the end of the next bud­get cy­cle and al­ready is the largest of its kind in the na­tion.

“This is a rough bud­get ses­sion. We need to look at all the things that are avail­able to us to get our bud­get to a rea­son­able place, and part of that is us­ing some rainy day money,” Zer­was said.

House Bill 2, Zer­was’ at­tempt to fill gaps in the cur­rent twoyear bud­get, would add:

$930.7 mil­lion to cover a short­fall in the state’s con­tri­bu­tion to the fed­eral Med­i­caid pro­gram.

$188.6 mil­lion for state hos­pi­tals and sup­ported liv­ing cen­ters.

$101.7 mil­lion for pay raises and new hires at the scan­dal-plagued Child Pro­tec­tive Ser­vices.

$47 mil­lion for the fos­ter care sys­tem.

$80 mil­lion for in­mate health care in state pris­ons.

$21.5 mil­lion to par­tially undo con­tro­ver­sial cuts to the rates paid by Med­i­caid to phys­i­cal, speech and oc­cu­pa­tional ther­a­pists.

House Speaker Joe Straus called the bill “a re­spon­si­ble ap­proach that com­bines spend­ing re­duc-

tions with a mod­est with­drawal from the rainy day fund.”

“This is a bet­ter op­tion than leav­ing $12 bil­lion sit­ting in the bank while mak­ing deep cuts to higher education and sig­nif­i­cantly in­creas­ing health care pre­mi­ums on re­tired teach­ers,” Straus said in a state­ment.

Hours after Zer­was filed HB 2, the newly formed Texas Free­dom Cau­cus of some of the most con­ser­va­tive House mem­bers voiced its op­po­si­tion.

“The Texas Free­dom Cau­cus shares the sen­ti­ment that we can take care of the state’s busi­ness with­out tap­ping the rainy day fund, and that in­cludes the sup­ple­men­tal ap­pro­pri­a­tions bill,” said state Rep. Matt Schae­fer, a Tyler Repub­li­can who chairs the cau­cus.

While Straus, R-San An­to­nio, likely has the votes to pass the sup­ple­men­tal bud­get out of his cham­ber, it faces a less cer­tain fu­ture in the Se­nate, which is led by Lt. Gov. Dan Pa­trick.

Pa­trick, who didn’t re­spond to a re­quest for com­ment, has pre­vi­ously crit­i­cized House bud­get plans and said the rainy day fund should only be tapped for one-time ex­pen­di­tures or nat­u­ral dis­as­ters. A key ques­tion will be whether Pa­trick will re­gard the sup­ple­men­tal mea­sure as a one-time ex­pen­di­ture.

Se­nate Finance Com­mit­tee Chair­woman Jane Nel­son, R-Flower Mound, said she will work with the House “to ad­dress our sup­ple­men­tal needs.”

“Se­nate work groups are meet­ing around the clock to iden­tify op­por­tu­ni­ties for sav­ings,” Nel­son said. “We will look at other op­tions to bal­ance this bud­get once that ef­fort is com­plete.”

The rainy day fund, cre­ated in 1987 to help the state weather eco­nomic down­turns, is funded pri­mar­ily by oil and gas pro­duc­tion taxes. Zer­was said he be­lieves his use of it in HB 2 will pass muster with con­ser­va­tive law­mak­ers.

“Most of the things in there would qual­ify as one-time ex­penses, or they’re just sim­ply things that we just ab­so­lutely need to do,” he said.

The sup­ple­men­tal bud­get, which ap­plies to the bud­get cy­cle that ends in Au­gust, will be ne­go­ti­ated along­side the state bud­get for 2018 and 2019, which might also in­volve a fight over the rainy day fund. State cof­fers are tighter than they were in 2015 be­cause of fis­cal con­straints adopted in re­cent leg­isla­tive ses­sions and low oil and gas prices that ham­per tax col­lec­tions.

Straus’ ini­tial pro­posal for the next bud­get, House Bill 1, spends $221.3 bil­lion over­all, in­clud­ing state and fed­eral funds, while Nel­son’s Se­nate Bill 1 spends $7.9 bil­lion less.

After fac­tor­ing in pop­u­la­tion growth and in­fla­tion, the Se­nate plan would amount to a 7.9 per­cent cut in to­tal spend­ing com­pared with the cur­rent bud­get, ac­cord­ing to the Leg­isla­tive Bud­get Board. The House plan would be a 5.6 per­cent cut in spend­ing.

In state spend­ing alone, the Straus plan ex­ceeds by about $4 bil­lion the amount of money that Comp­trol­ler Glenn He­gar es­ti­mates the state will have to spend next year. Be­cause tax in­creases are a non­starter with Repub­li­cans who run the Leg­is­la­ture, the dif­fer­ence would likely have to be made up by tap­ping the rainy day fund.

The House and Se­nate are unusu­ally far apart in their ini­tial pro­pos­als for the state bud­get, which is the only bill the Texas Con­sti­tu­tion re­quires law­mak­ers to pass. If they fail to reach an agree­ment by the end of May, Gov. Greg Ab­bott will be forced to call a spe­cial ses­sion on the bud­get.

Zer­was’ pro­posed sup­ple­men­tal bud­get fo­cuses on pay­ments the state is re­quired to make and on pro­grams that many law­mak­ers have said need a boost.

The big­gest ex­pense, cov­er­ing the Med­i­caid short­fall, has be­come a rou­tine pay­ment be­cause the GOP-con­trolled Leg­is­la­ture tra­di­tion­ally un­der­funds the pro­gram in its ini­tial spend­ing plans. Fail­ure to pay up on the back end would re­sult in the state de­fault­ing on the pro­gram, risk­ing le­gal chal­lenges and bil­lions in fed­eral fund­ing.

The money for pro­grams like CPS and the fos­ter care sys­tem comes after in­ves­ti­ga­tions have shown that the state is fail­ing to meet its goals for pro­tect­ing vul­ner­a­ble chil­dren. Ab­bott, Pa­trick and Straus in De­cem­ber agreed to a $150 mil­lion emer­gency pack­age that will give $12,000 raises to CPS case­work­ers and pay for 829 new hires.

Zer­was’ pro­posal to par­tially undo the ther­a­pist rate cuts law­mak­ers adopted in 2015 comes after many providers said they no longer would be able to pro­vide those ser­vices at the new rates. HB 2’s $21.5 mil­lion ap­pro­pri­a­tion, along with $29.8 mil­lion in fed­eral match­ing funds, re­stores only a frac­tion of the es­ti­mated $350 mil­lion in state and fed­eral spend­ing cut from the pro­gram last ses­sion.

Other pro­vi­sions in the sup­ple­men­tal bud­get, such as $80 mil­lion for in­mate health care, pay for cost over­runs in those pro­grams.

State cof­fers are tighter than they were in 2015 be­cause of fis­cal con­straints adopted in re­cent leg­isla­tive ses­sions and low oil and gas prices that ham­per tax col­lec­tions.

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