AUSTIN – Newly-appointed members of the House Appropriations Committee were greeted with sobering news during their first meeting Thursday at the Capitol.

House Speaker Joe Straus had announced his committee appointments for the 81st Legislature that morning. By 1:30 p.m., chairman Jim Pitts, R-Waxahachie, had called the Appropriations Committee together to hear the first testimony on a budget that already has a significant gap between expense and revenue.

Pitts, who previously served as Appropriations chairman during the 79th Legislature, will lead the 27-member committee. Richard Peña Raymond, D-Laredo, will serve as vice chairman.

“It’s a real honor for me to serve with this committee,” Pitts told members. “We’re all going to work on this together.”

After introduction of staff members, the first of several presentations during the 3-1/2 hour meeting was made to provide an overview of what the session’s budget process will entail.

Legislative Budget Board director John O’Brien reviewed the agency’s summary of budget and policy recommendations for the 2010-11 biennium.

A permanent joint committee of the Texas Legislature, the non-partisan LBB develops budget and policy recommendations for legislative appropriations for all agencies of state government. The LBB also completes fiscal analyses for proposed legislation for lawmakers’ use. 

O’Brien reported that LBB recommendations total $170.8 billion in all funds, a 0.6 percent increase over the 2009-09 base, with general revenue recommendations at $83.5 billion, an increase of $1.1 billion or 1.3 percent, above the 2008-09 spending level.

“The 2008-09 base is expected to come in at about 1 percent above original appropriations primarily due to higher than expected spending in teacher retirement, health and human services, criminal justice and transportation,” according to O’Brien’s report.

Describing the report as “good news, bad news, good news,” O’Brien said the good news is that the budget recommendations are within the 9.14 percent spending limit adopted by the LBB in November.

The bad news: The appropriations to handle the LBB’s recommendations exceed what the state comptroller has projected as available revenue by about $2.3 billion.

The gap could be even greater, depending on what lawmakers do this session.

“By design, the LBB recommendations do not attempt to cover all of the needs,” O’Brien said, saying this allows agencies to make direct appeal to the Legislature about their funding needs.

The LBB report also notes that when the 80th Legislature completed its work on the 2008-2009 biennial appropriations, the state had $80 billion in general revenue spending supported by $76.2 billion in recurring revenue.

“The combination of modest spending increases in LBB recommendations and lower revenue in the biennial revenue estimate exacerbates this structural deficit to over $7 billion,” according to the report, which also details supplemental appropriation needs of about $1 billion.

O’Brien encouraged the committee to exercise restraint to both contain the structural deficit as well as leave sufficient reserves for what the LBB is projecting as a “tough budget session in 2011.”

Describing the numbers as a “moving target” at this point, O’Brien said that state agencies have been asked by Straus and Lt. Gov. David Dewhurst to reduce their budgets by 2.5 percent and final figures are still being put together relating to costs from Hurricane Ike, among other factors.

Although the state’s Economic Stabilization Fund (Rainy Day Fund) is projected to reach $9.1 billion by 2011, O’Brien cautioned against tapping into it, citing a possibility that lawmakers will face more dire circumstances when the next budget rolls around. He also said the budget numbers don’t include any money that could be available from the economic stimulus package put together by Congress.

O’Brien also touched on governmental effectiveness and efficiency recommendation reports done by the LBB. The 73 reports include 192 recommendations, 14 of which would result in either general revenue gain or savings of about $119 million.

Those savings/gains would be achieved through program efficiencies, elimination of unnecessary programs and new revenue from improved collection of existing taxes and fees, he said.

Thirty-two of the reports include recommendations that could be implemented with existing agency resources and would improve service delivery, transparency and information available to managers to allow better decisions. Of those reports, 13 have the potential to produce long-term cost savings, according to the LBB.

Although 14 of the reports advocate additional spending of $11.2 million in general revenue, the implementation of their recommendations would lead to savings elsewhere, O’Brien explained.

Of the 192 report recommendations, 96 would require statutory change.

“We are seeking sponsors,” O’Brien said. “The (Legislative) Council has drafted legislation for each one of them.”

Also appearing before the committee Thursday were representatives from the state Comptroller’s Office, the Department of Insurance and the University of Texas Medical Branch at Galveston among others.

Pitts requested that committee members turn in their preferences as to which Appropriations sub-committee they want to serve on. Those assignments will be made Monday, with sub-committee meetings to start as early as Wednesday.

Pitts reinstated his rule that no lobbyist-provided meals will be accepted by the committee or its subcommittees, saying he will provide any meals if the committee were to work through lunch, as an example.

The House is adjourned until 10 a.m. Monday; however, Pitts has scheduled an Appropriations Committee meeting for Monday as well as Tuesday morning prior to the House going back into session.

On the Net:

http://www.capitol.state.tx.us

http://www.lbb.state.tx.us