Texas’ budget surplus could ‘disappear’ next year

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AUSTIN (KXAN) — Lawmakers heard ominous words Tuesday from the head of the state budget office. The director of the Legislative Budget Board (LBB), Ursula Parks, told lawmakers to prepare for “hard choices” next session in a House Committee on Appropriations meeting.

Lawmakers passed the largest budget in state history in 2015, and still had enough to leave billions in surplus accounts for worst case scenarios. Many lawmakers are preparing for bad scenarios to happen before lawmakers go back into session in January 2017.

The state’s current budget spends $209 billion more than FY 2015 and FY 2016. The “rainy day fund” will soon be close to $10 billion. Lawmakers left $4 billion on the table last session. Comptroller Glen Hegar has already told lawmakers they will have less money than expected and to keep a cautious eye on the economy.

“The state economy continues to function and keeps doing well,” said Comptroller Hegar.

Texas lawmaker are constitutionally required to pass a balanced budget. They can only spend what they think they will have in tax revenues, which is mostly sales and business taxes. Each day, more and more lawmakers fear the downturn in oil prices and a wave of possible court decisions could be a perfect storm.

“My biggest concern is that this is always a balancing act of trying to live within your means as a state but addressing the critical issues that are out there,” said the top budget writer in the House, Rep. John Otto, R-Dayton.Why the numbers might not match up:

  • Our current budget is based on oil at $49 per barrel. Tuesday, the price of oil is $40 per barrel, which is higher than it has been for most of the year. The oil and gas industry represents around 14 percent of the Texas economy.
  • Lawmakers wait on a decision from the Texas Supreme Court on the state school finance system. If justices rule against the state this year the state will have to fork over up to $10 billion, effectively depleting the “rainy day fund.”
  • A federal judge ordered the state to revamp its Foster Care and Child Protective Services department. The state has appealed, but if state lawyers lose the case, the comptroller predicts lawmakers will need to spend $100 million.
  • The Federal Government could take away billions of dollars for Texas hospitals to pay for people without insurance. The state has applied for the 1115 Hospital waiver but the U.S. Department of Health has threatened that money might not come because lawmakers have not expanded Medicaid with the Affordable Care Act. The state could be on the hook for $4 billion as soon as this year.

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