Texas Economy Improving, but State Budget Still Struggling

Texas Legislature

While the state’s economy is improving, Texas still faces more than $4.1 billion in budget shortfalls, budget experts told the House Appropriations Committee in February. This includes nearly $4 billion to cover Medicaid costs that lawmakers deferred by not funding Medicaid for a full two-year budget cycle.

Texas Capitol Dome from inside the Capitol

Photo: stock.xchng, echobase.

This means that the state will have to pass a supplemental appropriations bill to cover the remaining Medicaid costs before money runs out in April 2013 or find other ways to reduce costs. State agencies may be asked to make further cuts if lawmakers refuse to use the state’s Rainy Day Fund to cover the shortfall, said Texas House budget chief, Rep. Jim Pitts.

Last year, the Legislative Budget Board estimated that the Medicaid shortfall would be about $4.3 billion. “Our newest estimate is $3.9 billion,” said LBB Chair John O’Brien. The state also needs $183 million to cover the cost of wildfires and $60 million for correctional/prisoner health care.

O’Brien said the state received $1.6 billion more than expected in revenues because of the improving economy. In addition to this surplus, legislators could choose to use some of the state’s Rainy Day Fund to cover the budget shortfall. The Rainy Day Fund has $6.1 billion now and is expected to grow to $7.3 billion, according to John Heleman of the Texas comptroller’s office.

Heleman also pointed out that the state had recovered more than 440,000 jobs that the state lost in the recession, although thousands of people move to Texas every day which kept the unemployment rate at 7.8 percent last month.