AUSTIN, Texas – Texas lawmakers got their first glimpse of what the next state budget might look like late Tuesday, including a staggering $5 billion cut to public schools, as Gov. Rick Perry and his supporters were dancing at an inaugural celebration.
While public education appeared to bear the brunt of the $15 billion state revenue shortfall, few corners of state government were spared in the draft proposal for the next two years that spends $73.2 billion in state money.
The proposal reduces state spending by almost $14 billion over the current budget. The reduction is smaller than the shortfall because of $1.4 billion in savings requested by the state leaders from the current year budget.
The budget draft, which is expected to be filed as legislation in the House later this week, would cut funding entirely to four community colleges and would generally eliminate financial aid for incoming freshmen and new students. The Texas Grants scholarship program would drop by more than 70,000 students over the next two years.
The proposal also would reduce reimbursement rates by 10 percent for physicians, hospitals and nursing homes that participate in Medicaid — a decrease that could eventually dry up participation in the program for poor and disabled Texans.
In total, 9,600 state jobs would be eliminated over the next two years.
"It's a catastrophe. No financial aid for kids to go to college. No pre-kindergarten for kids to learn their numbers and their letters. Health and human services slashed," said Rep. Pete Gallego, D-Alpine. "No Texan can be proud of this."
Perry took the oath of office earlier Tuesday for his third term in office. After a day of parties, he spent the evening at a celebration in downtown Austin, just a mile from the Capitol. Donors are picking up the $2 million tab for the 2011 inaugural. The Legislative Budget Board was required by law to release the budget to leaders on Tuesday, the fifth business day after the session starts.
Some analysts say the true shortfall could be much higher than $15 billion — closer to $27 billion — to account for enrollment growth in public schools and on Medicaid rolls, cost increases and other variables. That figure amounts to almost a third of discretionary state spending in the current budget.
A $4 billion reduction to the Foundation School Program — the pot of money distributed to schools based on daily attendance — means the program would be short almost $10 billion below the amount required to fund the school finance formulas under state law. That would make school finance reform legislation almost inevitable.
The proposal also recommends cuts to arts education, teacher incentive pay, money for schools to administer steroid testing and pre-kindergarten programs.
The draft is just the beginning of a long process, which probably won't be finalized until next summer when the governor signs the Texas budget for 2012-13.
Four Texas two-year colleges would be closed to save $39 million in the next two-year state budget under preliminary spending plan.
Brazosport College in Lake Jackson, Frank Phillips College in Borger, Odessa College and Ranger College would be closed under a plan to slash $145 million in state funding for Texas community and junior colleges.
The state's contributions to the state employee retirement fund would be reduced from 6.95 percent to 6 percent, less than what is needed to maintain the fund, according the Legislative Budget Board, which drafted the budget. The base budget proposes a similar cut in contributions to the Teacher Retirement Fund.
While almost every other state agency would see a reduction in employees, the average number of full-time employees in Perry's office over the next two fiscal years would go to 132, up from an average of 120 in the 2010-2011 budget.
The base budget does not use any tax increases or money from the state's Rainy Day Fund.
"Texas needs a balanced approach that includes using the Rainy Day Fund and adding new revenue," said Scott McCown, executive director of the Center for Public Policy Priorities, which advocates for needy Texans. "With a revenue shortfall this large, as the proposed budget shows, the Legislature cannot balance the budget through cuts alone without doing terrible damage."
Rep. Jim Pitts, the chairman of the House Appropriations Committee, said he would explain the proposal to the chamber on Wednesday.
"There are no sacred cows for this next biennium for our introduced bill," Pitts said last week. "So many people said, 'You cannot cut education'. You can't not cut education . We will be cutting every article within our budget. We will be cutting health and human, we will be cutting education and we'll be cutting our own budget in the Legislature."
Other agency cuts include:
— $2.3 billion from Medicaid, the Children's Health Insurance Program and other health and human services.
— $772 million for Texas colleges and universities, including nearly $100 million for flagship universities Texas A&M University and the University of Texas at Austin.
— $459 million from the Department of Criminal Justice, including a 14 percent cut in psychiatric and pharmacy care for inmates.
— $78 million from the Texas Historical Commission, which oversees preservation of state landmarks and historic buildings, from about $100 million to $22 million.
The Texas Constitution requires a balanced budget, and state leaders and many of the new supermajority of conservative legislators elected in November have vowed not to raise taxes, meaning the shortfall will have to be overcome almost entirely with cuts.
The shortfall will be the driving force behind almost every decision the Legislature makes. From state parks and highways to health care programs for the poor and disabled, all state agencies are bracing for the hatchet.
Associated Press writers Chris Tomlinson, Jim Vertuno and Jay Root contributed to this report.
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