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In Downturn; Candidates Offer Few Specifics on Recovery

Thursday, Oct 14, 2010  |  Updated 1:54 PM CDT
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In Downturn; Candidates Offer Few Specifics on Recovery

Gov. Rick Perry and former Houston mayor Bill White.

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Texas has been hailed as a lone bright star in an otherwise dreadful economy, but in a few months state lawmakers will finally come face to face with the fiscal bloodbath that has spilled over the rest of the nation.

While a massive state budget shortfall will largely define the next governor's term, neither of the major candidates have laid out detailed plans to get the state through the historic financial crisis.

Democrat Bill White and Republican Gov. Rick Perry both vow to veto any proposed increase in the sales tax, the state's largest source of revenue, but they offered sharply different, yet unspecified visions about how to close the funding gap in exclusive interviews with The Associated Press.

"It's absolutely the elephant in the room," said University of Texas political scientist Jim Henson."Nobody can realistically declare any kind of initiative because there's no money to do anything with and nobody can realistically talk about doing anything to get any new money."

The state budget shortfall, which some estimates have pegged as high as $18 billion for the next two-year cycle, will be the driving force behind almost every decision the Legislature makes when it convenes in January. From state parks and highways to health care programs for the poor and disabled, state agencies are bracing for the hatchet to fall.

Perry, looking for his third term, has touted his economic development initiatives as the engine that has helped Texas weather the recession better than other states. But White says irresponsible policies and spending under Perry have led to the massive shortfall.

Each man gives different explanations for refusing to provide detailed plans before the Nov. 2 election.

Perry says he recognizes the severity of the shortfall but says he wants to see the official estimate of incoming revenues, expected in January, before discussing solutions.

"I'm not Pollyanna. We're not sitting around saying we don't have to worry about this. Sure, we're working on it," Perry said.

Perry did offer one promise to voters focusing on the budget: "I'm going to balance the budget without raising their taxes."

White says he can't lay out detailed plans now because he plans on forging a common vision with other legislative leaders. He says he doesn't want to put "preconditions" on those negotiations by staking out hard positions during his campaign.

"I'm not being coy," White said. "If I want to be the leader of this state, I can't come and say that I'm going to deal with the lieutenant governor, speaker of the House ... with all these preconditions. That's not the way I was as mayor (of Houston) and that's not the way I'll be as governor.

"It's going to have to be a team effort."

So far, the budget shortfall hasn't been showing up as a top issue for Texas voters, said Henson, who does public opinion polling.

"Ideally (the candidates) should have better ideas," he said. "It's a complicated issue to talk about in a campaign environment where most of what happens takes place on stump speeches and TV spots."

Both say education and public safety are spending priorities, though neither believe those areas should be exempt from cuts. Perry also lists spending on the "safety net for health and human services" -- like Medicaid and health insurance for poor children -- as a budget priority.

Perry says there isn't much waste in the state budget. White says he's certain there is and vows to find it.

Earlier this year, Perry, along with Lt. Gov. David Dewhurst and House Speaker Joe Straus, asked state agencies to cut their current budgets by 5 percent and submit proposals for 10 percent more over the next two-year budget cycle -- a move White called "Soviet-style" budgeting.

So far, those proposals have included a slash of about 25 percent in monthly welfare payments to extremely poor households, layoffs of 7,200 state prison system employees and a cut in the number of students who are eligible for college financial aid.

But Perry has a message for those Texans who would be affected by the proposed cuts he sought.

"Quit reading every story that says, 'Here's where the cuts are going to be' and to rely upon the Texas Legislature to make the appropriate decisions at the appropriate time," Perry said. "The bottom line is these are proposals, but are they where we're going to make the cuts? No, they're not."

White, meanwhile, has taken the posture of the businessman he is, talking about renegotiating vendor contracts, containing employee benefits and selling the state's "surplus assets." White didn't have examples of contracts that could be renegotiated for savings or unused state land that could be sold for one-time cash infusions.

"I would have started this process, as I did in the city of Houston, back after the collapse of Lehman (Brothers), in September 2008, when it was clear that we were going into a global recession," White said, criticizing Perry for waiting until Texas was in the throes of the recession before seeking cuts.

The shortfall, which won't be known with certainty until January, is the gap in available revenue and the level of state spending required to maintain state services at current levels. Because of the economic recession, state tax receipts have been down, but the state is also on the hook to fill a hole of about $11 billion left by federal stimulus money and other state savings that were used last year but are no longer available. Added cost pressures from increased enrollment in public schools and health care programs, decreased property values and spikes in health care costs all contribute to projections of an $18 billion hole.

"Frankly, we've been working since last legislative session (in 2009) on the preparation," Perry said. "We saw what was coming in '09. Everyone that was paying much attention at all was greatly concerned about the national economy."

Because the Texas Constitution tightly restricts government borrowing, lawmakers will have to make up for the shortfall by cutting government programs and services, raising taxes and fees or other minor methods.

When the comptroller makes her official revenue estimate "the switch gets flipped and then we start going through the actual process of saying here's how much money we're going to have and the Legislature will be in town ... we will start negotiations and talk about priorities," Perry said. "But all of the options are on the table except for raising taxes and for me, that's not going to be on the table."

Asked about increasing taxes to help close the gap, White said he'd be willing to look at closing "special-interest" tax loopholes, but doesn't advocate increasing the sales tax rate or expanding it to include services.

The state also can use money in the Rainy Day Fund, estimated to have an $8.2 billion balance by next year. But using that money requires a two-thirds vote of the Legislature, a hurdle that at times has proven too high.

Both Perry and White said some money needs to be kept in the Rainy Day Fund for the future.

"The funding of state government is an ongoing process," Perry said. "This isn't something that January shows up we get together ... (pass the budget, then) wipe our hands and prop our feet up on the desk and whistle 'Thank God We're Country Boys' and wait for another 14 months to roll on and then do it again."

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