The Hole Truth - TX Budget Year End $1.3 B in the Red

[sonias]

Texas Tribune 8/17/10
Documents Reveal Deficit in Texas State Budget

Comptroller Susan Combs' quiet acknowledgment that Texas will show a $1.3 billion deficit at the end of the budget year contrasts with the happy face she's put on state finances leading up to the 2010 elections. The numbers are the worst since 2003, when the Legislature responded with $10 billion in spending cuts, and increased fees, tuition and other revenue sources to balance the budget. And the deficit gives ammunition to lawmakers who want to trim spending in 2011.

Publicly, the state's chief financial officer has said there's no reason to adjust income and spending estimates to account for the effects of the recession on the Texas budget: mostly, falling tax revenue. But on Wall Street — where the bond markets require hard numbers before they'll lend money — Combs had to report the deficit that will require legislative attention, and that it will have to borrow from other state funds to meet cash-flow requirements.

The deficit came to light because of a routine borrowing exercise. Every year, the state borrows money to make up for a cash-flow gap created every autumn, when its bills arrive faster than its revenue. The state normally pays the loan back in the spring and summer, when revenues catch up. But this year, there's a dull-but-important fact hidden in that cash flow estimate: State leaders looked a year ago and determined that the "deep hole" — when the cash-flow demand peaks — would be $7.8 billion. Now, Combs has told the debt markets that the deep hole is actually $10.8 billion, or about $3 billion worse.

Next week, Texas is set to sell $7.8 billion in cash-flow notes, officially called Texas Revenue Anticipation Notes, or TRANs. (It will have to make up the remaining $3 billion by borrowing from other state funds.) The disclosure documents accompanying that borrowing contain the first public disclosure of a deficit in the current budget. Even though state leaders have already ordered agencies to trim up to $1.2 billion from their current finances, the state will come up $1.3 billion short, the disclosure documents reveal.

Nothing to see here, move along. Perry isn't worrying his pretty coiffed hair, so you shouldn't either.

:scared:

[The Philosopher]

1. Hrm

This part bothers me a lot:

Texas lawmakers are constitutionally required to balance the budget — to spend no more than the amount of money the comptroller says will be available over a two-year period. But there's nothing that says the state has to end every biennium in the black, so long as lawmakers believe it'll be in the black based on comptroller's projections when they do their budgeting.

Does that mean they can keep borrowing and never pay back, so long as the comptroller keeps saying we'll be okay? Or am I just seeing things?

Without having to dip into other state funds or borrow money we'll have to pay back later, I wonder how we'll balance the budget and keep services and fund things like GOOD education.

Maybe we should start by privatizing businesses? :shrug:

[sonias]

2. Welcome to the DU Texas forum,The Philosopher!

:hi:

Not sure what you mean by privatizing businesses. But if you mean what I think you mean - Perry and his crew have already tried that and it's actually costing the state more money than when the public sector was doing it.

For example, there has been one huge fiasco with Health and Human Services which administers the Food Stamp program in Texas. We used to run a pretty efficient and cost effective department that routinely won federal bonuses for timeliness and efficiency. The R controlled legislature decided to privatize it and screwed it up royally. In fact it was screwed up so badly, that the contract to privatize it was canceled and the state is still trying to play catch up on cleaning up the mess. Plus the Feds fined us for millions because the program is so badly run.

Here's an earlier thread on the food stamp program fine:
Texas fined $3.96 million over food stamp errors 6/28/10

Here's another example of a private contract gone bad:

AAS 8/17/10
Texas to rebid IBM's data center contract
Texas will begin looking for new companies to finish the data center consolidation work that IBM Corp. was hired to do almost four years ago, state officials said Tuesday.

Though IBM's day-to-day obligations under the $863 million contract have not changed, the state is now taking the lead on the project, said Thomas Johnson, spokesman for the state's Department of Information Resources.

"DIR has taken full control over the contract and will proceed to rebid all of the services within the contract," Johnson said.

The move probably signals the end of the seven-year contract between IBM and Texas to merge the data centers of 28 state agencies into two streamlined and secure facilities. The consolidation was supposed to be completed by December 2009 but is still only 12 percent complete.

Just saying private business isn't always the answer. :shrug:

[The Philosopher]

3. lol

I was making a poor joke just about that. That Republicans are taking such a pro-business approach to government that businesses no longer become privately funded, but publicly.

[sonias]

4. Good, glad to hear it

Oh and you are so right about private business being publicly funded - most of Perry's crony business partners take quite a bit of "contract" money to do things the state could be doing probably a whole lot cheaper.

We're toast on the budget hole - there will be many very horrible service cuts next session. I dread to see who they put on the cutting board.

:scared: