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The Texas legislature meets today for it biennial legislative session, and as I posted yesterday, it was expected that they would face a budget shortfall of between $21 and $25 billion. It turns out that those figures were just wishful thinking -- the actual budget shortfall is more than that.

The Texas Comptroller, Susan Combs, gave her official estimates for the upcoming biennium yesterday and the news was not good. According to Combs, the amount of money needed to maintain state services at its current levels (and remember, this is after three budget cuts have already been put in place) is about $99 billion. The amount of income the state can expect is $72.2 billion. That means the actual budget shortfall is projected to be about $26.8 billion (or 27.1% less than the amount needed to maintain the current pared-down level of services).

This certainly has to be disappointing for those touting the trickle down economic policies of the Republican Party. More than any other state in the Union, Texas has faithfully followed those policies -- having had a very conservative Republican leadership in both the governor's office and the legislature for many years now.

Texas doesn't have a state minimum wage law, has no state income tax ( and the taxes it does have are very regressive -- the kind of taxes Republicans love), is extremely corporate-friendly (even going so far as to give companies money and tax breaks to come to Texas), restricts government health insurance to only children and the disable (giving it the highest percentage of uninsured people at over 26%), funds its schools at one of the lowest per-pupil rates in the country (with a nearly 30% high school dropout rate), has some of the strongest anti-union laws in place of any state, ranks very low in median income for citizens and pay for state employees, and has deregulated most utilities (causing electric rates to climb to among the highest in the nation).

In short, Texas has followed the Republican game plan to the letter and it has resulted in a citizenry that is hurting and a government facing a financial disaster -- having one of the largest budget deficits in the country. Texas was supposed to be the "economic miracle" that showcased the Republican policies. What it really shows is that the Republican policies are the recipe for economic failure.

Governor Perry is trying to put a good face on this economic disaster saying, "I don't think it's the end of the world. I don't think it's apocalyptic." While it is not the "end of the world", it is as big an economic mess as that faced by any state (including California).

The governor has been bad-mouthing the federal government, and saying that it should be following the economic example of Texas. Now he must swallow his pride and depend on the federal government to help bail Texas out of the economic mess the Republicans have created. The federal government is offering Texas about $7 billion in stimulus money, and the governor is going to have to accept that money with his hat in hand.

That will still leave more than a $19 billion shortfall that the governor and the Republican legislature must make up. I don't think they can do it without raising taxes and robbing the state's "rainy day" fund -- both of which the Republicans assured voters they would not do. It should be interesting to see what they do now, especially since the voters (in a recent poll) said they didn't want education and human services to be cut -- the two largest areas of the state budget.

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The Republican committee chairman's southern accent turned plaintive as he urged legislators who had campaigned on preserving the state's $9.2 billion Rainy Day Fund to now break that promise to ease the budget pressure.

"If you want to close this shortfall through cuts alone, you have to either (completely) cut payments to Medicaid providers, cut payments to school districts or lay-off a substantial number of state employees," said state Rep. Jim Pitts, chairman of the House Appropriations Committee. "You would have to do these things immediately."

Magnifying the difficulty of the move here was that Pitts and other conservatives knew they had to get the state's -- and perhaps the nation's -- most outspoken advocate of budget cutting -- Gov. Rick Perry -- to climb down from the no-spending pledge with them. It took a week of convincing, but Perry, Lt. Gov. David Dewhurst and Speaker Joe Strauss -- all Republicans -- issued a statement on Tuesday approving a $3.2 billion withdrawal from the reserve fund to plug the budget hole, in addition to making $1 billion in cuts.

That deal will solve the budget problem -- until Aug. 31. Lawmakers still need to cut another $23 billion from the next two-year budget.

Perry, the state's longest serving governor, has signed every budget over the last 10 years and praised lawmakers for spending only what's necessary. Last week lawmakers pressed Perry's budget experts to help cut $4 billion from the current budget, but neither side could reach the goal.

So Perry relented, but his support for tapping the Rainy Day Fund now came with an ultimatum about the budget that begins Sept. 1.

"I remain steadfastly committed to protecting the remaining balance of the Rainy Day Fund, and will not sign a 2012-2013 state budget that uses the Rainy Day Fund," Perry warned. So the dilemma may return.

That Republican leaders' posture in the financial crisis came in stark contrast to their campaign rhetoric.

"Texas is better off than practically any state in the country," Perry said in September, well after the coming problem was identified. When asked about the budget deficit in December, Perry dismissed the question as speculative.

Even though Texas' budget shortfall is among the worst in the nation, Perry says Texas remains an example for other states.

Last week, he touted a Federal Reserve Bank statement forecasting that Texas could add more than 264,000 jobs in 2011. Proposed budget cuts, though, could lay-off 100,000 school employees, 60,000 nursing home workers and eliminate 9,600 state jobs this year.

Democrats question why Perry and Republican lawmakers would tap the Rainy Day Fund to pay bills to creditors due in August, but not to save jobs.

Using the fund, which is made up of revenue from oil and gas taxes, could "mitigate the cuts to our children's education, the zeroing out of pre-kindergarten, the zeroing out of college scholarships for all freshman starting in 2012 and 2013," Democratic state Rep. Mike Villarreal said.

But there is little for Democrats to do. Republicans hold every statewide office in Texas, two-thirds of the state House seats and 19 out of the 31 seats in the Senate. The main political division is between veteran conservatives and ultra-conservative Tea Party Caucus members.

State Rep. Debbie Riddle, a caucus member, said her constituents expect her to slash state spending. In the end, though, she voted to spend the Rainy Day Fund.

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