Like most other state governments in the U.S., the Texas Legislature is preparing to tackle a huge challenge in the form of a multibillion dollar budget shortfall. Of the ideas and plans that have been publicized, none promise to fully address the shortfall entirely. In order to achieve significant savings and ensure the Legislature meets the Texas Constitution's requirement to balance the budget, retro budgeting is the most viable solution.
Earlier this year, in response to budget shortfall projections for the 2012-2013 biennium, Governor Perry, Lt. Governor Dewhurst and Speaker Straus asked each state agency to cut their budgets by 5%. According to the Center for Public Policy Priorities, the revised agency budgets, in response to this request, will save only $2.1 billion. While this is a good start to addressing our budget problem, I believe the Legislature should take an entirely different approach in the form of retro budgeting.
Retro budgeting requires that each state agency craft their budget based on the assumption they will receive the same amount of funding they had in a previous biennium. In this case, assuming there will be a $15 billion shortfall, agencies would submit budgets totaling $168 billion, the total appropriated for the 2008-2009 biennium. Whether they choose to cut programs, streamline operations or cut salaries, each agency will contribute to reducing the shortfall. Legislators will then fund state operations at the 2008-2009 level and again pass a budget that totals $168 billion.
With revenues continuing to decline and the altogether disappearance of some revenue sources, we must make significant cutbacks. In the last biennium, the Legislature was able plug some of the holes with federal stimulus money. Texas accepted this funding with full knowledge that it would not be a sustained revenue stream. Additionally, some have indicated their preference to address the shortfall with money from the "rainy day" fund. Even if there is unanimous agreement to use the "rainy day" fund to bridge the gap this biennium, the entire $9 million fund wouldn't be enough to cover this budget shortfall, let alone the projected shortfalls in future years. It is my belief that money from the "rainy day" fund should only be used to support justified core functions of government. These functions could include highway infrastructure, corrections and education.
From the onset of the recession, families and small businesses have been forced to cut back and many are working within the same budget constraints from five to ten years prior. State and federal governments must follow the example set for them by families and small businesses. The process by which we develop our budget for the 2012-2013 biennium can serve as a template for the federal government, which will be forced to reign in spending and cut budgets as frustrated voters demand fiscal restraint. Retro budgeting is the answer.