Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Texas's love/hate relationship with Washington's money

texas_budget.gi.top.jpgTexas Gov. Rick Perry and state lawmakers must close a budget deficit of as much as $27 billion. By Tami Luhby, senior writer

NEW YORK (CNNMoney) -- Texas Gov. Rick Perry likes to tell Washington to stop meddling in state affairs. He vocally opposed the Obama administration's 2009 stimulus program to spur the economy and assist cash-strapped states.

Perry also likes to trumpet that his state balanced its budget in 2009, while keeping billions in its rainy day fund.

But he couldn't have done that without a lot of help from ... guess where? Washington.

Turns out Texas was the state that depended the most on those very stimulus funds to plug nearly 97% of its shortfall for fiscal 2010, according to the National Conference of State Legislatures.

Texas, which crafts a budget every two years, was facing a $6.6 billion shortfall for its 2010-2011 fiscal years. It plugged nearly all of that deficit with $6.4 billion in Recovery Act money, allowing it to leave its $9.1 billion rainy day fund untouched.

"Stimulus was very helpful in getting them through the last few years," said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, said of Texas.

Even as Perry requested the Recovery Act money, he railed against it. On the very same day he asked for the funds, he set up a petition titled "No Government Bailouts."

"Join our fight and add your voice to a growing list of several thousand Americans who are fed up with this irresponsible spending that threatens our future," Perry wrote on his blog on Feb. 18, 2009.

A governor's spokeswoman played down the money's role in shoring up Texas's finances.

"Texas would have balanced its budget regardless of the presence of stimulus dollars," said Lucy Nashed, Perry's deputy press secretary. "This money came from the pockets of Texas taxpayers, and we are committed to getting our fair share of these dollars, which would have otherwise been disbursed to other states."

Difficult years ahead

Unfortunately for Texas, and for most other states in the union, the stimulus safety net has dried up. So they are now facing draconian spending cuts as they try to close yawning budget gaps for fiscal 2012, which starts July 1 in most states.

Texas is in trouble too. State lawmakers last week unveiled an austere budget for the 2012-2013 fiscal years that cuts $31 billion in spending. Schools, colleges, Medicaid and social services for the needy will be hit especially hard.

The state won't replace any of the federal stimulus funds with its own revenues, said Rep. Jim Pitts, who is writing the budget bill for the Texas House. It doesn't have the money. The state comptroller estimated that revenues will be $15 billion less in fiscal 2012-2013 than the previous two-year period.

Gone are the $4.3 billion in stimulus funds for Medicaid and $3.25 billion for public education. The resulting cuts outlined in the budget means schools would likely close and class sizes would get bigger. And because the budget proposes a 10% cut in Medicaid reimbursement rates for doctors, physicians will likely leave the system, making it harder for the poor to get health care.

Other areas are being hit too. For instance, the state would have to lay off 565 caseworkers who investigate child abuse. And stimulus funded child care and job training programs would also end.

Of course, stimulus alone could not have plugged this year's revenue hole. Lawmakers are suggesting a wide range of cuts to bring the budget back into balance. In all, nearly 9,300 government jobs would disappear.

"The federal money bought us some time and that time has run out," said Eva De Luna Castro, budget analyst for the Center for Public Policy Priorities, which focuses on low- and moderate-income Texans.

The budget introduced earlier this week is only the first step in a long process to crafting a final spending plan. Lawmakers and Perry will weigh in over the next few months. The state's fiscal year begins Oct. 1.

But a vocal chorus of Democratic lawmakers and advocates are already urging the GOP, which controls the Texas legislature and governor's mansion, to tap into the state's estimated $9.4 billion rainy day fund to blunt some of the spending cuts and replace the stimulus money.

Stimulus "helped us save our rainy day fund for an even rainier day," De Luna Castro said. To top of page

Index Last Change % Change
Dow 17,050.75 138.46 0.82%
Nasdaq 4,810.79 19.64 0.41%
S&P 500 2,013.43 17.60 0.88%
Treasuries 2.11 0.05 2.23%
Data as of 5:31am ET
Company Price Change % Change
Bank of America Corp... 15.75 0.00 0.00%
EMC Corp 27.18 1.22 4.70%
Apple Inc 109.50 -1.28 -1.16%
Freeport-McMoRan Inc... 13.46 0.45 3.46%
General Electric Co 28.03 0.26 0.94%
Data as of Oct 8


Judge denies request by Paul Smith's College to change its name in order to secure huge donation from philanthropist Joan Weill? More

IMF's Christine Lagarde avoided blaming China for lackluster global economic growth on Thursday, framing the country's deep slowdown as the "healthy" result of needed reforms. More

The National Domestic Workers Alliance introduced a new initiative, Good Work Code, to set standards and protections for on-demand workers. More

Karim Abouelnaga turned down a job on Wall Street to address a problem that set him back as a low-income student: the summer slide. More

One of the largest pension funds in the country says it needs to cut benefits for 273,000 current and future retirees as soon as July. Otherwise, it won't be able to pay any benefits after 2025. More