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Texas Lawmakers Will Likely Tap Rainy Day Fund

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AUSTIN (AP) - Texas lawmakers will almost certainly have to tap the Rainy Day Fund to balance the budget in 2013, but by how much depends largely on the global economy and policy decisions made in Washington, state Comptroller Susan Combs told The Associated Press.

Many lawmakers have said they did not budget enough money to cover the state’s obligations for the 2012-2013 budget cycle, but the keeper of the state’s books said in an interview Tuesday that lawmakers will need to pass what is called a supplemental bill to make ends meet at the end of the biennium.

A day earlier she forecast that Texas will earn $1.6 billion more revenue than expected during over the next two years, due to the recovering national economy. But that won’t be enough to cover the cost of Medicaid, which lawmakers deliberately underfunded by an estimated $4.8 billion.

“That is the fungus that will eat the planet … that is a national problem,” Combs said of the health insurance program for the poor and disabled.

The Republican said she supported a new law that will allow Texas to enter into interstate agreements that proponents say will reduce Medicaid costs, but that won’t save enough.

“Sales tax revenue is up 9.4 percent year-over-year, and oil and gas is up more than 70 percent, but that’s still not enough to get us out of the Medicaid hole, and that has to have a national discussion,” Combs said.

Combs said there will still be a shortfall when lawmakers meet again in 2013 and they will likely have to tap the $7.3 billion in the Rainy Day Fund.

“I think that’s probably where they will need to get some money,” she said, based on her agency’s economic projections based on current conditions. “I don’t think the Legislature will have a problem with that. The question always is, how big?”

That will depend largely on oil and gas revenue.

“We are significantly better off now than we were in (2011),” Combs said of the last budget biennium, when lawmakers spent $3.8 billion from the Rainy Day Fund to make up a shortfall.

State agencies shouldn’t see any unexpected budgets before the end of 2013, but that depends on the global economy. She said that while Texas ranks as the nation’s top exporting state, the state’s continued progress is dependent partly on how China, India and Europe respond to current economic woes.

About 35 percent of Texas exports go to Mexico and 10 percent of those exports go to Europe, which makes Texas better insulated from European problems, but the state remains subject to global economic woes.

Combs said the lagging sector in the Texas economy is single-family home construction. Texas does not have a problem with a high foreclosure rate, but banks have reacted to global financial problems by making it more difficult for average Texans to get home loans. The result is more construction of multi-family structures, which do not employ as many workers.

She said the future depends on foreign nations, including Greece, Italy and Portugal, working out their debt problems.

At home, she said lawmakers should continue to look at government spending.

“The state needs to look at all of the long-term, ongoing obligations, and by that I really mean debt, pensions and regulatory headwinds,” she said.

Combs declined to discuss her plans for higher office. She is widely believed to be interested in replacing Lt. Gov. David Dewhurst, who is the front-runner for a U.S. Senate seat.

She first served in the Texas House and later as agriculture commissioner before becoming comptroller. She has made fighting obesity and promoting good health a priority in all of those positions. In 2011, her office completed a study of the health care costs and economic losses caused by obesity.

“My concern is that we must have a fit workforce that must be going strong,” she said. “If we don’t do anything about how our kids are and the workforce, we will see about $30 billion (in annual health care costs to private employers) by 2025 if we don’t change what we’re doing.”

Combs said her office has started keeping a detailed accounting of the economic impact of federal regulations to protect endangered species and prevent air and water pollution. The goal is to know where and how to intervene to stop needless regulations that could cost Texas jobs and to be ready with a safety net for those companies affected.

Combs also ordered a statewide survey of schools that indexes efficiency by looking at funds spent versus standardized test scores. Researchers then visited the best schools to identify what she calls “smart practices.”

The best schools “are trying to compress their costs and direct dollars to the classroom, which is where I think everybody will agree, we want the dollars in the classroom,” she said.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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