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New Comptroller report offers nearly $3.65 billion in savings

Limited Government, Unlimited Opportunity

Rising costs and a slower economy represent a financial challenge for the 2003 Legislature. A new report by Comptroller Carole Keeton Strayhorn's e-Texas project, Limited Government, Unlimited Opportunity, aims to help lawmakers make the tough choices needed to ensure the continued health of Texas government and, more importantly, the state economy on which it depends.

Texas is hardly alone in its tight fiscal outlook. States across the nation face serious money crunches. According to the National Conference of State Legislators (NCSL), 43 states reported fiscal 2002 budget gaps totaling $27.3 billion, an amount expected to rise to $57.9 billion in fiscal 2003. Many states are implementing cost-cutting measures including across-the-board cuts, layoffs and reduced entitlement benefits.

In Texas as elsewhere, spending rose sharply in the 1990s, in response to a growing population, federal mandates and new programs. Now the Legislature must cope with a severe gap between available revenues and spending projections. Even if the state freezes spending at current levels for the 2004-05 biennium, the gap will approach $10 billion.

Limited Government, Unlimited Opportunity offers 64 separate proposals and 179 individual recommendations addressing major and minor state programs in general government, health and human services and education.

"As you will see in this report, my office has identified savings and additional revenue of nearly $3.65 billion, including $1.7 billion in general revenue funds for the next biennium," says Strayhorn. "Some of these proposals are controversial, but I believe all are necessary."

Highlights of Proposals
(Revenue savings and gains for 2004-05; all dollars are general revenue unless otherwise noted)

Improve educational efficiency

  • Approve a constitutional amendment allowing the Permanent School Fund to use a "total return" management policy.
    Revenue gain: $83.1 million
  • Allow Texas public colleges and universities to retain their indirect cost recovery funds and give them greater flexibility in setting tuition rates.
    Savings: $24.1 million
  • Adjust general revenue appropriations to state higher education institutions based on the difference between their estimated and actual incomes.
    Savings: $6.9 million
  • Limit higher education institutions' use of "special item" funding by eliminating institutional enhancement funding and setting a cap on special item funding.
    Savings: $137.3 million
  • Improve Texas' early graduation scholarship program to encourage more students to take advantage of it.
    Savings: $2.9 million
  • Eliminate the Texas Education Agency's State Textbook Depository.
    Savings: $762,000

Consolidate or eliminate agencies and functions

  • Consolidate the Public Utility Commission and Texas Railroad Commission into a Texas Energy and Communications Commission.
    Savings: $12.5 million
  • Consolidate Texas' 24 health and human services agencies into five integrated agencies to make them more cost effective and increase their responsiveness and accessibility.
    Savings: $9.1 million
  • Abolish the Texas Department of Economic Development and move its economic development functions to the Governor's Office; place its tourism functions in a new Texas Office of Tourism within the Governor's Office.
    Savings: $3.6 million

Reduce work force costs

  • Offer cash bonuses of 25 percent of current annual salaries to persuade state employees eligible to retire in the 2004-05 biennium to do so.
    Savings: $32.8 million
  • Reduce the number of state managers and make other management improvements.
    Savings: $110 million
  • Require Texas' large state agencies to employ no more than one human resources worker per 100 employees, and require small agencies to outsource human resources.
    Savings: $30.3 million
  • Offer state employee health benefits 90 days after a new employee's start date and increase various co-payments.
    Savings: $121.1 million
  • Offer children's Medicaid call center services throughout the state.
    Savings: $20.7 million

Improve asset management

  • Require state agencies to provide the Legislature with detailed information on their real properties so the state can assess a biennial charge on agency properties as an incentive to reduce those holdings to a minimum.
    Revenue gain: $33 million
  • Eliminate the State Aircraft Pooling Board and contract as needed with a private aircraft charter company.
    Revenue gain: $20.7 million

Improve transportation efficiency

  • Ensure the highway program can keep building new roads by issuing grant anticipation revenue vehicles, or "GARVEEs"--bonds that use future federal highway funds to repay the principal, interest and any other costs.
    Revenue gain: $965.8 million for the Highway Fund
  • Hire a private vendor to create an insurance database to allow law enforcement to remove uninsured motorists from the road, decreasing Medicaid costs and increasing insurance tax collections.
    Revenue gain: $16.6 million

Increase revenues

  • Join a multi-state lottery that can offer larger base prizes and "rollover" jackpots, generating nationwide interest and increasing sales.
    Revenue gain: $101.5 million
  • Improve Texas' system for providing foreign buyers with exemptions from sales taxes for purchases made in the state and immediately exported.
    Revenue gain: $48.5 million
  • Eliminate ambiguities and loopholes in the Texas Tax Code so taxpayers clearly understand how to apply refund provisions.
    Revenue gain: $20 million
  • Hire additional auditors to increase audit coverage of large sales tax accounts.
    Revenue gain: $23 million
  • Expand enforcement activity on delinquent tax accounts to improve compliance.
    Revenue gain: $83.4 million
  • Institute a tax amnesty program to allow noncompliant taxpayers to remit taxes owed to the state without penalties and interest.
    Revenue gain: $50 million

Enhance quality of health care and human services

  • Contract with private companies to provide some Medicaid recipients with disease management services, which can improve the health of individuals with chronic illnesses while decreasing costs.
    Savings: $8.6 million
  • Outsource the Medical Transportation Program to transportation brokers.
    Savings: $4.3 million

Reduce health care costs

  • Postpone the scheduled implementation of a 12-month period of Medicaid eligibility for children whose families no longer qualify for welfare assistance until fiscal 2006.
    Savings: $282.3 million
  • Contract with a pharmacy benefit manager to apply the most advanced cost management techniques to Texas Medicaid's prescription drug program; expand the Employees Retirement System's and Teacher Retirement System's use of prior authorization for certain costly drugs.
    Savings: $164.8 million

Recover more state health care costs

  • Take advantage of new provisions in federal law that allow the state to increase its share of federal reimbursements for state-owned hospitals.
    Revenue gain: $192 million in federal Medicaid payments
  • Contract with a private vendor to pursue recoveries for clients eligible for both Medicaid and Medicare.
    Revenue gain: $18.9 million
  • Enhance efforts to identify and prevent Medicaid fraud and overpayments.
    Revenue gain: $18.6 million
  • Create a system of co-payments for Medicaid prescription drugs and non-emergency services furnished in hospital emergency rooms, to reduce the unnecessary use of high-cost pharmaceuticals and procedures.
    Revenue gain: $22.9 million

Bruce Wright