DALLAS — Texas lawmakers will be facing a revenue shortfall of at least $11 billion when they develop the next two-year budget in 2011.
John O’Brien, director of the Legislative Budget Board, told the House Appropriations Committee on Monday that the $11 billion projection is a conservative estimate — the shortfall could be as much as $15 billion.
O’Brien said his estimate was based on the state’s current two-year budget of $87 billion, which was financed with a revenue estimate of $75 billion, $6.4 billion of federal stimulus funds, and the deferral of some costs.
The projection assumes no increase in spending in the next budget and no increase in revenue over the current estimate of $75 billion.
“The $11 billion is a low estimate,” O’Brien said.
“If we don’t make the revenues projected for this biennium, that would put us deeper in the hole,” he said. “If revenues are $74 billion instead of $75 billion, you add another $1 billion to the shortfall. That would be $12 billion, and I can see where some people get to $15 billion.”
The state’s rainy-day fund currently totals $7.6 billion, according to O’Brien, and is expected to be $8.2 billion when the next budget is written.
“The bottom line here is that this estimate for fiscal 2012 and 2013 is short by $11 billion,” he said. “The deficit is larger than the rainy-day fund.”
Part of the problem is that property-tax valuations are not keeping up with public school enrollment, O’Brien said. Texas had enjoyed valuation increases of more than 10% for several years, but only rose 1.3% in fiscal 2009.
State agencies have proposed spending cuts of $1.7 billion over the next 18 months in response to Gov. Rick Perry’s request for a 5% reduction in agency budgets.
The Texas Legislature meets for 140 days every two years. Lawmakers will convene in early 2011 to write the budget for fiscal years 2012 and 2013.
John Heleman, chief revenue estimator for the state comptroller, told the committee the Texas economy is showing signs of a slow recovery.
The state has added 37,000 jobs in the last five months, he said. Sales tax revenues continue to lag collections in 2009, but things are not going bad as fast as they were.
“Preliminary figures for February show an 8.8% decline from February 2009,” Heleman said. “That’s better than the 14% decline we saw in January. One month certainly doesn’t make a trend, but it is encouraging to see that we are beginning to move in the right direction.”
Sales tax revenue for the first five months of fiscal 2010 was 13.1% below the same period in 2009, he said.
Thomas Suehs, executive director of the Department of Health and Human Services, said his agency will seek a supplemental appropriation in the current budget of $1.5 billion due to increased enrollment in the Medicaid system.
Suehs said officials had expected a 3.4% increase in Medicaid patients in fiscal 2010, but enrollments are up 11%.