Texas budget cuts not as big as feared

NEW YORK (CNNMoney) -- Texas legislative leaders agreed Thursday to a budget that cuts $15 billion in spending over the next two years.

Though many agencies will see reductions in state funding, the cuts were not as large as first proposed in the House budget in January.

The restoration left many advocates breathing a sigh of relief, though they remained concerned that lawmakers did not account for the demands that the state's fast-growing population will place on services in coming years.

Crafted by the Republicans who run the Texas Legislature, the $172.3 billion budget agreement does not raise taxes, nor does it dip into the state's rainy day fund to help close the coming fiscal year's multi-billion dollar shortfall. Lawmakers are expected to vote on the budget on Saturday.

Higher education and health and human services took the biggest hits.

Colleges and universities will see a $969 million cut, which will likely lead to higher tuition and curtailed programs, said F. Scott McCown, executive director of the Center for Public Policy Priorities, which advocates for low-income residents.

Even budget deficits are bigger in Texas

More than 43,000 students will lose financial aid, according to Rep. Mike Villarreal, a Democrat. Funding for several other programs and scholarships was also eliminated.

Health and Human Services will feel the most pain, losing $11.3 billion, part of it from disappearing federal stimulus funds. The state Medicaid program will be among the hardest hit. Nursing home providers, for instance, will continue to see a 3% cut in their reimbursement rates, while in-home care providers will see an even bigger reduction. And the budget leaves unfunded $4.8 billion in projected Medicaid expenses.

The budget cuts the underfunding of K-12 schools in half, to $4 billion. It also eliminates $1 billion in grants for pre-kindergarten and other programs. Lawmakers still have to decide how the money will be distributed among school districts.

Advocates say that the schools won't be able to handle the surge in children expected in coming years without more funds. But fiscal conservatives disagree.

"We feel comfortable that they can absorb that growth within their districts without reducing services in any way," said Talmadge Helfin, director of the Center for Fiscal Policy.