Senate Budget Plays Shell Games with Federal Stimulus

Read Bee's Op-Ed on the Stimulus in Texas Weekly

Houston Chronicle's Rick Casey on the Stimulus

The Senate Finance Committee this morning voted unanimously to approve Senate Bill 1—the appropriations bill—and bring the committee's report to the Senate floor.

The proposed budget includes $10.9 billion in funding Texas will receive under the American Reinvestment and Recovery Act (ARRA). However, Texans won't receive the full benefit of the ARRA funds, which represent federal income taxes paid by Texans coming back to our state.

Instead, the Senate Finance Committee is using about half of the ARRA funds to reduce existing general revenue appropriations, resulting in a "zero-sum game" for education, Medicaid and other core state programs. In cases where the ARRA funds can't be used to displace existing general revenue, the committee is—with a couple of notable exceptions—leaving it up to state agencies to come up with plans for how to spend their billions of dollars in new federal funds instead of relating the ARRA funding streams to policies legislators are proposing this session.

The general revenue dollars "freed-up" with ARRA funds are listed in detail in Article 12 of the committee's proposed budget. Where those freed-up dollars go is won't be easy to track, since they are unrestricted general revenue and won't have to be identified as ARRA-related.

Texas started its 2-year budget process with an expected budget shortfall and an anticipated need to tap the Rainy Day Fund. At least part of the shortfall is attributable to the unfunded property tax cuts lawmakers enacted in 2006 as part of the adoption of the new broad-based business tax.

Now, the Senate at least proposes to leave the Rainy Day Fund alone and use general revenue supplanted by the ARRA to fill the property tax-cut "hole," or "structural deficit" as budget leaders describe it.

This runs counter to the intent of the ARRA, and will put Texas farther behind than ever in core services while leaving Texas taxpayers with nothing to show for their significant ARRA investment. The point of the ARRA is to spend public money to generate private economic development that will outlast this one-time infusion of funds. Hoarding our ARRA allocation in the Rainy Day Fund is guaranteed to create no economic development or state services.

Other states are taking a much longer view of their ARRA funds, establishing public-private advisory bodies and proposing ARRA-specific legislation to get the most bang out of these one-time bucks. To date, Texas has articulated no vision whatsoever for implementing the ARRA.

What other states are NOT doing is using their ARRA funds to merely maintain business as usual, which is exactly what the Senate Finance Committee's budget envisions.

The reason so many other states are taking rational, long-term approaches to ARRA implementation is pretty obvious: they want to make sure they get the maximum return on investment of every dollar. They know this is a one-time opportunity and they don’t want to waste it. They are making a big effort to include private sector experts in their advisory bodies so they can be sure they create the greatest range of new opportunities for their residents.

Whatever we do with the ARRA funds, one thing is for sure: Texans, like all Americans, will spend decades’ worth of federal income taxes paying off the trillion-dollar deficit the stimulus package is creating. It’s enough of a stretch to imagine paying off this debt if the investment results in material improvement in our infrastructure, education systems or state services. It’s heartbreaking to contemplate making those payments in future years knowing that we got nothing but shell games and the status quo for our trouble.

Lawmakers struggle every session to meet human needs, grow our economy and protect our environment. Our ARRA funds can’t do everything everyone wants, but they can do a lot. It’s enough money to buy our school kids textbooks...restore ailing state parks… capitalize the Housing Trust Fund…bring solid infrastructure to colonias…and on and on. And, of course, it’s enough to help the Gulf Coast recover from multiple natural disasters.

Let's hope legislators take another look at all the opportunities the ARRA offers Texas and revise their approach before the budget becomes law.