Rick Perry "balanced" Texas' budget with gimmicks

State Budget Solutions | by Olivia Leonard | November 17, 2011

Texas Gov. Rick Perry has based his presidential bid upon a platform of fiscal responsibility that includes his "clear goal of balancing the budget by 2020," supporting this platform by pointing to Texas's reputation of fiscal health and claiming credit for six balanced budgets during his stint as governor. Unfortunately, as with many "balanced budget" claims, this one is questionable. Texas's budget, while appearing balanced on the surface, is a product of federal stimulus funds and budget gimmicks that included risky gambles with future funds, delayed payments, and underfunded programs; essentially, a convenient kicking of the budgetary can down the road until after the 2012 elections.

The National Conference of State Legislatures reported that Perry's Texas collected more stimulus funds in fiscal year 2010 than did any other state.  Texas relied on the $6 billion it received from the American Recovery and Reinvestment Act to close almost 97% of its budget shortfall at the end of fiscal year 2010. While Perry publicly protested the Recovery Act in a Feb. 18, 2009 blog post, he requested the $6 billion in federal funds on the very same day. Without that federal money, Texas would have been forced to dip into its frequently-touted Rainy Day Fund--the $6.5 billion that remains of the $9.5 billion in savings that Perry has frequently used as an example of Texas's fiscal health--to address the shortfall. Now that stimulus funds are unavailable, the Rainy Day Fund is both the first line of defense and, unfortunately, essentially empty. Bill Hammond, president of the Texas Association of Business, grimly referenced the Rainy Day Fund when he commented, "effectively, they've used it...they just aren't going to fess up until January of 2013."

How did Texas get into this deep of a financial hole when its governor and legislature boast of a history of balanced budgets? The recent list of "disingenuous, money-shifting shell games," as Perry himself called them during his 2006 campaign, is painfully long. In one accounting game, Texas delayed a $2.3 billion payment to its public schools by one day, shifting the bill from this year's budget onto the next. Nor did the education fund juggling end there; the new budget operates under a strange assumption of no growth in the number of students enrolling in Texas's public schools, despite Texas's swift population increase and expectations that more than 160,000 new students will enroll over the next two years. Not only did the Texas legislature and governor delay payments until the next fiscal calendar, they also arranged to collect more than $700 million in taxes (including the sales taxes from large Texas retailers) ahead of schedule--taking that money out of the budget for fiscal year 2013.

In order to further create the image of a balanced budget, Texas Republicans "came up" with another theoretical $800 million when drafting this year's budget by instructing the Legislative Budget Board to predict a faster increase in property values (and their accompanying taxes).  Additionally, the lawmakers intentionally underfunded Texas's Medicaid program by nearly $5 billion, a dangerous gamble based on a tenuous hope that the state economy might provide additional revenue by taking a drastic turn for the better. If that hope proves unfounded, the state will be forced to fill the gap with either the dregs of the Rainy Day Fund or further state debt. Increasing debt is nothing new for Gov. Perry, who supported a constitutional amendment that allowed the Texas Department of Transportation to borrow money to pay for road projects--contributing nearly $12 billion to the Texas debt that more than doubled under Gov. Perry from 2001 to 2009. All these budget troubles are in addition to the $8 billion structural deficit that plagues Texas biannually--the result of a gamble by the governor that transformed the state's business tax--which was not addressed in the supposedly "balanced" budget.

The line-by-line aside, a quick look at State Budget Solutions' own state debt research paints an even darker picture of the Texas that Rick Perry describes as fiscally healthy. This ranking, which presents the complete debt story by taking into account each state's unfunded pension liabilities and other public obligations, puts Texas at the very bottom when it comes to state debt: in 44th place nationwide for its total budget shortfall and in 47th place when it comes to outstanding debt. Texas' debt per-capita ranking is also below average, coming in at 29th place. Clearly, Texas is a far cry from the pillar of fiscal responsibility described by Gov. Perry.

Rick Perry and his legislature are neither the first nor the last to present the illusion of a "balanced budget" with accounting gimmicks. Perry's vocal opposition to such "shell games" and condemnation of dependence on federal bailouts, however, make his own reliance on federal money and budget dishonesty that much more unacceptable.