Senator Eliot Shapleigh - El Paso, Texas

Comptroller Susan Combs

 AUSTIN — When the state comptroller estimates the state's revenue next week, lawmakers will get their first glimpse of how much the national recession has hit Texas.

The biennial announcement from Comptroller Susan Combs — coming as the Legislature convenes for its 140-day session — will tell state budget writers how much money they have to spend on things like public schools, courts and health care services for the 2010-11 spending cycle. And it will show for the first time if Texas shoppers have tightened their belts so much that it put a dent in sales tax revenue.

The state budget — $167 billion for the current two-year period — is the only legislation they're legally required to pass.

Combs and Gov. Rick Perry, both Republicans, already have hinted that the national financial meltdown has begun to seep into the state economy, even though Texas so far has weathered it better than most states.

"Our state will not go untouched," Combs warned last month.

Sales tax receipts, which make up about 52 percent of the state budget, grew at a 12 percent rate two years ago, but that has slowed to a troubling 5 percent.

Perry wants state agencies to lower their budget requests and cut spending. Many agencies responded by cutting travel expenses for training and seminars.

State officials have estimated that Texas will have a surplus of about $11 billion, but Combs will confirm or change that number next week. But even that amount won't go far.

"I don't know what the comptroller's going to present us with ... but, yeah, it's going to be tighter than it has been," said Rep. Joe Straus, R-San Antonio, who will likely be elected House speaker.

"It's going to be lean, we'll have to be efficient and do our best to come up with consensus for priorities in the budget."

Texas will likely have to pay up to $2 billion for its share of costs from Hurricane Ike, rapid growth in Medicaid costs and enrollment, lower oil prices that might mean less income in the state's Rainy Day Fund, slowed consumer spending and lower-than-projected revenues from the state's new business tax in the fund intended to pay for public schools.

The Ike and Medicaid enrollment growth could cost together as much as $3.2 billion in the 2008-2009 budget before lawmakers even get started on the 2010-2011 budget, Lt. Gov. David Dewhurst and current House Speaker Tom Craddick have estimated.

The so-called surplus is made up of three parts:

_ $5.7 billion in the Rainy Day Fund from taxes that companies pay for producing oil and gas. That fund can only be tapped with the approval of a super-majority of the Legislature.

_ $3 billion set aside two years ago to give to schools to make up for property tax cuts.

_ $2 billion left over for lawmakers' discretionary spending.

Further exacerbating budget uncertainties, health care costs are rapidly rising and enrollment in entitlement programs is expected to grow with the economic slowdown.

Even with $3 billion stashed away for schools, a fund used to replace some school property tax money will fall at least $5 billion short of the $14 billion hole lawmakers created two years ago when they lowered school property tax rates by a third. That's mostly because revenues from the new business tax — revamped to replace some school property taxes in education funding — aren't as much as expected.

This year, it appears that money will be available without having to cut from other state spending. But it will take a bite out the state's economic growth that would have otherwise padded the surplus.