Perry calls on agencies to cut spending for rest of fiscal year

Even though the Texas economy remains strong — despite the financial impact of Hurricane Ike and a national economic crisis — Gov. Rick Perry is asking state agencies to cut back.

"Texas businesses and families are tightening their belts. They are cutting spending and exercising greater discipline," Perry said in a speech Wednesday to Houston business leaders. "They are taking a closer look at the difference between want and need. In times like this, state government should be no different."

This week, the Republican governor sent a letter to agency heads, asking them to look for ways to rein in spending. Among Perry’s suggested trims: cutting back on taxpayer-funded travel. Perry also asked the agencies to reconsider their budget requests for the next legislative session.

"As stewards of public dollars, we must remain fiscally responsible and continue to put taxpayers first by finding ways to curtail state spending," Perry wrote in the letter.

The agency heads have 10 days to let Perry know how they will reduce budgets for the rest of the fiscal year.

"Here’s the bottom line," Perry told the meeting of the Greater Houston Partnership, the equivalent of a chamber of commerce. "Given the current economic turndown and the expectation that it will ultimately impact Texas, all state agencies need to dial back their spending."

Perry credited tax cuts, spending reductions and tort reform enacted when the state tackled a $10 billion deficit in 2003 with helping to keep the Texas economy strong.

"Our economy is better equipped today than any other state in the nation to handle the two storms that have roiled the financial seas around us," Perry said.

However, he warned that Texas is not immune from the financial meltdown shaking the national economy. The state is estimated to go into the next budget period with an $11 billion surplus, but $9 billion has already been spoken for.

Almost $6 billion is for the state’s Rainy Day Fund and can’t be touched without super-majority approval from both chambers of the Legislature. About $3 billion is constitutionally dedicated to pay for property tax cuts approved last year. That money can’t be touched, either.

Inflation, growing costs and enrollment in federal entitlement programs like Medicare and Medicaid and hundreds of other priorities that will come up when lawmakers convene in January may further erode the surplus.

In addition, the state will also face unexpected costs, including an estimated $11 billion incurred by Hurricane Ike and uncertainty over how much Congress can help with federal aid.