Statement on the Comptroller’s Revenue Estimate

There is a substantial amount of flawed information showing up in traditional media accounts, driven largely by erroneous articles last week on Business Insider and in Paul Krugman’s New York Times column. Already today, we are seeing many media outlets splashing the liberal spin of a “$27 billion budget shortfall” in Texas.  That figure is nonsense.  Please find below two items from Talmadge Heflin, Director of TPPF’s Center for Fiscal Policy and former chairman of the Texas House Appropriations Committee.  The first is his statement on the release of the revenue estimate.  The second is a blog post specifically refuting the myth of the $27 billion budget shortfall.

David Guenthner –

Texas Public Policy Foundation


Talmadge Heflin

Statement by The Honorable Talmadge Heflin, Director of the Center for Fiscal Policy and former Chairman of the Texas House Appropriations Committee:

“Now that the Comptroller has released her estimate of state revenues for the next two years, it is imperative that the Texas Legislature produce a budget that balances within existing revenue.

“This session’s budget writers must recognize that just as Texans’ family budgets have shrunk, so now must the state’s.  Now is the wrong time to increase the burden of state government on those family budgets.  Legislators must set careful priorities to ensure that taxpayers’ limited resources are spent in the most effective and responsible manner.

“While this challenge may seem daunting, I encourage incoming lawmakers to heed the lessons of 2003—when the Legislature closed a $10 billion budget shortfall without raising taxes and positioned Texas for a decade of economic dominance.

“The decisions of this legislature will determine what kind of future Texas will have.  A budget within existing revenues will keep a light burden on Texas taxpayers, encouraging large businesses and entrepreneurs to create jobs here.  However, raising taxes to expand government’s footprint would send Texas down the path of California and Ohio toward economic stagnation and fiscal bankruptcy.”

The Honorable Talmadge Heflin is Director of the Center for Fiscal Policy at the Texas Public Policy Foundation. Heflin served 11 terms in the Texas House of Representatives and chaired the House Appropriations Committee in 2003, leading the Texas Legislature’s successful efforts to close a $10 billion budget deficit without a tax increase.  His recommendations for how legislators should address Texas’ budget situation were published in the January 2nd edition of the Austin American-Statesman.

The Texas Public Policy Foundation is a non-profit free-market research institute based in Austin.

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The myth of the $27 billion shortfall

State budget writers have a challenging session in front of them, but it may not be as bad as you’ve heard.

First, the facts. According to the newly released 2012-13 Biennial Revenue Estimate, the state is expected to collect $76.5 billion over the next two years for general purpose spending. Of this total, $4.3 billion is needed to cover expenses leftover from the last budget, leaving lawmakers with roughly $72.2 billion to cover general expenses for the next two years.

Since the announcement, several media reports are citing the estimate from Comptroller Susan Combs as the basis for a $27 billion budget shortfall. However, Combs specifically stated that she could not give a shortfall estimate – she is responsible only for the revenue side of the budget equation, and that spending levels are the prerogative of the Legislature.

The $27 billion figure in certain media accounts is premised on the belief that the state should carry forward all current spending and assumptions regarding program growth. But in difficult times, taxpayers cannot continue to spend money for programs and agencies in the same fashion as previous times when more resources were available.

Additionally, policy advocates touting the $27 billion figure are simply tallying the state agencies’ Legislative Appropriations Requests. But these requests are almost never fully funded – even at the start of the budget process – because they include many unnecessary spending items that appropriators recognize and quickly weed out.

Beyond that, Combs said that her estimate of a $4.3 billion deficit in the current budget cycle did not account for the implementation of agency budget cuts requested last year by Gov. Rick Perry, Lt. Gov. David Dewhurst, and Speaker Joe Straus. Once these agreed-to cuts are implemented, that will reduce the deficit by approximately $2 billion in this budget and increase available revenue by $2 billion in 2012-13.

The most important point tracks back to Combs’ statement that spending levels are the prerogative of the Legislature. Officially, there is no shortfall until there is an introduced budget that provides a preliminary expression of the Legislature’s desired spending level. If the House leadership follows through on its stated intention to introduce a budget that fits within available revenues, there will be no shortfall.

This is not to say that the process of developing a 2012-13 state budget will be a walk in the park. But claims that Texas is $27 billion in the red are flat-out false.

– Talmadge Heflin

Center for Fiscal Policy

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