Texas Is In Trouble, With A Capital 'T'

According to the Center on Budget and Policy Priorities, 39 states have projected budget gaps for the 2012 fiscal year.

With its projected $28 billion deficit, California has gotten most of the national attention. Illinois, New York and New Jersey have also received plenty of press.

However, another state — one that hasn't gotten nearly as much attention — also faces an enormous and troubling debt.

Texas has long prided itself on its low-tax, business-friendly model. And its governor, Rick Perry, has boasted that this has led to a more robust economy and sounder finances than other states.

However, the Texas budget deficit may have now spiked to level as high as $25 billion. The actual figure will be announced this month.

The state budgets in two-year cycles. It's next budget will be around $95 billion. So, a $25 billion deficit is just massive.

Texas is among seven states with no personal income tax, and raising taxes is not an option for its Republican, anti-tax governor. Sales taxes, which are falling, account for about 65 percent of revenue.

The Texas constitution requires a balanced budget, so the state faces scaling back already lean budgets for education, healthcare and public safety — all of which previously underwent cuts in 2003.

Education accounts for 55 percent of state spending. Healthcare accounts for 25 percent of spending. And public safety accounts for roughly 10 percent.

Further cuts would be devastating. At present, 26 percent of Texans are uninsured — a higher percentage than in any other state. The estimated average salary of public school teachers ranks 39th among states, with state and local expenditures per pupil in public schools ranking 44th.

There simply isn't much lower to go in each of these categories.

The Lone Star State is in big trouble.

Texas appears poised for a fiscal meltdown, and that has the potential to rock the bond markets in 2011.