Thursday, January 20, 2011

A Texas sized deficit

These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.

Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.

How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New York’s, about as bad as California’s, but not quite up to New Jersey levels.

The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven’t been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his “tough conservative decisions.”

Oh, and at a time when there’s a full-court press on to demonize public-sector unions as the source of all our woes, Texas is nearly demon-free: less than 20 percent of public-sector workers there are covered by union contracts, compared with almost 75 percent in New York.

So what happened to the “Texas miracle” many people were talking about even a few months ago?
Read the rest here.

The above was published on January 6th 2011. We now have Texas' answer to their budget crisis.
NEW YORK (CNNMoney) -- Texas lawmakers unveiled a Spartan budget late Tuesday night that slashes $31 billion in spending to close the state's massive budget deficit. Education, Medicaid and corrections would be hit particularly hard.

House legislators were forced to rely on spending cuts to close the shortfall -- estimated at between $15 billion and $27 billion -- because Republican leaders pledged not to raise taxes. They also did not touch the state's projected $9.4 billion rainy day fund, one of the most flush in the nation.

The spending plan calls for a 13% hit to public education and a 7.6% drop in higher education support. Among the cuts, funding for pre-K Early Start programs would be slashed, and four community colleges would be closed.

Such a drastic decline in public education support could be problematic because it would drop the education budget below a level mandated by the state, and force the legislature to change the law.

Health and human services would see funding plummet by nearly a quarter, while government services would fall by almost the same percentage.

Nearly 9,300 government jobs would be eliminated and Medicaid providers would see a 10% rate reduction. Fewer residents would receive meal deliveries and services to keep them in their homes. Some 60,000 students would lose financial aid for college.

Funding for defending the poor in court would drop by 15%. And the department that supervises and supports parolees would by cut by nearly 21%.
Read the rest here.


Fr. John Whiteford said...

I have worked for the state of Texas for the last 18 years, and I can tell you exactly how it works, because it is not the first time something like this has happened. State spending will shrink down to the amount of money coming in, and then when the economy improves, it will increase when the amount of money coming in increases. These budget cuts are tough, but it is the reason why the State of Texas get's the biggest bang for the buck in comparison to any other large state in the country.

If you want the big bucks, however, working for the state of Texas is something that you should probably not consider.

Unknown said...

One should note that cutting public services is essentially a tax on the poor, just like inflation is a tax on the middle class. The option isn't raise taxes or not raise taxes. The options are:
1. Raise taxes. This hurts the rich mostly since tax hikes are usually gradiated and is generally considered biting the hand that feeds your political career.
2. Print money. This hurts the middle class whose modest savings are wiped out. The rich buy one less yacht and the poor continue to live hand-to-mouth.
3. Cut services. The rich are buying their services from the private market anyway. The middle class tighten the belt a little and consider things like private school. The poor, living hand-to-mouth, now have no place to go to actually improve their lot and the food pantry they used to patronize is now closed.

Frankly, I think its time we do all three. Our economy is going to continue to tank as long as we debate over the "one true solution." Everyone has to do their part or we might as well call it quits.

Anonymous said...

As a matter of policy, Texas is our Ireland.

Fr. John Whiteford said...

I don't agree that cutting social services is a tax. I think in many cases, the poor would be far better without it. For my reasons why see:

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