He­gar: State’s bud­get look­ing ‘very dif­fi­cult’

Austin American-Statesman - - FRONT PAGE - By Peggy Fikac San An­to­nio Ex­press-News

De­spite signs of eco­nomic strength in oil prices, job num­bers and sales tax col­lec­tions, state law­mak­ers still face multi­bil­lion-dol­lar bud­get chal­lenges thanks to Mother Na­ture and their own fi­nan­cial de­ci­sions.

Law­mak­ers will have to fill a hole as big as $3 bil­lion to $4 bil­lion in the cur­rent bud­get be­fore they start look­ing at fu­ture needs, Texas Comptroller Glenn He­gar told the Se­nate Fi­nance Com­mit­tee on Tues­day, re­it­er­at­ing pre­vi­ous pro­jec­tions in ar­eas in­clud­ing Med­ic­aid.

“The num­bers are pretty clear. You’re go­ing to have a very dif­fi­cult bud­get and ap­pro­pri­a­tion process next ses­sion,” He­gar said.

Be­sides the is­sues law­mak­ers knew about when they com­pleted the cur­rent bud­get last year, they still are work­ing to get their arms around the cost of ad­dress­ing the dam­age left by Hur­ri­cane Har­vey.

“It’s go­ing to be very ex­pen­sive

for us to pay the costs. And we’re go­ing to have to deal with it next ses­sion,” said Se­nate Fi­nance Com­mit­tee Chair Jane Nel­son, R-Flower Mound. “The ex­penses that we’re fac­ing next time, and you can put Har­vey right at the top of those ex­penses, are very real.”

Hur­ri­cane Har­vey has had an ef­fect on both sides of the state ledger.

There is an eco­nomic boost re­flected in ar­eas in­clud­ing sales tax col­lec­tions due to the eco­nomic ac­tiv­ity spurred by re­build­ing dam­aged homes and re­plac­ing de­stroyed cars, He­gar said. He em­pha­sized this is seen on the state level, not in rav­aged com­mu­ni­ties or at the in­di­vid­ual level.

But there is also the need for state dol­lars to ad­dress is­sues such as schools’ loss of prop­erty value. When lo­cal school districts’ lo­cal prop­erty tax rev­enues de­crease, the state has to pick up a big­ger share of fund­ing.

The fed­eral gov­ern­ment is ex­pected to pick up the big­gest share of gov­ern­ment aid for Har­vey, but the state will be re­spon­si­ble for an amount that isn’t yet de­fined, which is caus­ing frus­tra­tion for some of­fi­cials.

“I can’t get a num­ber,” said state Sen. Lois Kolkhorst, R-Bren­ham, who said peo­ple in her area are hurt­ing and need help as they await aid.

Nel­son said that “we just aren’t there yet” with a hard num­ber for the state’s costs re­lated to Har­vey.

“We don’t know. I can tell you, it’s go­ing to be big,” she said, adding that sen­a­tors should use what in­flu­ence they have on de­ci­sion-mak­ers in Wash­ing­ton.

“Keep re­mind­ing our fed­eral gov­ern­ment how many peo­ple we have in this state who have been sig­nif­i­cantly im­pacted, are suf­fer­ing, and not to for­get us. Re­mind your friends up there,” she said.

He­gar also pre­sented pos­i­tive eco­nomic news to bud­get writ­ers, point­ing out that the state snapped back from a flat 2016 to ex­ceed the na­tion’s growth in 2017.

Texas had solid job growth, its low­est un­em­ploy­ment rate in four decades, dou­ble-digit in­creases in sales taxes when com­par­ing monthly to­tals with the same month the pre­vi­ous year and higher-than-ex­pected rev­enues from oil and nat­u­ral gas pro­duc­tion taxes.

Law­mak­ers’ only real cushion ap­pears to be the rainy day fund that re­quires a su­per­ma­jor­ity of the Leg­is­la­ture to agree to spend.

The rainy day fund is ex­pected to have $11.2 bil­lion at the end of this bud­get pe­riod, and per­haps more if sev­er­ance taxes keep com­ing in at a higher-than-ex­pected pace.

Gov. Greg Ab­bott and Lt. Gov. Dan Pa­trick have been re­luc­tant to dip into the fund for on­go­ing costs, but have said it makes sense to use it for Har­vey costs.

But Har­vey costs aren’t the only big ex­penses law­mak­ers will be fac­ing.

In the cur­rent bud­get, the Med­ic­aid short­fall alone could be as much as $2.5 bil­lion, He­gar said.

Look­ing ahead to the next bud­get, law­mak­ers are con­strained by a re­quire­ment that they set aside up to $2.5 bil­lion an­nu­ally for trans­porta­tion that other­wise could be used for gen­eral pur­poses.

They also face a $1.6 bil­lion trans­porta­tion pay­ment put off from the cur­rent bud­get to make ends meet.

An ad­di­tional $140 mil­lion is ex­pected to be trans­ferred to the high­way fund from the motor ve­hi­cle sales tax; the state will forgo $440 mil­lion in sales taxes on in­ter­net ser­vices due to a new fed­eral law; and the con­sti­tu­tion­ally guar­an­teed pre­paid tu­ition pro­gram needs $240 mil­lion.

But He­gar of­fered some po­ten­tially bright news for law­mak­ers who are watch­ing the pos­i­tive eco­nomic signs, say­ing he would look this sum­mer at whether con­di­tions war­rant a new rev­enue es­ti­mate.

De­spite the tough bud­get pic­ture, he said, “We are go­ing to be able to get through it.”

The Med­ic­aid gap alone could hit $2.5B, Comptroller Glenn He­gar told sen­a­tors.

JAY JANNER / AMER­I­CAN-STATES­MAN 2017

Texas Comptroller Glenn He­gar, seen early last year giv­ing the bi­en­nal rev­enue es­ti­mate, told state sen­a­tors Tues­day the Leg­is­la­ture will need to plug a bud­get hole of $3 bil­lion to $4 bil­lion.

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