House Appropriations Has Questions for Combs

 

8:00 – House Appropriations Committee video stream is on. It's early!

 

8:11 – Rep. Pitts, Chair of the House Appropriations Committee, kicks things off with an opening statement. 

 

 

8:13 – Chairman Pitts says: “As a body, we’re trying to figure out […] what our priorities as a state should be.” Clearly, the budget exceeded the Comptroller’s estimate, and “our budget is substantially below the constitutional threshold of being balanced.” Pitts lays out some “limited options” for the committee.

"None of these options come without consequences." Chairman Pitts closes by saying that the committee must weigh whether further reductions are practical and reasonable.

 

8:18 - Susan Combs, Texas Comptroller of Public Acounts, along with staff members John Heleman, Chief Revenue Estimator, and Suzy Whittenton, Director of Fiscal Management.

Combs says, “I'm a small business owner, and I have never emptied my bank account because I never know when the next drought will come."

 

8:20 – Combs states that she cannot certify new appropriations until the deficit is addressed, then begins a discussion of past usage of Rainy Day Fund. 

 

8:24 - Rep. Turner has questions about the 2003 use of the Rainy Day Fund. He says that at that time, we were under a $10 billion shortfall and we used $1.2 billion to fund Health and Human Services (Medicaid), Teacher Retirement System (TRS), and the Enterprise Fund. He remembers using the funds to address the current shortfall, as well as the shortfall that we anticipated in the next biennium.

 

8:29 - Rep. Schwertner questions the rules on Medicaid flexibility and whether things were different in 2003. Will federal requirements about health and human services in future remove some of the flexibility we had in the past?

 

 

8:30 - Combs does not have glowing things to say about the next biennium - “2013 will probably not be a wonderful session either.”

 

8:31 - Rep. Villareal asks questions about the recent S&P report that encourages state budgets to use other sources of revenue to fill the growing funding gap, and emphasizes using structural solutions within the budget. Rep. Villareal has questions about the structural deficit.

 

8:32 - Heleman explains the makeup of the franchise tax and the ensuing structural deficit.

 

8:37 - Rep. Villareal says, “If you accept that the budget deficit is $27 billion, the franchise tax structural deficit accounts for 40% of our shortfall.”

 

8:39 - Rep. Otto asks if it is wise to depend on prosperous times to replenish the Rainy Day Fund again, and says that he doesn’t foresee the recovery happening at the rate it did in the past. Therefore, he is concerned about the risk of using all of the Rainy Day Fund.

 

8:43 - Rep. Turner insists that this budgetary shortfall is much much greater than it was in 2003. Rep. Turner says, “I wish this was 2003! If anyone is trying to say that [our current situation is] similar, they are not facing reality.” The representative reminds the committee that the Enterprise Fund and the Emerging Technology Fund were both boosted with Rainy Day Fund monies, and asks lawmakers to consider whether they are making the fiscal situation better, or worse. “At the end of the day, as appropriators, we need to know what we are buying. What are we getting for it?”

 

 

8:48 - Rep. Aycock asks about deferrals for school districts. 8:49 - Combs says, “We won’t get $4.3 billion with only cuts.”

 

8:51 - Discussion begins about how the presence or absence of a Rainy Day Fund affects Tax Revenue Anticipation Notes (TRANs) in August. TRANs are the short-term loan notes that the state uses to manage its cash flow between the Sept. 1 start of the fiscal year and the arrival of tax revenues later in the year. Established - Combs is authorized to tap into the Rainy Day Fund to pay off the TRAN.

 

8:57 - Heleman says that the whole country is going through this right now, “we’re no different” 8:57 - Rep. Aycock asks Combs, what she would do if she was in their place. Combs - “You’ve gotta fix the $4.3 billion hole. We will fix it one way or another”

 

8:59 - Combs urges the committee to “look at this as a 2-biennium problem. What you do today is the seed for the next session.”

 

 

9:01: Combs says that it is important for the legislature to be willing to deal with tough budgets.

 

9:02 - Rep. Giddings says, “Sometimes we have to spend some money on making an investment to reap dividends. By not spending the Rainy Day Fund, we could retard our own recovery.”

 

 

9:03 - Rep. Eiland starts a discussion about collecting the franchise tax on certain dates. This leads into another discussion about TRANs. Combs explains that it is common, established practice to use TRANs upfront, and then pay them back as tax revenue comes in.

 

9:13 - Heleman explains that this year the Biennial Revenue estimate is much lower than 2003, and mentions that in the mid-2000s, the economy was so strong that the state brought in much more money than expected. TRAN discussion continues. Rep. Eiland asks questions about the wisdom of multiple deferrals, paying on the 30th and then shifting to payment on the 1st.

 

9:24 - Rep. Crownover asks, “Is there a certain amount of money that we should keep in the Rainy Day Fund?” She calls the Rainy Day Fund a “tool in the toolbox” that has protected the state.

 

 

Combs says, “We’ve gotten down to $8 million and it’s not affected our bond rating, and we’ve gotten down to $0 and it’s not affected it.”

 

9:35 - Rep. Riddle asks, if we’re looking at seed-time and harvest, what bad seed do you think we should avoid?

 

 

Combs reminds the committee that the decisions they make now are important for the 2013 session, and urges them to “please look forward,” as they examine tax policies and tax structure. It is important to balance spending and revenue, and plan ahead.

 

9:38 - Combs says, “We love our Texas, we love our state, we think we’re the luckiest place to live.”

 

9:41 - Rep. Aycock asks what will happen if we don't use Rainy Day Fund, don't make cuts. Then what happens? Combs explains that the Comptroller is allowed to borrow from the Rainy Day Fund if no one does anything.

 

9:43 - Rep. Eiland busts out the constitution.

 

9:45 - Rep. Villareal - Our credit rating is based on many factors, and the Rainy Day Fund is a tool that isn’t cemented to the table, but is readily accessible--not just to have, but to use. Combs interjects - it was a measure of good foresight and pre-planning to create the Rainy Day Fund. Many states do not have one, and it is good management and good governance to invent “this animal.”

 

 

9:50 - Combs reminds members that the S&P report does not encourage completely depleting the Rainy Day Fund, and encourages them to use prudence.

 

10:00 - Rep. Pitts closes the Appropriations Committee meeting and members report to the House Floor.