Is Dubya Bankrupting Texas? (Not Really)

Al Gore has for many months been accusing George W. Bush of fiscal irresponsibility, but this week he went for Bush’s jugular on the specific issue of Texas’ budget shortfall. Depending on whom you ask, this shortfall is somewhere between $610 million and $750 million. Gore is laying the blame on a $1.7 billion tax cut that Bush pushed through as governor. “If Governor Bush ran America the way he has run the State of Texas, our prosperity could vanish and our progress could be blocked,” Gore said July 20 in San Antonio.

Gore’s attack raises two questions:

1) Is Texas broke?
2) To whatever extent Texas is broke, are tax cuts to blame?

The answer to 1) is “no.” It is true that the two-year budget passed by the Texas legislature, and signed by Bush, failed to appropriate enough money to cover state expenditures. As a consequence, the legislature will have to make a supplementary appropriation to cover the shortfall. (It is not correct to characterize this shortfall, as the New York Times did in a headline it subsequently retracted, as a deficit. States, unlike the federal government, are not permitted to run budget deficits.) In Texas, these supplementary appropriations are called “emergency” appropriations, but they aren’t really emergencies; earlier shortfalls necessitated passage of “emergency” appropriations five times during the last decade, during the governorships of both Bush and his predecessor, Gov. Ann Richards.

It is true that the current Texas budget shortfall is much larger than four out of five of the decade’s earlier shortfalls; it’s larger than all five if you ignore an accounting gimmick that blew up one of these shortfalls to more than $1 billion. Score one for Gore. According to Rob Junell, chairman of the appropriations committee in the Texas House, rising state health expenditures due to increasing drug prices were a major reason expenditures exceeded projections. Score two for Gore, who’s making pharmaceutical-company greed a campaign issue. But the crucial thing to remember is that this latest supplemental expenditure won’t require the legislature to raise taxes; it will merely reduce the projected surplus. According to Texas state comptroller Carole Keeton Rylander, the Texas budget is now expected to run a surplus of $1.4 billion. Score one for Bush.

To the extent that Texas is experiencing some budgeting difficulties, is Bush’s $1.7 billion tax cut to blame? Yes, partly. According to the Bush campaign, 30 percent of the reckless expenditures that Gore says put Texas in the hole paid for tax cuts. That’s a big chunk, and Gore is right when he says that money might otherwise have been spent providing Texans better health care. Money you spend on one thing obviously can’t be spent on another. But another 37 percent of the reckless expenditures that Gore says put Texas in the hole paid for elementary and secondary education, including a $3,000-per-teacher pay raise. This is not an expenditure Gore is ever going to complain about. True, spending money to increase teacher salaries in Texas is probably better policy than spending money to lower taxes in Texas. But you can’t really argue that the increase in education spending is thriftier than the decrease in taxes if the increase in education spending costs more.