Texas Legislature to Wrestle Over What to Do with Unexpected Budget Surplus

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Bloomberg reports that when the Texas Legislature begins its 2013 session it will face a problem that most states will kill for. Texas will likely have a budget surplus of around $8 billion. The question arises, how to spend it?

How Texas arrived at a surplus

In 2011, when it looked as if Texas was facing a multi-billion-dollar budget deficit, the Texas Legislature cut spending, especially funding for education, Bloomberg notes. However, partly because of the fracking boom, revenues from the sale of oil and gas soared, bringing in unexpected tax revenues. The jobless rate also declined sharply, currently down to 6.2 percent. Revenue from sales taxes has increased as well. Steve LeBlanc, co-founder of CapRidge Partners LLC in Austin, is quoted as suggesting that Texas has the financial strength of Germany and the cost competitiveness of China.

Democrats: restore education cuts

Democrats in the Texas Legislature sense an opportunity to spend the surplus. The Burnt Orange Report, for example, reflecting Democratic thinking, suggests restoring some or all of the 2011 cuts that were enacted on education funding. Health care funding is another area Democrats are keen to increase.

Republicans: hold the line on spending

The San Angelo Standard-Times is reporting that Republicans, including Texas Gov. Rick Perry, are expressing caution on any new spending. Perry and GOP leaders in the legislature want to limit new spending to the growth in population in Texas plus inflation. Lt. Gov. David Dewhurst is proposing setting up a $1 billion water projects bank that would loan money to local governments from the state rainy day fund to address water conservation, The drought that hit the state in 2011, the effects of which are still being felt, has convinced even some Republicans that spending on water projects is a needed expense to provide assistance to Texas agriculture and industry that depends on access to water.

The politics of spending the surplus

The Burnt Orange Report notes that while the Republican super majority that adhered in the 2011 session is gone thanks to Democratic gains in the 2012 election, the GOP still enjoys a healthy dominance in the Texas Legislature. Moreover many new Republican members who were elected in 2012 were influenced by the tea party and therefore takes a dim view toward government spending in any form. The bottom line is that the debate over what to do with the deficit is likely to be contentious, but Republicans still retain the upper hand.

Texas resident Mark Whittington writes about state issues for the Yahoo! Contributor Network.

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