The Associated Press March 18, 2011, 8:44AM ET

Deal to tap reserves won't do much to avoid cuts

Texas lawmakers this week freed up $4 billion to spend over the next two years, but it won't do much to save teachers, nursing homes or the hundreds of other state programs coming under the budget knife.

The plan, now being considered by a House budget committee, would put $2 billion back into public schools and add almost $2 billion to pay for Medicaid caseload growth. The money was made available after leaders agreed to tap the Rainy Day Fund to knock out a deficit in the 2011 budget. The proposal is expected to get a committee vote next week.

By some estimates, that leaves the state only $23 billion short of what it needs to maintain current services for the next two years. The Rainy Day Fund would still have a projected $6.3 billion in it by 2013, though Gov. Rick Perry has said he won't sign a budget that takes any more money from the state savings account.

Under the new budget proposal, schools would still be underfunded by almost $8 billion -- or about $800 per student. Lawmakers would cut full-day pre-kindergarten, teacher incentive pay, arts education and numerous other school programs.

"If this is all they're willing to do, to spend a tiny part of the Rainy Day Fund, they're just going to make a tiny improvement in a big problem," said Eva DeLuna Castro, a budget analyst for the Center for Public Policy Priorities, which advocates for needy Texans. "They need to use the rest of it."

DeLuna Castro estimates the $2 billion in new money would keep roughly 12,500 teachers, cafeteria workers and other staff at work. More than 108,000 jobs would still be lost, she said.

The part of the budget that pays for health care programs for needy, elderly and disabled Texans still faces a more than $4 billion shortfall.

Proposals to reduce reimbursement rates to nursing homes and other Medicaid providers wouldn't change from the original House proposal. The projected 33 percent cut to nursing homes could jeopardize 45,000 residents in the state's 550 nursing homes that depend on Medicaid, experts said.

"So far, it doesn't appear that any direct actions have been taken to solve a very difficult problem of funding for nursing home care," said Tim Graves, president and CEO of the Texas Health Care Association.

The budget still would cut Medicaid reimbursement rates by 10 percent. That's on top of 3 percent rate reduction that state leaders requested this year. Medicaid, the state and federal cost-sharing program, serves 3.1 million Texans -- mostly children, pregnant women and adults with disabilities.

But Graves and other advocates said the true cut to nursing homes is closer to 33 percent because of recent changes in the federal-state funding formula. The state's share has increased, but budget proposals are not paying for that increase.

Some of the money being added back to the health and human services budget proposal -- about $48 million -- would pay for as many as 461 child protection workers.

"The best news is that they're funding some of the case workers for Child Protective Services," DeLuna Castro said. "It's not everything ... but it's something."

The new plan also reinstates funding to four community colleges that had been set to have their funding cut off. Those cuts would instead be evenly distributed among all community colleges in Texas.

Perry and Texas House leaders ended a stalemate earlier this week by agreeing to use about $3.2 billion from the state's Rainy Day Fund. If approved, the money would plug a budget deficit in the current fiscal year. Their agreement also called for $800 million in spending cuts to state agencies this year. Coupled with a projection from the comptroller that improved sales taxes will generate $300 million in additional revenue, the plan freed up $4.3 billion for lawmakers to use as they write the next two-year state budget.

While Perry agreed to use the Rainy Day Fund to address the 2011 deficit, he threatened to veto any plans to use more of the reserves to tackle the 2012-2013 budget.

The proposals still have far to go before being finalized later this year.


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