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Gov. Rick Perry and Texas House leaders ended a stalemate Tuesday by agreeing to use about one-third of the state's reserve fund to plug a budget deficit in the current fiscal year and to make $800 million in spending cuts to state agencies.

Shortly after Perry and House Speaker Joe Strauss announced they had reached an agreement to tap $3.2 billion of the state's Rainy Day Fund to help close a projected $4.3 billion deficit, the House Appropriations Committee voted unanimously to back the measure. The vote sends the measure to the full House where, as in the Senate, it would need the approval of three-fifths of voting lawmakers before becoming law.

While Perry agreed to use the Rainy Day Fund to address the 2011 deficit, he vowed not to agree to use it to address the massive revenue shortfall that remains as lawmakers tackle the budget for 2012-2013.

"We have worked closely with state leaders and lawmakers to balance the current budget, which includes using a one-time amount from the Economic Stabilization Fund to help our budget deal with the impact of the national recession," Perry said. "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."

The state is facing a revenue shortfall that could reach as high as $27 billion over the next two-year budget when counting population growth and cost increases. The next budget likely will include severe cuts to all areas of state government, most heavily to public education and low-income and elderly health care programs.

Democratic Rep. Sylvester Turner, of Houston, cautioned that people should not think schools, nursing homes and Medicaid providers will be spared from budget cuts because of Tuesday's agreement.

"For the teachers that came to this Capitol on Saturday and yesterday, to all the medical providers walking the halls, all the children concerned about their needs, nothing is going to be used from the Rainy Day Fund to cover any of their needs for the next two years," Turner said.

The Rainy Day Fund, which is expected to have a balance of $9.4 billion at the end of the next budget period, is made up of revenue from oil and gas taxes.

The measure approved by the House Appropriations Committee on Tuesday also would make $800 million in agency cuts in the current budget, which covers state spending through Aug. 31.

House Speaker Joe Straus said the agreement allows the state to preserve about $6 billion of the reserve fund to cover future emergencies.

"Today Republican leaders locked in a plan to force up local taxes, make college more expensive, crowd more kids into classrooms, fire teachers, close nursing homes, and cut basic health services for children and the disabled," said Rep. Mike Villarreal, a Democrat from San Antonio, who is on the House Appropriations Committee. "Texans have already paid taxes into the Rainy Day Fund, but the governor would rather sit on the people's money than use it to save our schools."

Conservatives have argued the Rainy Day Fund should be preserved.

"We can reasonably predict that economic pressures on the Texas state budget will be even more severe in the next legislative session," said Talmadge Heflin, director of the conservative Texas Public Policy Foundation's Center for Fiscal Policy.

"It is the duty of those elected to government to govern -- and it is the duty of those who elected them to hold them accountable. Now more than ever, Texans must demand that their Legislature craft a responsible, conservative state budget with no further use of the Rainy Day Fund," Heflin said.

Posted 12:27 PM

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