Senator Ellis Press Release

For Immediate Release
May 20, 2011
Contact: Jeremy Warren, 512-463-0113

Ellis: Texas Creating Perpetual Deficit Machine

Structural deficit, off-limits Rainy Day Fund precedent and outright dishonesty imperil Texas' future

(Austin, Texas)—Senator Rodney Ellis (D-Houston) today said the budget solution being crafted between the House and Senate will create perpetual future deficits which will force more cuts and more pain next session and beyond.

Ellis said the political decision to not use any of the remaining $6.6 billion Rainy Day Fund for the current budget, the failure to address Texas' structural deficit and over-reliance on accounting tricks, payment deferrals and outright dishonesty -- such as counting not federal Medicaid waivers which are not likely to be granted -- will lead to another massive deficit in 2013 and provide fewer tools to address it.

"Those in charge are creating a perpetual massive deficit machine, which will force future legislatures to pay the hot checks written by this one," said Ellis. "It is Enron accounting writ large and will force more deep cuts next session and keep us from investing in the future."

According to reports on budget negotiations, House and Senate budget leaders will push $4.8 billion in Medicaid spending to the next budget, count money from federal Medicaid waivers, and defer nearly $2 billion in payments to Texas schools by a month, which extends the costs into the 2014-15 budget cycle. Meanwhile, with HB 400 and SB 22 in peril, school finance formulas would remain unchanged; if so, education funds would be prorated and the state would not pay schools everything they are owed this cycle, adding $5 to $6 billion to the deficit for 2014-15.

In addition, the legislature has done nothing to address the structural deficit resulting from how the legislature paid for property tax cuts during the 2006 school finance debate. The business, or "margins tax," simply did not raise enough revenue to offset property tax cuts and, according to the Texas Comptroller of Public accounts, will lead to a $10 billion shortfall every two years if we do not fix the tax.

"We have set the precedent that the Rainy Day Fund cannot be used even under the most dire fiscal circumstances," said Ellis. "We are pretending to balance the budget with money we will never get from the federal government and by passing the buck down to local governments, or just by kicking the can down the road with deferrals. It is dishonest, immoral and Texas families will pay the price."

Ellis linked the de facto budget deficit regime to HCR 18, which calls for a federal balanced budget amendment and passed the Senate yesterday.

"It is ironic that the same week this legislature lectured the federal government on deficit spending, we are ensuring Texas carries deficits well into the future," said Ellis. "Politics is full of hypocrisy, but when it will lead to more cuts to schools, more cuts to health insurance, more cuts to nursing homes, more cuts to the environment and to virtually every program important Texas families, we're entering a whole new level of dishonesty. We certainly shouldn't pat ourselves on the back and say 'we did the best we could', because we didn't and, frankly, we didn't even try."

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