State Budget Strained by Hurricane Ike, Healthcare and Economy

AUSTIN, Texas (AP) - Last summer, visions of tax rebates danced in the heads of Texas Republican leaders at the mere mention of an $11 billion state budget surplus.

They crowed that Texas had dodged the national meltdown.  Six months later, the surplus appears to have shriveled as costs mount and worsening economic news starts to shrink once-robust tax returns.

The state's budget is being hit with up to $2 billion in costs. They include the state 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 revenue from the state's new business tax in the fund intended to pay for public schools.

The fraction of the projected $11 billion surplus that was left unencumbered will almost certainly be eaten up early in the upcoming legislative session by costs of Ike and Medicaid enrollment growth. Lieutenant Governor David Dewhurst and House Speaker Tom Craddick say those items could cost together as much as $3.2 billion in the 2008-2009 budget before the Legislature even gets started on the 2010-2011 budget.

Lawmakers are scheduled to convene in Austin January 13th for the biennial 140-day legislative session.