Perry wants $3.7 billion from Rainy Day Fund

AUSTIN (AP/KXAN) — Gov. Rick Perry called Tuesday for tapping the Rainy Day Fund to spend $3.7 billion on critical water and transportation systems in the state.

In his State of the State speech on Tuesday, Perry said there is more money in the fund than is needed, and that the state should not accumulate any more. He said tapping the fund for a one-time investment in infrastructure was needed to ensure a high quality of life.

Perry also called to use road funding only on transportation projects.

The Republican has for weeks called on the Legislature to cut taxes and continue to hold down government spending — even though Texas' economy is booming. He also called for $1.8 billion in tax relief and said how to do that was still open for consideration.

Perry also used his address to a joint session of the Legislature to call for amending the Texas Constitution to allow the state to return tax money it collects but doesn't spend back to its citizens.

Perry delivered the speech Tuesday morning to a joint session of the Legislature, telling lawmakers that he has "never bought into the notion that if you collect more, you need to spend more."

"Today, I'm calling for a mechanism to be put in place so when we do bring in more than we need, we'll have the option of returning tax money directly to the people who paid it," the governor said. "Currently, that's not something our constitution allows. We need to fix that."

The Republican has for weeks called on the Legislature to cut taxes and continue to hold down government spending — even though Texas' economy is booming. He'll also use the speech to give a specific dollar amount he'd like to see in tax reductions.

Proposing a constitutional amendment requires two-thirds support of both the Texas House and Senate, and it then must be approved by a majority of voters. Republicans control both chambers of the Legislature but would need Democrats to get two-thirds support — something that seems highly unlikely.

In their response after the 45-minute speech, legislative Democrats included in their list of priorities plans to fix the state's business tax, end what they called accounting gimmicks to make the state's books appear balanced, making improvements to infrastructure and to restore funding to the Women's Health Program.

"We all love Texas deeply," said Sen. Kirk Watson, D-Austin. "We all want Texas to enjoy success in this century, just like it did in the past."

One House Democrat said the governor painted an unrealistic picture of the state.

"Not sure what parallel universe Gov. Perry is living in, but it's not the same one as the people in my district," said Rep. Naomi Gonzalez, D-El Paso. "We need to restore money to education and health care."

While he has made cutting taxes his chief mantra since lawmakers headed back into session on Jan. 8, calls to limit government spending are nothing new for Perry. Last April, he unveiled a "budget compact" that proposed a constitutional amendment limiting state spending increases to only enough to cover the cost of population growth and inflation. That issue hasn't yet been taken up the Legislature.

Tuesday marks the seventh time Perry has given the State of the State since taking over for George W. Bush as governor in December 2000. Two years ago, he declared there would be "no sacred cows" immune to deep budget cuts as the state struggled with a $27 billion budget deficit amid an economy still feeling the effects of The Great Recession.

Lawmakers responded by passing deep cuts across-the-board, including slashing $5.4 billion from public schools.

The economic picture has since brightened substantially, with sales tax receipts up, unemployment down and the oil and gas industry humming. Yet early draft budgets proposed in the Texas House and Senate were so austere that they would leave about $5.5 billion in projected state revenue unspent and do nothing to restore the 2011 cuts.

Perry has also said he'd support taking as much as $3.7 billion from the state's cash reserve, or Rainy Day Fund, to pay for water infrastructure and other projects. The fund has a projected balance of $12 billion, and proposals being considered by the Legislature would use up to $2 billion of that on meeting the state's future water needs.

Perry also reiterated his opposition to the federal health care law, saying "Texas will not drive millions more into an unsustainable system, and that has not changed one iota."

During the speech, a protester shouted at the governor about the state's uninsured population. State troopers ushered the man and his group - the Texas Organizing Project - out of the chamber, where they continued chanting about the state not participating in the federal Medicaid expansion.

The governor also pushed some bold ideas when it comes to public education. He wants to cut costs by offering more charter schools in Texas.  There could be scholarships to give parents more options to pay for private schools and more flexibility for