1. All About the Money: The State Budget One Voice: A Collaborative for Health and Human Services September 30, 2004 Eva De Luna Castro, Budget Analyst (deluna.castro@cppp.org) 900 Lydia Street - Austin, Texas 78702 Phone (512) 320-0222 – fax (512) 320-0227 - www.cppp.org

2. PRESENTATION OUTLINE: What happened in 2003? Why it matters What lies ahead

3. Estimated General Revenue shortfall of $15.6 billion for 2004-05 The “Balancing” of the 2004-05 State Budget Cuts to 2003 Budget: $1.4 billion Cost shifting: $1.0 billion “Smoke and mirrors”: $1.2 billion Rainy Day Fund: $1.3 billion Federal Fiscal Relief: $1.4 billion State Revenue Measures: $1.8 billion Cuts to 2004-05 Budget: $7.5 billion

4. Where Budget Cuts Were Made Health Care (not just Medicaid and CHIP, but also teachers’ and state employees’ health coverage) K-12 textbook funding; grant programs such as kindergarten and pre-K expansion grants; Telecommunications Infrastructure Fund (now used for Technology Allotment) Layoffs of state employees More details available in CPPP’s July 2004 report, at http://www.cppp.org/products/rep orts/budget-impact04/index.html http://www.cppp.org/products/rep orts/budget-impact04/index.html

5. Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

6. 2004-2005 GR Budget Percent of All GR Texas Education Agency$20.6 billion35% Health and Human Services Commission$7.4 billion13% Department of Criminal Justice$4.6 billion8% Teacher Retirement System$3.8 billion6% Department of Human Services$3.3 billion6% State worker retirement and health insurance$2.6 billion4% Mental Health and Mental Retardation$2.1 billion4% Higher Education Coordinating Board$667 million1.1% Family & Protective Services$478 million0.8% University of Texas at Austin$483 million0.8% Source: Legislative Budget Board, Fiscal Size Up 2004-05, and budget requests for 2006-07. Where 80 Percent of General Revenue Goes

8. What Texas State Government Spending Pays For Source: U.S. Bureau of the Census, State Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $70.3 billion.

9. What Texas Local Government Spending Pays For Source: U.S. Bureau of the Census, Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $77.1 billion.

10. Source: U.S. Bureau of the Census, State & Local Government Finances, Fiscal 2002. 50-State Ranking: 13 th 46 th 26 th 39 th 15 th 13 th 35 th 41 st 23 rd 36 th 33 rd 43 rd

11. Indicators of Texas’ Need for Public Social Services Texas US Average Texas rank % of Population under 18, 200228.0%25.3%3 rd Child Poverty Rate, 200322.8% 17.7%8 th Elderly Poverty Rate, 200313.0%9.8%7 th % of Under-65 Population with No Health Insurance, 2003 26.9%17.6%1 st % of Residents Aged 25 or over with at least a High School Diploma, 2003 77.8%83.6%49 th % of Residents Aged 25 or over with at least a Bachelor’s Degree, 2003 24.5%26.5%27 th Source: U.S. Bureau of the Census, March CPS and American Community Survey

12. How Houston Compares to Other Large Cities Houston (City) US Average Rank out of 68 Cities Child Poverty Rate, 2003 (3 rd highest in TX, after El Paso, 34%; Dallas, 30%) 29.6% 17.7%21 st Overall Poverty Rate, 200320.3%12.7%20 th % of Residents Aged 25 or over with at least a High School Diploma, 2003 72.9%83.6%59 th % of Residents Aged 25 or over with at least a Bachelor’s Degree, 2003 26.6%26.5%38 th Source: U.S. Bureau of the Census, American Community Survey

13. $560 for Aid to Local K-12 School Districts $398 for Medicaid Acute Care and CHIP $204 for Workforce Commission Programs (Unemployment Insurance, Employment Services and Job Training, Subsidized Child Care, etc.) $162 for Highway Construction and Maintenance and other TXDoT spending; $141 for State Prisons, Probation, Parole; $103 for Teacher Retirement System Mental Health & Mental Retardation programs ($64); Department of Health programs ($59); University of Houston [main campus only] ($53) Employees Retirement System ($40); Public Community and Junior Colleges ($39); Payments to Nursing Homes ($37); M.D. Anderson Cancer Center ($34); Protective & Regulatory Services ($32); University of Texas Health Science Center at Houston ($32) DHS Community Care programs ($18); Cash Assistance [TANF] ($10); Alcohol and Drug Abuse Commission ($7): Department on Aging ($3) State Spending Per Harris County Resident, 2003

14. Biennial General Revenue % State Budget, 2004-05$58.9 billion Across the board 5% cut to baseline (if no exceptions were made) ($2.9 billion)-5% Requests to Date for Additional GR: Education Agency: Baseline Increase $1 billion1.8% Education Agency: Exceptional Items $1.3 billion2.2% Department of Criminal Justice$303 million0.5% Teacher Retirement System$1.4 billion2.3% Employees Retirement System$500 million0.8% Higher Education Coordinating Board $597 million1.0% Family & Protective Services$200 million0.3% CHIP/Medicaid Shortfall for 2005$320 million0.5% New GR Needed so far:$5.6 billion9.5% 2006-07: Another Tough Budget to Write

15. Biennial GR % State Budget, 2004-05$58.9 billion Replacing “Robin Hood”At least $2.3 billion4 % “Buying down” local school property taxes by 10 cents per $100 taxable value $2 billion3.4% Eliminate waiting list (30,000) for working-poor child care $73 million0.1% Reaching the national average in state/local spending from taxes $16 billion27% Other Potential Budget Items

16. Outcome Depends on Available Revenue Comptroller will give legislators the official revenue estimate no later than January 2005 Good news: revenues for 2004 show higher-than- expected annual growth, at 6.4%, much better than fiscal 2003 Bad news: health care costs—one-third of state budget—expected to continue rising at double-digit rates Long-term structural inadequacies of state/local tax system are putting too much pressure on property taxes Heavy reliance on sales taxes also makes Texas tax system very regressive (taking more from families with the lowest incomes)

18. Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash Report.