From the Austin American Statesman:
Texas’ cuts-only approach to its budget shortfall won’t solve the state’s long-term fiscal problems, according to Standard & Poor’s, a major bond rating agency.
“We believe that a balanced approach that includes both revenue enhancements and expenditure cuts has a higher potential of success in preserving the state’s long-term structural budget balance than a strategy that relies solely on expenditure cutbacks,” wrote S&P credit analyst Horacio Aldrete-Sanchez in a report released last week.
Though S&P is not likely to join the Texas Forward coalition, the analyst’s language mirrors that of the education groups, health and human service advocates and faith leaders that have decried the deep budget cuts.
Aldrete-Sanchez also emphasized that the state’s budget hole is not a one-time problem that will go away as the economy improves.
“In our view, the state’s budget imbalance is likely to reappear or persist beyond the upcoming biennium unless other sources of revenue or additional budgetary flexibility are identified to fill this growing funding gap,” the analysis continues.
As we discussed in 2302, Texas is a "pay as you go" state so it cannot run deficits, but recent amendments to our constitution have allowed for bonds to be sold to fund certain items like prisons. While Standard and Poor's still rates Texas bonds at a high level, this could change.
- Relevant state agency: Texas Bond Review Board.
- Commentary from Paul Burka:
The refusal of Texas’s leaders to raise revenue is imperiling the state’s fiscal stability. We raise money only by the most expensive means–borrowing. Our revenue and tax structure is untenable. We have a nonperforming business tax that has created a permanent structural budget deficit, and our state leaders, who have known about this since 2006, when they paid no heed to the comptroller’s fiscal note, continue to pretend that it doesn’t exist.
