Analysis: Legislators start with a $5.3 billion difference of opinion

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Drop the puck.

The Texas Senate and the Texas House have done their big reveal on the state budget — more of a ring-and-run in a Capitol giving most of its work week to a national holiday and a Trump inauguration — and they are billions of dollars apart.

They have 18 weeks to play this out, but the first days of the legislative session offer a decent preview of the battle ahead.

So far, this finance puzzle has three pieces.

• Texas Comptroller Glenn Hegar released a Biennial Revenue Estimate, telling lawmakers they will have $104.9 billion in state funds in 2018-19 — less money to spend than two years ago. He said there would have been $4.7 billion more than that, had lawmakers and voters not dedicated that amount to transportation projects. Hegar said the state’s Rainy Day Fund is on its way to a record-busting $11.9 billion balance. And he said lawmakers have $1.5 billion in surplus funds for the current or the next budget.

• The Senate, which gets to lead on the budget talks this year — it alternates from session to session — opened with a relatively stark offering, which includes general state spending of $103.6 billion and overall spending, which includes federal and other funds, of $213.4 billion.

• The House quickly followed with a $221.3 billion budget that includes $108.9 billion in general state spending. That’s $5.3 billion more than the Senate’s proposal, and it’s also considerably higher than Hegar’s outer limit.

It’s important to remember that the budget has to balance before it’s signed — but it doesn’t have to balance when it’s proposed.

The House and Senate are coming at this from different directions. The Senate approach is to put lots of programs in peril and then figure out which ones need the most help, if any at all. Its budget’s biggest scrimps are in health and human services, where it proposed $2 billion in cuts; in public education, $1.5 billion in cuts; and in higher education, $690 million in cuts. The actual cuts would be bigger in health and human services, where costs are driven in part by population increases. The Senate’s proposed budget doesn’t include any money for that. The Senate does account for population growth in schools, but counts on increasing local property values for much of that funding.

The House’s approach puts the spending needs in front, which would force lawmakers to find the money or cut the programs. They would spend $1.5 billion more than the Senate on public education, contingent on changes in school finance laws, and the House budget accounts for growth in Medicaid caseloads where the Senate’s does not. House leaders say they don’t have higher taxes in mind, but would balance their budget with a combination of cuts, deferrals (a fancy word for regularly employed government accounting tricks) and the state’s burgeoning Rainy Day Fund.

That fund started as a cash-flow device, designed to grow in good times for use in bad times — the way chipmunks use nuts. It has become a sacred bovine in recent years, with lawmakers saying that money shouldn’t be used for ongoing expenses; they think of it more like a savings account than a cash-flow account. The House appears ready to challenge that.

This was state Rep. Drew Darby, R-San Angelo, speaking to reporters on Tuesday: “This is a time where we could use some money to smooth out those rough edges of a cyclical budget, of trying to plan two years in advance and try to allocate resources two years. [The Rainy Day Fund] was designed to accommodate these times that we’re in right now. It has been raided and reduced to near zero three times in the past. … It’s become this scared cow, if you will, that seems to be untouchable, and I think we need to rethink that.”

There’s more to come. For one thing, lawmakers think the current budget is at least $1.5 billion short of what it requires — in other words, that expenses and emergencies have run that much higher than expected when the budget was put together in 2015.

In their first-day numbers, the two chambers didn’t even agree on the size of the current budget. The House baked in some of those supplemental expenses, adding $1.2 billion for Medicaid and the Children’s Health Insurance Program. The Senate left that out.

That’s the setup. Here’s the procedure: The Senate will pass its budget and send it over to the House, which will pass their version and send it back. Each side will appoint negotiators to hammer out the differences, and the result will be the next state budget.

They’re supposed to finish before the end of the regular legislative session, on Memorial Day. They have to finish — to agree, that is — by Aug. 31 — the last day of the current budget year.

More columns from Ross Ramsey:

• Not everything is stuck in silos, but following particular groups is a way to cut through the sheer volume of good and bad ideas that steam up the Texas government’s windows every two years.
• In the midst of all the week’s gloomy state budget news, this stuck out like a gold nugget in a cow patty: Rising property values in the state’s school districts translate into higher local tax revenue, cutting the state’s obligation to education.
• House Speaker Joe Straus won a fifth term in that post on the first day of the legislative session. And unlike his predecessors, he’s more secure politically now than when he started in 2009.