A Self-Inflicted Mess?

Although Rick Perry is no longer a presidential candidate, he still governs more than 25 million people. In the early stages of his candidacy last year, Texas’ budget struggles made headlines as they called into question his self-avowed fiscal conservatism. Although they often disappear from the headlines once the final budget is approved, state budget crises have serious consequences for local governments, in particular for social services and local school districts. Texas is a particularly interesting case for many reasons, not least because it is often held up as a model of Republican-oriented governance.

The debates around state budget shortfalls echo those at the federal level: there’s no “simple” way to measure or identify the causes of a deficit, as each deficit is a product of historic decisions about how to structure state finance and state programs, which itself must be understood in the context of local finance (Texas, for example, has no state income tax, and like California it has many complicated formulas for taking and returning funds from local governments, which raise money primarily by levying property taxes).

The Texas budget deficit received a lot of attention last year from the New York Times:

In a recent column on Texas’s huge budget deficit, Paul Krugman wrote that “it’s hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts.”

On Tuesday, this was what Texas legislators proposed doing,with a plan to slash $31 billion in state spending that includes cuts in education, Medicaid and the prison system. New taxes weren’t an option for the Republican-controlled state government. Texas has among the lowest tax burdens in the country, with no income tax.

But how did a state which touts its fiscal tightfistedness find itself in a deficit bind in the first place? Its oil and gas industries hummed along during the recession, and it had no housing meltdown. Unions are not an issue, and it has the lowest state spending in the nation per person.

But there is not even unity on the amount of its budget shortfall: is it $12 billion to $15 billion, as the Republicans say, or up to $27 billion, a figure used by liberal groups like the Center on Budget and Policy Priorities? Many fiscal conservatives say that the gap is not a problem. Why do they say that? Are there lessons for other states?

Read: A Self-Inflicted Mess – Room for Debate – NYTimes.com for a good overview of the discourse around fiscal crisis: who gets blamed, and how solutions are imagined.