AUSTIN – Lawmakers have been thinking ahead to a massive shortfall, topping $10 billion, that's probably coming when they write the next budget in 2011. But state officials told them Monday that they'll have to fix a hole in the current budget, too.
Rising health care costs have dug a hole of about $1.7 billion, the officials said.
Texas has about 350,000 more poor people on government health insurance than it did last year, and health care costs also are skyrocketing for state employees and prison inmates, several agency heads told the House Appropriations Committee.
"We're running 11 percent ... growth in the Medicaid program," said Health and Human Services Commissioner Tom Suehs, referring to the nation's main health care program for the poor. Lawmakers assumed enrollment would grow by only 3.4 percent this year, he said.
The bad news comes just six months into the two-year budget passed last year.
As for the next budget, John O'Brien, the Legislative Budget Board's director, who oversees a large staff serving 10 key lawmakers who track fiscal matters, said the shortfall will be at least $11 billion and could be as high as $15 billion.
"We have a deficit that's larger than the rainy day fund," he said, speaking of an emergency fund that he said will have slightly more than $8 billion by next session.
O'Brien said the shortfall could grow by billions if Texas real estate values continue to cool off, state tax revenues continue to fall short of predictions and a federal health care overhaul requires additional state spending.
John Heleman, the state's chief revenue estimator, said economic signals are mixed.
"It looks like we have turned the corner on our employment picture," said Heleman, who works for Comptroller Susan Combs.
He noted that Texas added slightly more than 30,000 jobs in January, about two-thirds of them with temporary help agencies.
Sales tax receipts in February declined by 8.8 percent from a year earlier, Heleman said. That's not as bad as January, when they were down by 14 percent, he said.
Still, Texans' shopping and business activity will have to pick up if sales tax receipts are to grow by 0.5 percent this year and 4.2 percent next year, as Combs predicted in official revenue estimates. Her predictions set the ceiling for last session's budget.
House budget writers seized the chance to plead that favorite programs be spared from 5 percent spending cuts.
Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus, R-San Antonio, asked agencies to offer ideas for trims. If all the submitted cuts are adopted, they would save $1.7 billion over the next 18 months, O'Brien said.
However, a proposal to save $27 million by cutting 50 beds each from the Terrell State Hospital and three other mental hospitals sparked protests.
"That's a bad idea, Commissioner," Rep. Ruth McClendon Jones, D-San Antonio, told Suehs.
Other House members criticized proposed cuts to a start-up fund for community health clinics and to family planning clinics' Medicaid payments.
Raymund Paredes, the state's higher education commissioner, asked that he be spared from having to ax $50 million out of financial aid programs.
O'Brien said it will be several weeks before legislative leaders decide on cuts.
Texas' current two-year budget is going to run about $1.7 billion short in various health care programs, officials said Monday. A breakdown:
$1.3 billion: Medicaid
$142 million: health coverage for state employees
$88 million: correctional managed health care
$81 million: eligibility screening for Medicaid, CHIP, two other programs
$72 million: Children's Health Insurance Program
SOURCE: Testimony to the House Appropriations Committee
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