Teetering on the edge of fiscal default, Texas political leaders are eyeing the state’s teacher-pension fund as a possible vehicle for avoiding a painful election-year tax increase.
A group of legislators has proposed-and Gov. Mark White has tentatively endorsed- a plan to delay the state’s payments to the retirement accounts for teachers and state employees.
The move would save the state’s cash-starved treasury about $120 million, money it desperately needs to pay other, more pressing bills.
The idea, which has met stiff resistance from the state’s teachers’ unions, is an outgrowth of a prolonged deadlock between the House and Senate of the Texas legislature over how to cope with a speedy collapse in the price of the state’s most important resource--oil.
The state’s oil-tax revenues have dropped by nearly 22 percent since last year and income from the natural-gas industry is down by 11 percent, reflections of a global crisis in the oil industry that has left Texas-and the other so-called “oil patch” states-in the midst of a major recession.
In Texas, these falling fortunes have left legislative leaders scrambling to escape a budget deficit for the biennium now estimated by the state comptroller to be approximately $2.9 billion.
While that estimate has been challenged by some, including the Governor.. . no one contests the fact that the state is close to the brink. According to the state treasurer, the state government will run out of cash and its checks will begin bouncing by late November or early December.
“If nothing is done, we can’t stop it; all we can do is have the mechanisms in place to make it less messy than if it was your personal checking account,” said a spokesman for State Treasurer Ann Richards.
Deep Cuts, Tax Hikes Eyed
In early August, Governor White, after some hedging, called the legislature to Austin. Since that time, both houses have approved deep reductions in the state’s budget-the Senate endorsed cuts of about $418 million, while the House voted to slice approximately $750 million.
Both Mr.White and William P. I Hobby, who holds the powerful post of lieutenant governor, have called for an increase in the state sales tax to make up the difference. But House leaders, several of whom face tough re-election campaigns, have determinedly refused to go along, preferring to wait until next January when the new legislature begins its term.
Under the state’s constitution, any tax bill must originate in the House, so the special session ended in a complete stalemate last week, with the two houses unable even to agree on a compromise budget cut.
A Second Special Session
Under state law, the legislature was forced to adjourn last Thursday. But 10 minutes later, Governor White called yet another special session to begin Sept. 12, a step he could repeat every month until January.
Legislative sources speculated, however, that in a round of last-ditch meetings before adjournment, Governor White, Lieutenant Governor Hobby, and Speaker of the House Gibson D. Lewis may have come close to an agreement that would at least solve the short-term cash-flow problem.
“There are wheels being greased and deals being done, but nobody really knows what is going to come out of all that,” said one observer.
In the meantime, said Richard Salwen, a Dallas lawyer who has been active in the state’s education-reform movement, legislators have “gradually become aware that it’s too late. Raising taxes tomorrow wouldn’t bring in enough money to keep us from going over the cliff.”
Pension-Fund Transfer
Bills pending in both chambers would allow the state treasurer to defer scheduled transfers of revenue to the pension funds in November and December. The money, about $120 million, would be repaid with interest later next year, according to the Governor’s budget director.
The teachers’ unions, however, fear the money will never be returned, leaving an unfunded liability and leading the way toward benefit reductions in the future.
“We don’t think teachers should have to pay because oil prices are low,” said Annette Cootes, a spokesman for the Texas State Teachers Association.
But legislators may have little choice. Several other idea.s--such as a proposal to delay aid payments to the state’s school district&-were raised during the session but quickly abandoned because of political opposition.
To a large extent, spending for elementary and secondary education has been sheltered from the crisis, according to a spokesman for the Texas Education Agency. Aside from minor cuts in bilingual aid and in the agency’s administrative expenses, neither chamber has proposed any reductions at all-at a time when both houses are backing sharp cuts at the state’s politically powerful colleges and universities.
Dallas billionaire H. Ross Perot, who figured prominently in the campaign to pass the state’s 1984 education-reform law, has been an active participant in the budget debate, as have other members of the business-education alliance he spearheaded.
Reform Weathering Storm
“So far, the reform movement has weathered this very well,” said Mr. Salwen, who assisted Mr. Perot in the reform drive. “I don’t think there is a feeling on the part of anybody that we can back away from providing a first-class education for our children’s future.”
