Perry, a Republican, campaigned on the strength of the Texas economy and made political hay of the fact the Lone Star state had avoided California’s massive deficit, pegged at $25.4 billion through the upcoming budget year.
Now Texas faces a budget deficit estimated as high as $27 billion for the upcoming two-year cycle of 2012-2013. To close the gap, state legislators have proposed steep cuts in funding to education and welfare programs.
California and Texas are in similar budgetary dire straits following a painful U.S. recession that severely crimped state tax receipts and other critical revenue sources.
How the debate plays out in Austin and Sacramento will be watched closely by the $2.8 trillion U.S. municipal bond market, which states could tap to cover their shortfalls. California, which has the world’s eighth-largest economy, is the market’s biggest debt issuer.
