Tuesday, April 30, 2013

After HB 11: How to Move Forward

This morning, Cahnman's Musings was blessed to attend a breakfast/Q&A session with Governor Perry.  The discussion was candid, much of it surrounded water, and last night's failure of HB 11 weighed heavily on the visibly tired Governor's mind.  The Governor made several salient points regarding the long term water needs of our state and, in the spirit of solving this impasse, Cahnman's Musings has a proposal:

Pass the Texas Budget Compact first.

The discomfort around HB 11 in grassroots circles concerns creating new quasi-governmental agencies before we've addressed the state's long-term finances.  Grassroots Texans are justifiably queasy about tapping the state's savings account before the legislature enacts structural reforms to state spending.  The Texas Budget Compact has always been the best way to assuage those concerns.

By amending the state constitution to limit spending to inflation and population growth, the Texas Budget Compact will prevent a new water authority from growing out of control.  The Texas Budget Compact will enforce the discipline necessary to limit any new water authority to its original functions.  Speaking candidly, the Texas Budget Compact will keep a new water authority honest.

In the event that the legislature passes the Texas Budget Compact, Governor Perry's points regarding water make a lot of sense; the Governor wanted to stress that:
  • Right now, with $12 billion, there's too much money in the rainy day fund.  The state only needs to keep $7 billion in the rainy day fund to maintain its bond rating and be prepared for a major disaster.  Keeping this extra $5 billion around ad infinitum is an invitation for mischief.
  • Water infrastructure is a one time expense.  Governor Perry repeated his opposition to using the rainy day fund to pay for ongoing expenses (ie. education and Medicaid).  If you have extra cash, and you face a one time expense, proactively addressing the problem  makes a lot of sense.
  • Given the rate at which Ben Bernake is printing digitizing money, the bucks sitting in the rainy day fund will shortly have a lot less bang.
Using extra cash to pay for one time expenses makes sense, but only if the necessary long-term controls are put into place first.

If the Texas Budget Compact becomes law during the General session, then grassroots opposition to a narrowly tailored water infrastructure package will be defused during a special session; the ball is in your court, Mr. Governor.

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