Texans historically are misers when it comes to state spending. They applauded Governor William “Pass the Biscuits Pappy” Lee O’Daniel in 1939 when he vetoed funding to build new state hospitals and asylums for the insane and slashed the public safety budget in half, a cut so deep that Texas Rangers had to borrow bullets from the highway patrol. Little wonder that the past decade of budget and tax cuts have caused scarce consternation among the populace.
A Republican legislator once told me he opposed tax increases in times of revenue shortfalls because once the tax increase was in place it did not go away, even when the economy rebounded to restore funding for state programs. That certainly was the approach in the 2011 session as lawmakers dealt with a major shortfall, but now that times are flush again, Governor Greg Abbott has asked state agencies to cut their budgets by 10 percent while Lieutenant Governor Dan Patrick and the Senate are pressing for public school property tax cuts that will have to be made up from state funding.
What has been established since 2003 is a cycle of ratcheting state government down in staffing and services. Small-government conservatives are sure to welcome, but it also has set up a cycle of penny-wise, pound-foolish governing. The cost of this frugality may run into the billions of dollars.
If you look at the state budget just in terms of dollars, the budget looks like it has grown tremendously. From 1994 through the 2015 fiscal year that ends August 31, the combined growth of state and federal spending has been 175.4 percent, and the state tax dollar portion of that has grown by 137.7 percent. But when population growth and inflation are factored in, total state spending in that period grew 18.8 percent, and the expenditure of state tax dollars increased a meager 2.5 percent. When adjusted, state tax spending only had a major increase in 2008-09 when money was poured into a public school property tax cut; otherwise, state spending was reduced in 2003, 2009 and 2011. Check out Pages 13 and 14 of the state Fiscal Size-up for more details. The only way the state has kept growth that small is by strangling state government.
This point was clearly brought home recently when Ann Bishop, the executive director of the state Employees Retirement System of Texas, explained to the House Pensions Committee that her agency is foreseeing a major shortfall for two simple reasons: The Legislature had exceeded its constitutional minimum contribution to the state retirement plan only once in 20 years, and reductions in the state workforce had meant there were fewer new employees contributing to the plan as older employees retired and drawing money out of the plan. The result is a $7.5 billion unfunded liability in the state employee retirement that will grow by $500 million a year if a plan is not put into place to erase that shortfall.
Over the past weekend, Jay Root and Neena Satija of the Texas Tribune explored infrastructure deterioration caused by budget cuts. Deferred maintenance alone could cost the state $1 billion.
Dilapidated parks. Walls patched with toilet paper. Rodent urine leaking into the ceiling at a state school for deaf and disabled kids. Decades-old computer and technology systems. A backlog of pipeline safety inspections. Consumers getting “screwed” at the gas pump for lack of fraud investigators.
There also are financial pitfalls that this decade-long cycle of cuts has set for future Legislatures.
For instance, the Texas Tomorrow Fund, now known as the Texas Guaranteed Tuition Plan, was set up in the 1990s, charging a flat fee based on a child’s age when purchased to pay for a college education. (My parents bought a plan for each of my children, and it has been a lifesaver in keeping us from having to go into debt to pay for college.) All told, there were 158,442 Texas children who had plans purchased for their educations. Of the plans where the information was collected, more than 80 percent were sold to families with incomes of less than $100,000 a year.
But the plan was closed to new purchases in 2003 when the Legislature, faced with a $5 billion revenue shortfall, decided to deregulate college tuition rather than raise taxes. The Texas Higher Education Coordinating Board reported that tuition between 2003 and 2009 rose 72 percent statewide; however, as some individual campuses it was even higher: University of Texas at Arlington, 133 percent; U.T. Austin, 119 percent.
The impact of tuition increases on parents and students was devastating. For the tuition plan, the long-term health was destroyed. Its structure was based on new sales, investment returns and predictable tuition rates. Without the latter, the plan closed to new membership. As of last August, the plan had an unfunded liability of $568 million and will run out of cash in 2019. Because the plan payment is guaranteed in the state Constitution, the Legislature will have to make up that shortfall in the state budget. At present, the plan is paying $154 million a year to the state’s colleges and universities. While that is a small amount from a total high education budget running into billions of dollars, it would have been 20 percent of the increased spending on higher education in the last budget cycle.
Former Governor Rick Perry once made a compelling argument to me that the reason he kept government spending in check, with low taxes and less regulation was to grow a state economy that would provide the state with additional money to pay for services through increased revenues. In other words, a strong economic tide floats the state government boat. There also are anti-government conservatives who apparently want to cut state government no matter what. Few Texans would advocate for a welfare state or cradle to grave government; however, even a government of conservative spending requires some fiscal responsibility.
Anti-tax crusader Grover Norquist often is quoted as saying: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” When you drown something in a bathtub, though, you still have to deal with the dead body.