Texas Senate passes state budget that cuts spending

AUSTIN, Tex (Reuters) - The Texas Senate on Wednesday passed a budget that makes cuts to education and health care, but not as deep as the cuts in the budget that the Texas House has already approved.

The Republican-dominated Senate voted 19-12 along party lines, which is rare for a budget vote, to approve the $176.5 billion budget for 2012-2013. Texas has a two-year budget cycle.

The budget blueprint approved by the Senate spends $11 billion less than the current budget but $12 billion more than the House proposal.

Neither version adds taxes. That is key at a time when the economy is climbing out of a recession, said Republican Senator Steve Ogden, the chairman of the Senate Finance Committee.

"You cannot raise taxes on Texas businesses as they try to recover," Ogden said during the budget debate. He called the budget "a bridge to the future."

But Democrats said that despite cutting less than the House, the Senate budget will still lead to lost jobs and crowded classrooms.

"The cuts are too deep, and they cut into the heart of our future," said Democratic state Senator Wendy Davis.

Texas, the second most populous state behind California, has been doing better financially than other states, but still began the legislative session in January with a budget shortfall of up to $27 billion over the two years.

The Senate version of the budget had included a provision to spend $3 billion from the state's Rainy Day Fund, but senators voted on Wednesday to take out that provision.

Governor Rick Perry has said he is against using money from the fund for the 2012-2013 budget, and the House version does not use Rainy Day Fund money. The Republican governor has endorsed using about a third of the $9.4 billion fund to close a deficit in the 2011 budget, which ends August 31.

The Senate budget faced opposition from some Republicans who did not want to tap the Rainy Day Fund and Democrats who said the cuts were too deep. Senate Republicans did not have enough votes to take up the budget bill under normal procedures, so they turned to a little-used maneuver on Wednesday to bring it up anyway.

The budget bill now returns to the House, and House-Senate negotiations are expected to follow.

"I look forward to signing a fiscally responsible, no new taxes state budget in the next few weeks that funds Texas schools, border security and health care priorities, while protecting Texas job creation and preserving the remaining balance in the state's Rainy Day Fund for future emergencies," said Perry, who won reelection in November after campaigning on how well Texas has weathered the U.S. economic downturn.

The state's budget shortfall is partly due to the economic downturn and partly due to the state's reliance on one-time money -- including federal stimulus dollars -- in 2010-2011. Also, a reconfigured state business tax designed to pay for 2006 school property tax cuts has not generated as much as expected.

(Editing by Greg McCune)