In 2011, at the height of the fiscal crisis that plagued states, Deltek parsed through the political rhetoric to report
on the health of Texas’ budget. In that report, we examined Governor Rick Perry’s proposed budget and found that a budgetary deficit of $27 billion had prompted him to slash spending in nearly every department and vertical, minus public finance. In retrospect, we can report that the depth of the cuts proposed by the governor for the FY 2012-13 biennium were not borne out in the actual expenditures from FY 2012. Indeed, the governor’s current biennium budget proposal contains a near complete restoration of funding to 2011 levels.
In the FY 2014 – 15 biennium budget, we gain an excellent opportunity to compare the proposed budget with actual expenditures. At face value, Governor Perry’s proposals reflect a high point in FY 2011, with massive cuts in FY 12-13, and a near restoration of funding in FY 14-15 (Figure 1).
However, the real story, reflected in Figure 2 below, is far different. Yes, the governor proposed a budget for FY 12-13 that was severely cut vis à vis FY 11, but when one observes the actual expenditure data, it becomes clear that the state found it quite difficult to slash the budget across all verticals as originally proposed. The actual expenditures show an increase in funding for the health and human services, general government, natural resources, and public safety verticals. This is a far different picture of fiscal health than the one painted in Governor Perry’s original budget proposal.
The somewhat confusing nature of the governor’s proposed budgets can obscure the real budgetary picture of the state of Texas. While Governor Perry and state legislators agreed on the existence of a deficit in 2011, they diverged on the method by which the budget hole should be filled. The governor’s response was to slash across all verticals, except public finance, by double digits. The final expenditures for FY 2012 clearly point to disagreement about the nature and depth of the cuts necessary to balance the state’s budget. In a final analysis, only transportation agencies saw fewer funds expended than proposed in FY 12. All other verticals were cut less or grew more than originally proposed.
With the actual expenditures from FY 12 in mind, an analysis of Governor’s Perry current proposed budget for fiscal years 2014 and 2015 becomes much more coherent. General government, higher education, and public finance will experience double-digit decreases from FY 2012 actual to FY 2015 proposed by 29 percent, 26 percent and 18 percent, respectively. Only the legislature and transportation will see similar increases, at 14 percent and 21 percent, respectively. All remaining verticals will experience modest (less than 10 percent) growth or reductions from year to year. The governor’s priorities for the biennium are clearly transportation, social services (6 percent increase), K-12 education (3 percent increase), economic development (3 percent increase) and health care (2 percent increase). Of lesser priority are higher education, public finance, homeland security (8 percent decrease), natural resources (6 percent decrease) and justice and public safety (3 percent decrease).
The governor’s proposed budget for the 2014-2015 biennium represents a return to normalcy. Gone are the massive cuts proposed in 2011. Indeed, the governor’s priorities are again in line with federal mandates (in the case of health care and social services) and based on improvements to the state’s infrastructure and K-12 education. Specifically, the governor cites the sustained economic growth Texas has experienced over the past number of years as presenting a strain on the state highway system and increased water demand. He proposes a one-time infusion of infrastructure capital to meet the challenges of future development. Also highlighted in the proposed budget is the state’s Emerging Technology Fund. Perry proposes spending $132 million on the fund, which benefits start-up technology companies and universities that invest in research.
A vertical analysis of IT spending again points to the same priorities that existed from FY 13. Healthcare, primary and secondary education, and general government spending round out the top three verticals for IT line-item spending. Overall, the state will see a slight 1 percent decrease in IT spending from FY 13 to FY 15. One notable decrease in IT spending by verticals is transportation, which sees a 63 percent drop since 2013 levels. One possible explanation is the final sunset of stimulus-funded projects.
A proposed state budget in line with pre-deficit spending can only represent good news for those doing business with the state of Texas. Spending on IT line items has increased slightly since FY 2013 and will, it seems, continue on an upward trajectory. For those who choose to do business with the state of Texas, a return to normal spending proposals points to a state that has solved its own fiscal crisis and is moving back in the right direction.