AUSTIN – Texas' top two leaders Tuesday laid out ambitious goals for improving public schools in the legislative session that begins in January. But a looming revenue shortfall of $2 billion could jeopardize some of those plans.

While Gov. Rick Perry pitched his education ideas to the Dallas Chamber of Commerce, Lt. Gov. David Dewhurst told an Austin business group that the Senate is drafting its school finance plan and is ready to tackle a host of other problems.

But Mr. Dewhurst said that the next state budget would probably be another tight fit. Two years ago, lawmakers had to overcome a $10 billion revenue shortfall before passing a two-year budget of about $117 billion. Deep cuts were made in such things as the children's health insurance program, education and medicare.

"It looks to me like we're going to be short about $2 billion," said Mr. Dewhurst, who presides over the Senate.
"That's a lot of money, and during all of the 1990s the Legislature was never faced with a shortfall like that," he said. But after the deficit of two years ago, he added, "Two billion dollars doesn't sound quite as bad."

Even with a shortfall, he said, "We're going to balance this budget. We're going to put more money into public education. We're putting more money into the Medicaid and CHIP programs. We're putting more money into adult protective services and child protective services.

"These are all critical needs."
A spokesman for state Comptroller Carole Keeton Strayhorn had no comment on Mr. Dewhurst's revenue estimate, saying Ms. Strayhorn will make her two-year revenue projections in January.

Mr. Perry made his case for education changes to Dallas business leaders, insisting that school improvement must be an integral part of the debate as lawmakers try to fix the state's troubled school finance system next year.

"School finance is not simply about cutting property taxes or eliminating Robin Hood," he said. "It is, first and foremost, about providing a great education for every child."

Mr. Perry said parents and taxpayers "will measure the success of school finance by the results we reap, and not the amount of new money invested."

But the governor made clear that he is still pursuing property tax relief and elimination of the share-the-wealth provisions of the current school funding system. He also called for creation of a series of financial incentives for teachers and schools, referring to the program he proposed to the Legislature earlier this year.

Mr. Perry also sought to strike a bipartisan approach to school finance and other issues, noting that Texans "want Democrats and Republicans to walk down the same aisle and pursue the same objectives."

Last year, Mr. Perry's decision to call three special sessions on congressional redistricting so that Texas Republicans could win more seats in U.S. House triggered bitter partisan divisions in the Legislature.

"Reforming public education, cutting property taxes, fixing adult and child protective services and funding our budget can all occur when Democrats and Republicans engage in consensus and cooperation – not cynicism and combat," the Republican governor said Tuesday.

Rep. Jim Dunnam of Waco, chairman of the House Democratic Caucus, welcomed Mr. Perry's comments, saying, "We're ready to do that. We have been ready to do that for two years.

"What happened last year was unfortunate. If the governor is sincere, we welcome the opportunity to have meaningful participation."

Mr. Dewhurst said while the Senate is still working on its school finance and education improvement ideas, there is general agreement on several of the major proposals that were laid out during the unsuccessful special session on education in the spring.

Among the areas of agreement, he said, are a school property tax cut of at least one-third and a revamped business franchise tax that has a low rate but covers most businesses in the state.

Mr. Dewhurst also said the Senate has unfinished business on insurance reform and will consider tougher penalties for companies that charge excessive premiums. His remarks were directed at State Farm Insurance Co. and Farmers Insurance Co., which have been fighting state orders to refund premium overcharges of between $250 million and $300 million.