DALLAS — Top Texas leaders have asked state agencies to cut their fiscal 2011 budgets by 2.5% due to lower-than-expected revenue during the first year of the state’s current two-year budget cycle.
The proposed cuts are in addition to 5% cuts sought earlier this year and a potential additional 10% reduction in state spending, or some $3 billion a year, in fiscal 2012 and 2013.
The letter from Gov. Rick Perry, Lieut. Gov. David Dewhurst, and House Speaker Joe Strauss, R-San Antonio, was sent to state agencies, appellate court chief justices, higher education officials, and legislative agency directors. It told them to find savings of 2.5% of their original general revenue and general-revenue dedicated appropriations for the remainder of fiscal 2011.
“Reduced spending in the current fiscal year puts state government in a better position to prepare for the budget reductions that will be necessary to balance the budget for the 2012-2013 biennium,” the leaders said in the letter, which was released Tuesday. “And every dollar we save in fiscal year 2011 will alleviate the level of reductions necessary for the upcoming biennium.”
In their letter, Strauss, Perry and Dewhurst said the spending cuts are necessary because total state revenue in fiscal 2010 were $2 billion below the estimate.
“The sales tax has performed well in the first two months of fiscal year 2011 — more than 6% growth compared to 2010 — but we still anticipate insufficient revenue to cover general revenue spending needs in the current biennium,” they wrote.
The sales tax accounts for 40% of Texas general fund revenue. New taxes were again ruled out as a solution to the revenue shortfall.
“Identifying these savings builds on our ongoing call to keep government spending in check so that we can balance our state budget without raising taxes and continue to attract businesses that create jobs for Texans,” the letter said.
The earlier 5% reduction, which was reduced to 1.5%, exempted state aid to local school districts and spending by the state prison system from budget cuts. However, the officials said agencies should re-examine spending in the previously spared budgets.
The cuts enacted in spring 2010 reduced expenditures by $1.2 billion, with 40% of the savings coming from the higher education budget.
Perry has estimated the size of the revenue shortfall over the next two fiscal years at $10 billion, although legislative economists said the budget hole might be as deep as $25 billion.
State Comptroller Susan Combs will present the latest revenue estimates when lawmakers return to Austin Jan. 11 to develop the next biennial budget.
Texas operates under a two-year budget cycle. The current two-year general fund budget, which will end Aug. 31, 2011, totals $86 billion. The total budget is more than $182 billion.
If all the proposed cuts are enacted by the incoming 86th Legislature in a supplemental appropriations bill that amends spending over the remainder of fiscal 2011, officials expect to save $500 million to $750 million.
Rep. Jim Pitts, R-Waxahachie, chairman of the House Appropriation Committee, said the proposed reduction of 10% in spending over the next two years would mean the loss of almost 10,000 state jobs, the elimination of some state agencies, and a 80% budget cut for others.
Combs said Wednesday the state could save $558 million a year by raising the maximum elementary classroom size to 25 students from 22, where it has been for 25 years. Aid to local education accounts for 40% of the state budget.
“Many school officials believe the 22-to-1 limit interferes with their ability to staff campuses cost-effectively, asserting that classes with up to 25 students can operate without any loss of instructional effectiveness,” the comptroller said in a report on school spending and student achievement.
Superintendent Michael Hinojosa of the Dallas Independent School District said he expects Texas to cut public school funding by as much as $4 billion over the next two years.
If that happens, Hinojosa said, the district could see its state aid reduced by between $132 million to $67 million a year.